12.3.2 Using Financial Elements as Income Statement Reporting Lines

You may wish to build up fully allocated, multidimensional profitability balances that represent reporting lines in your final analytical results. For example, if you wish to construct income statements by Organizational Unit and by Product and by Geography, you might choose to construct allocation rules that will drive towards final result balances by Organization Unit, by Product, by Geography, and by Financial Element where Financial Elements are used to store reporting line balances for:

  • Interest Income / Interest Expense
  • Charge for Funds Used / Credit for Funds Provided
  • Fee Income
  • Direct Expense
  • Indirect Acquisition Expense
  • Indirect Servicing Expense
  • Direct and Indirect Taxes

Under this approach, Financial Elements that serve as “Reporting Lines” in your Management Accounting income statements take the place of the General Ledger Account dimension that serves the “reporting line” function in pre-allocated Financial Accounting income statement data extracted from your General Ledger. Whereas your Financial Accounting income statements may be very detailed and may be comprised of hundreds or even thousands of GL Accounts, your Management Accounting income statement reporting line structure will likely have far fewer rows, probably 30-60 lines.

A seeded set of Financial Elements that you may wish to use as reporting lines are included in the standard data model (the complete list of all seeded Financial Elements is documented in Seeded Financial Elements).

A seeded Financial Element hierarchy is also provided that contains rollup points for the seeded “reporting line” Financial Elements. These rollup points, which include values such as Total Interest Income, Total Interest Expense, Net Interest Income, Risk-Adjusted Net Interest Income, and Risk Adjusted Net Income, are structured to function as subtotals. The seeded “reporting line” Financial Elements (leaf member values plus rollup point values) are pre-built into the Oracle Financial Services Performance Analytics (OFSPA) Business Intelligence (BI) application. If you choose to develop a strategy that involves allocating balances to Financial Elements that are intended to support such a “reporting line” structure, you may customize the seeded profitability Financial Element structure by (1), adding your own user-defined Financial Elements and (2), modifying the seeded Financial Element hierarchy. After having customized the seeded profitability Financial Elements and the related subtotaling hierarchy, the changes can be made to flow seamlessly into the analytical dashboards within the OFSPA BI application without any additional customization. You may, of course, choose not to develop a “reporting line” strategy for developing multidimensional profitability; or you might choose to build out reporting lines under another user-defined Key Processing Dimension.

Regardless of what dimension you choose for storing “reporting line” balances within your Management Ledger (assuming that you do adopt such a strategy), your final “reporting line” balances may be the result of bottom-up processes such as:

  • • Aggregation of Transfer Pricing charges and credits from the instrument-level. Such FTP charges and credits may result from charges or credits for principal balances, charges or credits for basis risk or liquidity risk, or charges or credits for secondary balances that you have allocated to instruments (such secondary balances are typically allocated from the Management Ledger to the instrument-level; examples would include loan loss reserves, risk equity, central bank reserves; or other allocated debit or credit balances such as plant & equipment, cash & due from banks, goodwill, prepaid expenses, and so on.) The charges & credits associated with these allocated balance-sheet balances may be generated using the transfer pricing rates that have already been assigned to each instrument's principal balance; or you may adopt a simple methodology for ascribing transfer rates to these allocated balances (example, pre-determined rates that are assigned to each allocated balance as a function of its perceived duration).
  • Aggregation of rate times volume results from the Instrument and/or Transaction Summary levels for activity-based expenses or revenues.
  • Aggregation of instrument-level revenues or expenses that are derived directly from your source systems (for example Accrued Interest Payable or Receivables, Fee income, and so on.).

Or they may be the result of top-down processes such as:

  • Non-interest expense balances (typically in the form of center-to-center or center-to-product allocations).