Primary Ledgers, Secondary Ledgers, and Reporting Currencies

Companies account for themselves in primary ledgers, and, if necessary, secondary ledgers and reporting currencies. Transactions from your subledgers are posted to your primary ledgers and possibly, secondary ledgers or reporting currencies based on balance, subledger, or journal level settings.

Local and corporate compliance can be achieved through an optional secondary ledger. Provide an alternate accounting method, or in some cases, a different chart of accounts. Your subsidiary's primary and secondary ledgers can both be maintained in your local currency. You can convert your local currency to your parent's ledger currency to report your consolidated financial results using reporting currencies or translation.

Primary Ledgers

A primary ledger:

Is the main record-keeping ledger.
Records transactional balances by using a chart of accounts with a consistent calendar and currency, and accounting rules implemented in an accounting method..
Is closely associated with the subledger transactions and provides context and accounting for them.

To determine the number of primary ledgers, your enterprise structure analysis must begin with your financial, legal, and management reporting requirements. For example, if your company has separate subsidiaries in several countries worldwide, enable reporting for each country's legal authorities by creating multiple primary ledgers that represent each country with the local currency, chart of accounts, calendar, and accounting method. Use reporting currencies linked to your country-specific primary ledgers to report to your parent company from your foreign subsidiaries. Other considerations that affect the number of primary ledgers required are:

Corporate year end
Ownership percentages
Local government regulations and taxation
Secondary ledgers

Secondary Ledgers

A secondary ledger:

Is an optional ledger linked to a primary ledger for the purpose of tracking alternative accounting.
Can differ from its primary ledger by using a different accounting method, chart of accounts, accounting calendar, currency, or processing options.

When you set up a secondary ledger using the Manage Secondary Ledger task, you select a data conversion level. The data conversion level determines what level of information is copied to the secondary ledger. You can select one of the following levels: Balance, Journal, Subledger, or Adjustment Only.

Balance: When you run the Transfer Balances to Secondary Ledger process, balances are transferred from the primary ledger to the secondary ledger.
Journal: When you post journals in the primary ledger, the posting process copies the journals to the secondary ledger for the sources and categories that you specify in the Journal Conversion Rules section on the Map Primary to Secondary Ledger page.

In the Journal Conversion Rules section, you can do one of the following:
- Accept the default setting of Yes for the journal source and category combination of Other, and then specify the source and category combinations to exclude from the conversion.
- Set the journal source and category combination of Other to No, and then specify the source and category combinations to include in the conversion.
You can assign a secondary ledger only a subset of the primary balancing segment values that are assigned to a primary ledger and its legal entities. See the Legal Entity-Specific Secondary Ledgers with Controlled Replication from Primary Ledgers topic for more information on this feature.
Subledger: When you run the Create Accounting process in the primary ledger, the process creates subledger journals for both the primary and secondary ledgers. When you run the Post Journals process in the primary ledger for journals that are created through methods other than the Create Accounting process, the posting process copies the primary ledger journals to the secondary ledger. For any journals that you don't want copied by posting, you can change the settings in the Journal Conversion Rules section on the Map Primary to Secondary Ledger page. To prevent duplication, posting doesn't copy any journal that originated from subledgers, regardless of the settings in the Journal Conversion Rules section.

Caution: You don't have to specify journal conversion rules for your subledgers because journal conversion rules are applicable only to postings from Oracle General Ledger. The Create Accounting process automatically produces accounting for both the primary and the secondary ledger, regardless of the journal conversion rule settings.
Adjustment Only: This level is an incomplete accounting representation that holds only adjustments. The adjustments can be entered as manual journals in General Ledger. This type of secondary ledger must share the same chart of accounts, accounting calendar, period type, and currency as the associated primary ledger.

Tip: To obtain a complete secondary accounting representation that includes both transactional data and adjustments, use ledger sets to combine the ledgers when running reports.

Example

Your primary ledger uses US Generally Accepted Accounting Principles (GAAP) and you maintain a secondary ledger for International Financial Reporting Standards (IFRS) accounting requirements. You first decide to use the subledger conversion level for the IFRS secondary ledger. However, since most of the accounting between US GAAP and IFRS is identical, the adjustment only level is the better solution for the secondary ledger. The subledger level requires duplication of most subledger and general ledger journal entries and general ledger balances. The adjustment only level transfers only the adjustment journal entries and balances necessary to convert your US GAAP accounting to the IFRS accounting. Thus, requiring less processing resources.

Tip: To avoid difficult reconciliations, use the same currency for primary and secondary ledgers. Use reporting currencies or translations to generate the different currency views to comply with internal reporting needs and consolidations.

Reporting Currencies

Reporting currencies maintain and report accounting transactions in additional currencies. Consider the following before deciding to use reporting currencies.

Each primary and secondary ledger is defined with a ledger currency that's used to record your business transactions and accounting data for that ledger.
Best practices recommend that you maintain the ledger in the currency in which the majority of its transactions are denominated. For example, create, record, and close a transaction in the same currency to save processing and reconciliation time.
Compliance, such as paying local transaction taxes, is also easier using a local currency.
Many countries require that your accounting records be kept in their national currency.

If you maintain and report accounting records in different currencies, you do this by defining one or more reporting currencies for the ledger. When you set up a reporting currency using the Manage Reporting Currency task, you select a currency conversion level. The currency conversion level determines what level of information is copied to the reporting currency.

You can select one of the following levels: Balance, Journal, Subledger.

Balance: When you run the Translate General Ledger Account Balances process, balances are transferred from the specified ledger to the reporting currency and converted.
Journal: When you post journals, the posting process copies the journals to the reporting currency for the sources and categories that you specify in the Journal Conversion Rules section on the Create or Edit Reporting Currency pages.

In the Journal Conversion Rules section, you can do one of the following:
- Accept the default setting of Yes for the journal source and category combination of Other, and then specify the source and category combinations to exclude from the conversion.
- Set the journal source and category combination of Other to No, and then specify the source and category combinations to include in the conversion.
Subledger: When you run the Create Accounting process in the primary ledger, the process creates subledger journals for both the primary ledger and the reporting currency. When you run the Post Journals process in the primary ledger for journals that are created through methods other than the Create Accounting process, the posting process copies the primary ledger journals to the reporting currency. For any journals that you don't want copied by posting, you can change the settings in the Journal Conversion Rules section on the Edit Reporting Currency page. To prevent duplication, posting doesn't copy any journal that originated from subledgers, regardless of the settings in the Journal Conversion Rules section.

Caution: You don't have to specify journal conversion rules for your subledgers because journal conversion rules are applicable only to postings from Oracle General Ledger. The Create Accounting process automatically produces accounting for both the primary ledger and the reporting currency, regardless of the journal conversion rule settings.

Note: A full accounting representation of your primary ledger is maintained in any subledger level reporting currency. Secondary ledgers can't use subledger level reporting currencies.

Don't use journal or subledger level reporting currencies if your organization translates your financial statements to your parent company's currency for consolidation purposes infrequently. Standard translation functionality meets this need. Consider using journal or subledger level reporting currencies when any of the following conditions exist.

You operate in a country whose unstable currency makes it unsuitable for managing your business. As a consequence, you manage your business in a more stable currency while retaining the ability to report in the unstable local currency.
You operate in a country that's part of the European Economic and Monetary Union (EMU), and you select to account and report in both the European Union currency and your National Currency Unit.

Note: The second option is rare since most companies have moved beyond the initial conversion to the EMU currency. However, future decisions could add other countries to the EMU, and then, this option would again be used during the conversion stage.