Legal Entity-Specific Secondary Ledgers with Controlled Replication from Primary Ledgers

Certain companies in Financial Services or other service industries may decide their operations in multiple countries should share a single functional currency and record the accounting for multiple countries in one single primary ledger.

For example, a company may want a view of their Canadian and US operations in the USD functional currency and record their accounting transactions in a single primary ledger called Vision Corporation North America.

Secondary ledgers might be required to address the local regulatory reporting requirements in each country. In this example, the following respective secondary ledgers would be created:

• Vision Corporation Canada
• Vision Corporation US

When a journal is posted in the Vision Corporation North America primary ledger, all of its accounting entries would typically be propagated to its associated secondary ledgers (Vision Corporation Canada, Vision Corporation US). The Legal Entity-Specific Secondary Ledgers Controlled Replication from Primary Ledger feature allows journal-level secondary ledgers to include only a partial accounting representation of their associated primary ledger.

When mapping a primary ledger to a journal-level secondary level, you select a data conversion level. The data conversion level determines what level of information is copied to the secondary ledger.

Journal-Level Secondary Ledgers

While mapping a primary ledger to a journal-level secondary ledger, you can set up journal conversion rules. The rules specify journal sources and categories for inclusion or exclusion. When a primary ledger journal is posted, these rules determine the journals eligible for creation in the secondary ledger.

In addition to journal conversion rules, you can define conversion rules for primary balancing segment values and assign a subset of the primary balancing segment values that are assigned to the primary ledger and its legal entities. For example, when you map the Vision Corporation North America primary ledger to the Vision Corporation Canada secondary ledger, define primary balancing segment conversion rules by selecting the primary balancing segment values from the Vision Corporation North America primary ledger that are associated with the legal entities for Canada.

When the journal entries are posted in the Vision Corporation North America primary ledger, the accounting processes will propagate to the Vision Corporation Canada secondary ledger only those journal lines with the primary balancing segment values defined in the primary balancing segment values conversion rules.

This feature effectively enables organizations to populate journal-level secondary ledgers for specific legal entities when the primary ledger represents multiple legal entities or countries.

Subledger-Level Secondary Ledgers

The Legal Entity-Specific Secondary Ledgers Controlled Replication from Primary Ledger feature allows subledger-level secondary ledgers to include only a partial accounting representation of their associated primary ledger when the journals in the primary ledger are created manually or through a spreadsheet or through file-based data import.

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 doesn't copy the primary ledger journals to the secondary ledger. You must run the Replicate Journals by Primary Balancing Segment Values process to replicate the journal lines from the primary to the secondary ledger based on the primary segment value conversion rules. For journals in the primary ledger that are created through the Create Accounting process, you must configure mapping sets and/or additional journal rules conditions in the Subledger Accounting application to replicate partially to the secondary ledger based on specific primary balancing segment values.

Note: For a complete list of considerations before adopting the Legal-Entity Specific Secondary Ledgers with Controlled Replication from Primary Ledgers feature, see the Cloud ERP Enterprise Structures White Paper (Doc ID 2415848.1) on My Oracle Support.

Here’s a summary of the steps to set up and use this feature:

1. Enable replication by primary balancing segment values.
2. Define primary balancing segment value conversion rules.
3. Run the Replicate Journals by Primary Balancing Segment Values process.

Considerations for Using Controlled Replication from Primary Balancing Segment Values

The legal entity-specific secondary ledgers feature doesn’t apply to valuation method applications such as Oracle Assets and Oracle Costing since they directly feed secondary ledgers.

However, they both support features that make them compatible with the approach.

• Assets supports multiple books assigned to a ledger. Define a separate corporate book for each country. Assign it to the primary ledger and the corresponding tax book to the country-specific secondary ledger.
• Costing assigns a combination of cost organization and cost book to a primary ledger or valuation method-enabled secondary ledger. Since cost organizations belong to a single legal entity (and legal entities are country-specific), you should define a separate cost organization for each country.

Legal entity-specific secondary ledgers may not support full compliance with local regulations in all countries. Carefully consider the following before adopting this configuration:

• Local compliance. Ensure that all necessary reports comply with local regulation and audit requirements. In particular, reports run in the secondary ledger that rely on Oracle Subledger Accounting journals could produce unexpected results. You'll encounter issues in countries with detailed tax and audit reporting requirements.
• Applicability of setups. Ledger options apply to all countries and legal entities. Examples include accounting options and sequencing. Determine whether your choices are valid for all countries hosted by the primary ledger.
• Country-specific processes. Ensure no ledger-level processing should be managed separately. For example, period close. You won't be able to open and close periods for individual countries.
• Automated processing defaults. Verify that values defaulted by automated processes are valid for all countries.
• Usability. Verify that values defaulted by manual procedures such as manual journal entry apply to all countries. If not, users must be prepared to override defaulted values.
• Other country-specific features. If features are implemented for a subset of country operations, confirm that they don't impact the smooth operation of other countries’ operations.

The legal entity-specific secondary ledgers are most suited to financial services enterprises and companies operating in countries with light regulatory reporting requirements. Additional considerations apply to Oracle Fusion Cloud ERP business units. See the Business Units, Ledgers, and Legal Entities in Financials section in the Cloud ERP Enterprise Structures White Paper (Doc ID 2415848.1) on My Oracle Support.

Enable Replication by Primary Balancing Segment Values

In this example, Vision Corporation North America is a global company based in the United States with all the primary accounting transactions recorded across the different legal entities in the country with USD as a global currency.

There are secondary ledgers created in the respective countries for the local regulatory tax reporting in the legal entities, for example, Vision Corporation Canada and Vision Corporation US. The accounting entries in Vision Corporation Canada are required to report only the accounting transactions belonging to the legal entities in Canada, not the accounting transaction entries from the other countries in Vision Corporation North America, such as the US.

To keep only the accounting transactions related to the Canadian legal entities, the administrator can enable the replication of journals by primary balancing segment values from the Vision Corporation North America primary ledger to the Vision Corporation Canada secondary ledger.

Here are the steps to enable replication.

1. In the Setup and Maintenance work area, go to the Complete Primary Ledger to Secondary Ledger Mapping task.
   • Offering: Financials
   • Functional Area: General Ledger
   • Task: Complete Primary Ledger to Secondary Ledger Mapping, with the primary ledger scope set to Vision Corporation North America and the secondary ledger scope set to Vision Corporation Canada
2. In the Primary Balancing Segment Value Conversion Rules section on the Map Primary to Secondary Ledger page, enable the Replicate journals by primary balancing segment values check box.
   Caution: Once enabled you won’t be able to disable the check box, so make sure of your requirement to use this feature before performing this step.

   After enabling the check box, it’s recommended that you enable the audit before defining the primary balancing segment value rules. This will help your auditors keep track of the primary balancing segment values that are added or removed at any point of time.

3. Save the mapping.

Note: You can enable replication for new or existing secondary ledgers. For new secondary ledgers, you can run the Create Opening Balance Journals in Reporting Currency or Secondary Ledger process to initialize the balances in the secondary ledger before enabling replication by primary balancing segment values.

Define Primary Balancing Segment Value Conversion Rules

Before defining primary balancing segment value conversion rules, it’s recommended that you enable auditing to keep track of the primary balancing segment values that are added or removed at any point of time.

To enable auditing, in the Setup and Maintenance work area, go to the Manage Audit Policies task.

• Offering: Financials
• Functional Area: Application Extensions
• Configure Business Object Attributes for Product: General Ledger
• Object Name: Primary Balancing Segment Value Conversion Rules

You define primary balancing segment value conversion rules in the Primary Balancing Segment Value Conversion Rules section on the Map Primary to Secondary Ledger page. In the Setup and Maintenance work area, go to the Complete Primary Ledger to Secondary Ledger Mapping task.

• Offering: Financials
• Functional Area: General Ledger
• Task: Complete Primary Ledger to Secondary Ledger Mapping, with the primary ledger and secondary ledger scopes set

You can define primary balancing segment value rules for these types of values.

Note: You can search for primary balancing segment values based on the value, description, and legal entity.

• Single Value: Rules with child values.
• Parent Value: Rules with parent values in the value set.
• All Values: Journals are replicated from the primary ledger for all the primary balancing segment values to the associated secondary ledger.

  For example, if you enabled the Replicate journals by primary balancing segment values check box but don’t want to assign a subset of the primary balancing segment values belonging to the Vision Corporation North America primary ledger and its legal entities to the Vision Corporation Canada secondary ledger, then you can select the All values value type and define a single rule.

Note: You can either define a subset of values with the Single Value and Parent Value value types, or you can define a rule for all the values. Both are mutually exclusive. Once you define a rule with the value type of All Values, you won’t be able to define a rule with a subset of values.

Here are some considerations for tree codes and tree versions.

• If you define primary balancing segment value rules with the Parent Values value type, then you must select the relevant tree code and version. The default tree code associated with the primary balancing segment value will be defaulted. If you want to maintain a special reporting tree code for your secondary ledger requirements, then you can select the relevant tree code.
• All active tree versions for the selected tree code will be listed in the Tree Version field. You can select the relevant tree version for which you'd like to define the Parent Values-based primary balancing segment value rules.
• If you change a tree code or version after defining the primary balancing segment value conversion rules, then the application validates to check if the parent value type rules are valid for the new tree code and version. If they aren’t, a warning message will appear and the invalid parent values will be deleted. Though the application lets you change the tree code and version at any time, it’s recommended to use a specific tree code for the replication by primary balancing segment values to address the reporting requirements.

How Journals Are Replicated by Primary Balancing Segment Values

The replication of journals by primary balancing segment values can be enabled for new or existing journal and subledger-level secondary ledgers.

When replication by primary balancing segment values is enabled, you must run the Replicate Journals by Primary Balancing Segment Values process.

Here are the parameters.

• Source Ledger: This is the primary ledger.
• Target ledger: This is the secondary ledger. The list of values displays all secondary ledgers that are enabled for replication by primary balancing segment values for the selected source ledger.

The process replicates all the posted journal entries in the source ledger, for example Vision Corporation North America, to the secondary ledger, for example Vision Corporation Canada, based on the assigned primary balancing segment values. The subset of the accounting entries from the primary ledger will be propagated to the secondary ledger based on the assigned primary balancing segment values in the primary balancing segment value conversion rules.

Note: If you leave the Target Ledger parameter blank, then the process will replicate the primary ledger journals to all associated secondary ledgers where replication by primary balancing segment values is enabled. The accounting entries are replicated based on the assigned primary balancing segment values.

Here's an overview of how the process works for Journal and Subledger-level secondary ledgers.

• Journal-Level Secondary Ledgers

  The primary ledger posting process will stop the replication of all journals into the associated journal-level secondary ledgers that are enabled for replication by primary balancing segment values. The journals created in the primary ledgers are replicated to these secondary ledgers by running the Replicate Journals by Primary Balancing Segment Values process.

• Subledger-Level Secondary Ledgers

  The primary ledger posting process will stop the replication of journals created manually, through a spreadsheet, or through file-based data import, into the associated subledger-level secondary ledgers that are enabled for replication by primary balancing segment values. These journals are replicated into the subledger-level secondary ledgers by running the Replicate Journals by Primary Balancing Segment Values process.

  When the journals are created in the primary ledger from subledger sources, the Create Accounting process will replicate partial accounting from the primary ledger to the subledger-level secondary ledger if mapping sets are configured in the Subledger Accounting application to replicate partially based on the primary balancing segment values.

Note: If you have intercompany transactions between the legal entities related to the secondary ledgers, for example, between the Vision Corporation Canada and Vision Corporation US secondary ledgers of the Vision Corporation North America primary ledger, and if you enabled the subset of the primary balancing segment values replication in the secondary ledgers, then the intercompany transaction journal lines will be split between two journals in the respective Vision Corporation Canada and Vision Corporation US secondary ledgers. The process will copy the intercompany balancing lines from the Vision Corporation North America primary ledger into its associated secondary ledgers.