Joint Venture Account Sets

Welcome to the demo for Joint Venture Account Sets in Oracle Fusion Joint Venture Management.

A joint venture account set contains filter criteria to identify accounts with transactions that you want to process in Oracle Joint Venture Management. Use an account set to identify all transactions for a joint venture, identify transactions to which you want to assign a particular ownership definition, or identify transactions to use for the calculation of overhead.

Based on the joint operating agreement, the managing partner might need to identify accounts for various purposes: Expense, revenue, and capital cost accounts that are distributed and invoiced Accounts that are distributed for reporting purposes but won’t be invoiced. Accounts for specific ownership percentages. Accounts to calculate overhead.

Many times, there can be hundreds of accounts per joint venture. Managing partners need an easy and flexible way to determine the accounts to be used for identifying transactions, assigning ownership definitions, and calculating overhead.

Joint venture account sets eliminate the need to manually enter and maintain account combinations in joint venture definitions, overhead methods, and ownership definition assignment rules.

HEPP Petroleum is the managing partner for the joint venture Permian Alpha. The other partners in the joint venture are Beijing Super Petroleum and Best Rig.

The partners have agreed to the following in the joint operating agreement: All accounts associated with the joint venture are distributable for reporting purposes. Expense, Revenue, and work in progress Asset accounts are invoiced to recover costs or pay revenue. Different types of accounts have different ownership percentages associated with them. Expense and work in progress accounts are distributable and billable to the stakeholders HEPP Petroleum, Beijing Super Petroleum, and Best Rig with ownership percentages 70, 20, and 10 respectively. Revenue accounts are distributed and paid to the stakeholders HEPP Petroleum, Beijing Super Petroleum, and Best Rig with ownership percentages 70, 15, and 15 respectively. Overhead is 10% of the utility bills for the managing partner. Overhead accounts are not part of the joint venture’s cost center and the calculated overhead amount is invoiced to the stakeholders Beijing Super Petroleum and Best Rig with ownership percentages 70 and 30 respectively.

If an account is distributed and is not in the cost or revenue account sets, the default ownership percentages is 60% for HEPP Petroleum, 20% for Beijing Super Petroleum, and 20% for Best Rig.

Let’s see how we can use accounts sets to easily represent this in Joint Venture Management.

The joint venture Permian Alpha has 2 primary segment values corresponding to the cost centers 6400 and 6410 to represent the oil rig Permian Alpha and the construction of the Permian Alpha Ocean Bridge. All transactions for the joint venture are coded to these primary segment values.

Oracle recommends that you review your joint operating agreement for specific account information and cross reference it with the accounts available in your financial system prior to creating the account sets. Accurate identification of accounts in an account set will minimize the effort required to maintain accounts in Joint Venture Management.

For this scenario, it has been determined that there should be five account sets:

• DISTRIBUTABLE ACCOUNTS - Account set to include all Asset, Liability, Owners Equity, Expense, and Revenue accounts.
• DISTRIBUTION ONLY - Account set to include all Liability, Owners Equity, and Asset accounts that are not work in progress based upon the identified distributable accounts.
• EXPENSES – Account set to include all accounts in the Expense range and work in progress Asset accounts.
• REVENUE - Account set to include all accounts in the Revenue range.
• UTILITY - Account set to identify transactions in general ledger and subledger utility accounts in the managing partner’s cost center for the basis of calculating overhead.

Please note that the transactions in the cutback accounts should never be distributed in the joint venture to avoid these kind of transactions getting into a loop. The cutback accounts are excluded using the “Exclude joint venture transactions” checkbox under the “Account information” page in the Joint Venture Definition.

Here are the natural account ranges for HEPP Petroleum’s chart of accounts. And here are the account sets to support this use case. According to the joint operating agreement, all transactions are distributable for reporting purposes.

Assets, Liability and Owners Equity are Distribution only. The only exception is the asset account for construction work in progress represented by the natural account 17911. The construction work in progress accounts are considered to be a cost for the joint venture.

We have an account set to represent the expenses, and another one to represent the revenue. The last account set is the utility account set used for overhead calculations.

Here are the transactions for Jan 2017 for the joint venture. Both the debit and credit side of the transaction are represented here.

There are transactions in Asset, Expense, Revenue, and Liability account ranges for the joint venture Permian Alpha.

Here are the transactions for Jan 2017 for the managing partner for utility expenses that will be used to calculate overhead for the joint venture.

I will be using these transactions to demonstrate how the account sets can be used to easily represent the accounts in Joint Venture Management.

Here, I have the joint venture transactions and the ownership percentages.

All transactions are distributable for reporting purposes. Asset and Liability are Distribution Only.

The Expense account set is used to set the ownership percentage of 70:20:10 for the expense transactions.

The Revenue account set is used to set the ownership percentage of 70:15:15 for the revenue transactions.

The ownership percentage for the overhead transaction comes from the overhead method definition.

If an account is distributed and is not in the cost or revenue account sets, the default ownership percentage of 60:20:20 is used.

Let’s begin by looking at how we can set up the account sets that we have identified for our business.

Under the Financials offering in Setup and Maintenance, navigate to the Joint Venture Management functional area and select the task Manage Joint Venture Account Sets.

The joint venture accountant for the joint venture Permian Alpha creates the following joint venture account sets to identify the accounts.

Account set Distributable accounts to identify all the transactions that are distributable to the joint venture. Account set Distribution only to identify the accounts that will be distributed but won’t be billed to the joint venture stakeholders.

Expense account set to identify the expense and work in progress accounts that are distributable to the stakeholders HEPP Petroleum, Beijing Super Petroleum, and Best Rig with ownership percentages 70, 20, and 10 respectively.

Revenue account set to identify the revenue accounts that are distributable to the stakeholders HEPP Petroleum, Beijing Super Petroleum, and Best Rig with ownership percentages 70, 15, and 15 respectively.

Utility account set to identify the accounts from the managing partners’ cost center for calculating overhead.

Let’s look at each of these account sets individually. For the distributable account set, there is a single filter set to represent all the natural accounts between the range 00000 and 79999. For the distribution only account set, there is a single filter set with two filters.

The operators provide an efficient way to identify segment values. The ‘Between’ operator is for providing a range of values. The ‘Is Not’ operator is for exclusion and can be used on its own or in conjunction with the ‘Between’ operator. For the expenses account set, there are two filter sets. One to identify the range of natural accounts between 50000 and 79999, and the other to identify the construction work in progress natural account 17911. The ‘Is’ operator is used for exact matching.

For the revenue account set, there is a single filter to include the natural account between the ranges 40000 and 49999.

For the utility account set, there is a single filter set with two filters, one filter to specify the range of natural accounts between 60012 and 60019 and another filter to specify the cost center 6440.

The cost center 6440 is the managing partners cost center and is not part of the joint venture Permian Alpha.

You can also manage joint venture account sets in an Excel spreadsheet. In order to use an account sets for joint venture processing, it must be at an Active status.

Next, let’s look at the joint venture definition for the joint venture Permian Alpha to see the use of the account sets for distributable accounts and distribution only accounts.

Here’s the Basic Properties page for the joint venture.

Next, let’s click Account Information in the pane on the right side to review the accounts that have been specified for processing by the joint venture.

Note that an account set’s been selected to define distributable accounts for the joint venture Permian Alpha.

Because we are using an account set to designate the distributable accounts, we do not have to specify the individual accounts in the Distributable Segment Values section. Hence, the section Distributable Segments is not editable.

Next, let’s click the tab for the Primary Segment Values.

Cost centers 6400 and 6410 have been defined as the primary segment values for this joint venture.

Here is the definition for the account set - Distributable Accounts.

Transactions where the cost center value is 6400 or 6410 have been defined as distributable on the account set named Distributable Accounts. These transactions will be identified for joint venture processing. In this example, all values between 00000 and 79999 where the cost center value is 6400 or 6410 for the segment called as H E P P Account are distributable to the joint venture.

Recall the transactions from our example.

Hence, the transactions for these natural accounts will be identified as distributable to the joint venture.

Next, let’s look at the Distribution Only account set.

When assigned to a joint venture, this account set identifies transactions that will be distributed for reporting purposes, but will not be invoiced to partners.

Here’s the definition of the distribution only account set.

All natural accounts in the range 00000 to 39999 where the cost center value is 6400 or 6410 other than the account 17911 have been defined as distribution only.

Resulting in the highlighted transactions to be set to Distribution Only during joint venture processing.

Next, let’s click the Stakeholders button to review the stakeholders that have been defined for this joint venture.

Beijing Super Petroleum and Best Rig are external stakeholders.

The managing partner HEPP Petroleum is represented by Permian Blue Star.

Let’s take a look at the ownership definitions by clicking Ownership definitions in the right pane.

There are four ownership definitions.

Expense and work in progress accounts are distributable to the stakeholders HEPP Petroleum, Beijing Super Petroleum, and Best Rig with ownership percentages 70, 20, and 10 respectively.

Revenue accounts are distributable to the stakeholders HEPP Petroleum, Beijing Super Petroleum, and Best Rig with ownership percentages 70, 15, and 15 respectively.

The overhead amount is to be invoiced to the stakeholders Beijing Super Petroleum and Best Rig with ownership percentages 70 and 30 respectively.

The default ownership percentage is 60% for HEPP Petroleum, 20% for Beijing Super Petroleum, and 20% for Best Rig.

Next, let’s look at how account sets are used in Ownership Definition Assignment Rules.

Let’s click the task Manage Joint Venture Ownership Definition Assignment Rules.

Assign a joint venture account set to an ownership definition assignment rule to easily designate the accounts whose transactions will receive the designated ownership definition or direct billed stakeholder.

There are 2 ownership definition assignment rules. One to designate the ownership definition to be used for transactions with accounts in the expense range. And another to designate the ownership definition to be used for transactions with accounts in the revenue range.

You can see the accounts sets associated with the assignment rules in the Account Sets column.

Joint venture account sets are available for use on the overhead methods page.

Let’s click the task Manage Joint Venture Overhead Methods.

Let’s review the overhead method definition for the utility expenses.

You can use an account set or you can select a single account on the overhead method.

Here, we have selected an account set in the overhead method to identify transactions in accounts in subledger accounting and general ledger that are the basis for the overhead calculation.

Here is the definition of the utility account set.

Transactions for accounts in the range 60012 to 60019 with the cost center segment as 6440 will be selected for the overhead calculation.

And here, I have the Joint Venture Source Transaction for the utility overhead that was created when I ran the Process Joint Venture Overhead process.

Now, let’s identify the transactions for the joint venture Permian Alpha.

Let’s click the quick action link to access the Identify Joint Venture Transactions process.

Let’s identify the joint venture source transactions first.

Let’s identify the transactions from subledger accounting and from general ledger.

Select Yes for the parameter Process Ownership Definition Assignment Rules.

Select No for the parameter Bypass Default Ownership Definition Assignment to ensure that the default ownership definition will be applied for the transactions that did not receive an ownership definition or direct billed stakeholder based on the ownership definition assignment rules.

Let’s click the Transactions icon to view the identified transactions in the Joint Venture Transactions work area.

Note that the transactions have been identified and set as distribution only based upon the distributable and distribution only account sets.

The ownership definitions have also been assigned based upon the ownership definition assignment rules and the account sets assigned to them and the default ownership definition for the joint venture.

This concludes this demonstration.