Financial Reporting by Joint Venture Stakeholder

Welcome to the demo for Financial Reporting by Joint Venture Stakeholder in Oracle Fusion Joint Venture Management.

You can now generate financial reports for each stakeholder using the existing Financial Reporting tools available. The stakeholder reporting ledger will have an additional stakeholder dimension in the chart of accounts to be able to generate financial reporting by stakeholder. Some joint ventures have reporting requirements to generate financial reports for each stakeholder showing each stakeholder’s share of the account that they are participating in.

The Stakeholder Reporting Ledger will contain information from joint venture distributions, with an added stakeholder dimension. This makes it easier for managing partners to generate financial reports to comply with the joint operating agreement.

The following demo will show how the Financial Reporting by Joint Venture Stakeholder feature streamlines the reporting process. Here’s a sample Balance Sheet report coming from the Financial Reporting by Joint Venture Stakeholder functionality.

The stakeholder reporting ledger defined through this functionality will contain information from the joint venture distributions. The chart of accounts associated with this ledger will include an additional stakeholder segment.

This eliminates the need for joint venture accountants to manually prepare financial reports for each stakeholder, ensuring compliance with the joint operating agreement.

I want to introduce you to the concepts behind Financial Reporting by Joint Venture Stakeholder. There are 2 sets of accounting books, one is the source ledgers, and the other is the stakeholder reporting ledgers. When doing the financial reporting we must have two ledgers, a source ledger and the stakeholder reporting ledger.

The first level shows the source ledgers. A source ledger is a ledger associated with the business unit of the joint venture. The Source Ledger can be the primary ledger for the business unit, or a currency or secondary ledger assigned to the primary ledger. Source ledgers cannot be a valuation method ledger as that designation is meant strictly for the Stakeholder Reporting ledgers. The second level shows the stakeholder reporting ledger.

These ledgers are secondary ledgers assigned to the primary ledger and are designated as valuation method ledgers. A stakeholder reporting ledger is a ledger that will contain journal entries for each distribution for stakeholders within a joint venture. The chart of accounts that will be assigned to the stakeholder reporting ledger must have a stakeholder segment. This will be used to provide financial reporting by stakeholders. The transactions from the source ledger will be brought into the system. Once the transactions are identified and distributed to the stakeholder, they will be recorded in the stakeholder reporting ledger. This enables joint venture accountants to generate reports directly from the stakeholder reporting ledger showing each stakeholder's share.

Let’s take a look at a business scenario for the Permian Alpha Joint Venture to better understand how the financial reporting by joint venture stakeholder reporting works.

In this case, the joint venture is set up as a legal entity. Hepp Petroleum serves as the managing partner of the Permian Alpha Joint Venture, while Beijing Super Petroleum and Best Rig are the external stakeholders.

According to the joint operating agreement, transactions for all accounts are distributable to the joint venture. Each month, based on the determined share outlined in the joint operating agreement, Hepp Petroleum is responsible for providing a report that shows each stakeholder’s share of the accounts. Let’s begin by discussing how we can enable financial reporting by stakeholder in Joint Venture.

The first step is to set up a secondary ledger that will be designated as the stakeholder reporting ledger for the joint venture. This secondary ledger will have a chart of accounts structure the same as it’s source ledger with the addition of a stakeholder segment and will be designated as a valuation method ledger.

Once a secondary ledger is created ensure that the secondary ledger is configured correctly.

Under the Financials offering in Setup and Maintenance, navigate to the Joint Venture Management functional area and select the task Manage Subledger Accounting Options. Search for the secondary ledger and under the Joint Venture application name, click Edit Accounting Options action. This ledger should be configured with a valuation method type and must be enabled for subledger accounting to ensure proper tracking and reporting. Lastly, you'll need to setup subledger accounting for Joint Venture Stakeholder Reporting. This setup is for enabling the creation of journal entries for the stakeholder reporting ledger. For detailed steps, refer to the Joint Venture Management Implementation Guide. Next step is the enabling of the stakeholder reporting feature in the System Options.

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

Click the Start Action. On the General Information page, enable the Stakeholder Reporting option under the Feature section. Enabling this option will activate the necessary fields for stakeholder reporting. The third setup is the assignment of the source ledger and stakeholder reporting ledger for the joint venture.

Under the Financials offering in Setup and Maintenance, navigate to the Joint Venture Management functional area and select the task Manage Joint Venture Definitions. Search for the Joint Venture and Click the Joint Venture Name.

Once you're on the Joint Venture Definition page, click Start to begin setting up the books.

On the Billing and Report Information page, configure the source ledger and stakeholder reporting ledger under the stakeholder reporting books section. After doing the setups, stakeholder reporting journals that will be written to the stakeholder reporting ledger must be created.

On the Joint Venture Distributions manage page, there are two new columns: "Created by Joint Venture," which indicates whether the transactions were generated by Joint Venture Invoices or Journal Entries. This also includes follow-on transactions related to joint venture-created invoices, such as receipts for payments received from stakeholders and payments made against payable invoices to pay stakeholders for their share of revenue.

Once these transactions are brought to the joint venture, it will be set to 'Distribution Only' and direct billed to the stakeholder.

And the other column “Stakeholder Reporting Status” which shows the current stage of the stakeholder journal entry creation process for the distributions.

After the setups are done, you can now create stakeholder reporting journals. To create stakeholder reporting journals, you need to run the Create Stakeholder Reporting Journals mode of the Create Joint Venture Invoices and Journal Entries process.

In this process, I will simply enter the Joint Venture and the Period where I want to create stakeholder reporting journal entries.

Once the ESS process has been completed, open the report output file.

The report summarizes the journal entries created, and the number of distributions included in the journal entry. You can also view additional stakeholder reporting information by navigating to the Joint Venture Distributions Details page. From the Joint Venture Distributions work area, click on the Distribution ID to navigate to the Details page.

Once you're on the details page, scroll down, and you'll find the Stakeholder Reporting Book Information section, which contains key data related to the stakeholder’s reporting, including the corresponding ledger, journal ID, creation date and the status. You can also view the stakeholder reporting journal details that was created by clicking on the Stakeholder Reporting Header ID. This action will redirect you to the Joint Venture Journal Details page, where you can see the details of journal entries related to each stakeholder.

After performing the Create Accounting process to post the journals. Run the Create Joint Venture Distributions process in 'Update Accounting for Invoices' mode. This will update the Stakeholder Reporting Status to Process Complete Checking the Stakeholder Reporting Journal Entries is also possible by navigating to the Journals Manage page from the Joint Venture Management. Search for the journal entries that you want to view. And click on the document number of the journal entry. Clicking on the document number opens the Journal Details page, where you can view all the transaction details included in the journal entry.

After posting all the entries to the stakeholder reporting ledger, you can now generate financial reports using any financial reporting tool available.

But for this example, I will use Smart View connected to Essbase cluster in generating a balance sheet report.

I’ve already formatted the report layout and set up the filter criteria. Once connected, I'll update the cost center of Permian Alpha Joint Venture and click Refresh action.

As you can see, the report includes balances that reflect each stakeholder’s financial position. Here’s a sample Income Statement report generated using Smart View, displaying each stakeholder’s share of expenses and revenue.

This concludes this demonstration.