SAP AG 2002

Joint Venture Accounting (JVA)

Joint Venture Accounting (JVA)

SAP AG 2002

JVA Workshop

Day 1 Basics1. Introduction2. Accounting Principles3. Master Data4. Integration

Day 2 Day-to-Day Processes1. Data Entry2. Payments3. Operated Accounting4. Non-Operated Accounting

Day 3 Periodic Processes1. Cutback2. Foreign Currency Valuation3. Month End Processing

Day 4 (half day) Reporting1. Billing2. Reporting3. Planning4. Year End

Day 4 (sec half) Configuration1. Customizing #1

Day 5 (first half) Configuration1. Customizing #2

SAP AG 2002

JVA Workshop Goal

Understand the concepts and gain hands-on experience of mySAP.com Oil & Gas JVA

Perform JVA related functions, using Finance, Controlling, Project System, and Materials Management

Use sample companies to understand and apply JVA functions

This workshop will enable you to:

SAP AG 2002

JVA Unit 1

Basics

1. Introduction

2. Accounting Principles

3. Master Data

4. Integration

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JVA 1.1

Introduction

This section introduces the concept of JVA.

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What are the Oil and Gas Industry processes?

EXPLORE DEVELOP PRODUCE REFINE MARKET SELL

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Why Are Joint Ventures Used?

The Upstream Oil and Gas Industry Is characterised by:

• High Risk• Large Investment• Long Term Commitment

To share the risk Companies form Joint Ventures

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Who Runs a Joint Venture?

Non OperatorPartner A

Non Operator Partner B

Manage the work

Plan and run venture activities

Maintain accounting records for venture

Report venture activity to partners

Share income or product

Operator

JV#1 Exploration

JV#2 Construction

JV#3 Production

35%

65%

30%

30%40%

70% 30%

Joint Ventures

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SAP JVA

Non-Operating Partner

Maintain accounting records for their own share of the venture

Settle accounts with the operating partner, according to the conditions of the venture

Operating Partner

• Manage the venture on a day-to-day basis

• Maintain venture accounting records• Calculate partner shares of venture

expenditure and revenue• Report venture activity to partners

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JVA 1.2

Accounting Principles

This section describes the accounting principles behind SAP JVA.

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T Accounts

Partner Account

1 150

50 2

100

Notes

1. Partner share of venture costs

2. Settle partner account

Account name

Debit Entry Credit Entry

Final Balance of Account

Asset account Liability account Capital account

Increase Increase IncreaseDecrease Decrease Decrease

JV Costs

150 1

150

JV Bank

2 50

50

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Company BCompany A

Operator Oriented Accounting

Notes

1. Company A incurs costs running the venture.

2. Company A calculates company B’s share of costs (40%).

3. Company B accounts for its own share of costs.

4. Company B reimburses company A.

Partner B

2 40

40 4

Venture Bank

100 1

4 40

60

Venture Costs

1 100

40 2

60

Venture Account

40 3

4 40

Own Bank

40 4

Venture Costs

3 40

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Partner Oriented Accounting

Operating Co. Company A

VentureNotes

1. Company A incurs costs while running the venture.

2. Company A calculates the share of costs for Partner A and Partner B.

3. Company A accounts for its own share of costs.

4. Company B accounts for its own share of costs.

5. Company A reimburses the venture.

6. Company B reimburses the venture.

Partner A 60%

2 60

60 5

Venture Bank

100 1

5 60

6 40

Venture Costs

1 100

60 2

40 2

Venture Account

60 3

5 60

Own Bank

60 5

60

Venture Costs

3 60

60

Company B

Venture Account

40 4

6 40

Own Bank

40 6

40

Venture Costs

4 40

40

Partner B 40%

2 40

40 6

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Company A

Operator / Partner Accounting

CompanyVentureNotes

1. Company A incurs costs running the venture.

2. Company A calculates the share of costs for Partner A and Partner B.

3. Company A accounts for its own share of costs.

4. Company B accounts for its own share of costs.

5. Company A reimburses the venture.

6. Company B reimburses the venture.

Partner A 60%

2 60

60 5

Venture Bank

100 1

5 60

6 40

Venture Costs

1 100

60 2

40 2

Venture Account

60 3

5 60

Own Bank

60 5

60

Venture Costs

3 60

60

Company B

Venture Account

40 4

6 40

Own Bank

40 6

40

Venture Costs

4 40

40

Partner B 40%

2 40

40 6

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Billing Basis

Expenditure Based

Invoice Based

Cash Based

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Venture

Billing Basis: Expenditure Based

Expenditure

1 100

100

Vendor

100 2

3 100

Venture Bank

100 3

100

GRNI Accruals

100 1

2 100

Bil

lab

leN

on

-Bil

lab

le

Notes

1. Expenditure is incurred in Month 1.

2. An invoice is received in Month 2.

3. An invoice is paid in Month 3.

JV Billing Month 1

Expenditure 100

Total 100

JV Billing Month 2

Expenditure 0

Total 0

JV Billing Month 3

Expenditure 0

Total 0

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Billing Basis: Invoice Based

Venture

Expenditure

1 100

100

Vendor

100 2

3 100

Venture Bank

100 3

100

GRNI Accruals

100 1

2 100

Bil

lab

leN

on

-Bil

lab

le

Notes

1. Expenditure is incurred in Month 1.

2. An invoice is received in Month 2.

3. An invoice is paid in Month 3.

JV Billing Month 1

Expenditure 100

GRNI Accruals -100

Total 0

JV Billing Month 2

Expenditure 100

GRNI Accruals 0

Total 100

JV Billing Month 3

Expenditure 0

GRNI Accruals 0

Total 0

SAP AG 2002

Billing Basis: Cash Based

Venture

Expenditure

1 100

100

Vendor

100 2

3 100

Venture Bank

100 3

100

GRNI Accruals

100 1

2 100

Bil

lab

leN

on

-Bil

lab

le

Notes

1. Expenditure incurred in Month 1.

2. Invoice received in Month 2.

3. Invoice paid in Month 3.

JV Billing Month 1

Expenditure 100

GRNI Accruals -100

Vendor 0

Total 0

JV Billing Month 2

Expenditure 100

GRNI Accruals 0

Vendor -100

Total 0

JV Billing Month 3

Expenditure 100

GRNI Accruals 0

Vendor 0

Total 100

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JVA 1.3

Master Data

This section describes the master data used in JVA.

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Joint Operating Agreement (JOA)

Formal contractual agreement

• Specifies conditions for joint activities• Defines partner shares (working interests)• Describes rules for sharing profit and loss• Specifies penalties

JOA

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Joint Venture

Joint Venture

Definition of joint activities

• Defines role of own company in venture• Assigns partner shares and validity• Specifies reporting requirements• Defines taxation rules• Defines accounting procedure

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Equity Group

Definition of partner shares and roles

• Single operating partner and share• One or more non-operating partners and shares

Equity Group

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Joint Venture Partner

Definition of entity participating in a joint venture

• Can participate in one or more ventures simultaneously

• Linked to customer accounts receivable (A/R) sub-account for non-operating roles

• Linked to vendor accounts payable (A/P) sub-account for operating roles

Partner

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Joint Venture Partner: A/R and A/P

• Customer record required for all partners

• Vendor record required for all partners

• Link customer and vendor using Account control fields

JV PartnerCustomer

Vendor

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SAP Company GBU1

Customers

Inter-Company Partners

Partner Inter-Co Code Partner Name

JV5001 Caledonian Oil

JV5101 Troll Oil

JVGBU2 GBU2 SAP Company GBU2

JV5001

JV5101

JVGBU2SAP Company GBU2

Customers

Partner Inter-Co Code Partner Name

JVGBU1 GBU1 SAP Company GBU1

JVGBU1

Vendors

JVGBU1

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Partner 2

Partner 1

Master Data Structure

Venture 1

Operator

Venture 2

Equity Group A

Venture 3

Equity Group E

Partner 2

Partner 1

Operator

Partner 3

Equity Group B Equity Group C

Equity Group D

Equity Group A

JOA

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Equity Group E

Equity Group D

Equity Group C

Equity Group B

JOA Assignments

JOA

Venture 1Equity Group A

Venture 2

Venture 3

DATE

DATE

DATE

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Equity Type

Definition of activity in a joint venture

• Represents time-independent aspect of venture and equity group

• Provides link between venture activity and equity group

• Activity may be actual or logical

Equity Type

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Assignment of Equity Group to Equity Type

March April May

Equity Group A Equity Group C

Equity Group A

Equity Group A Equity Group D

Equity Type 1

Equity Type 2

Equity Type 3

Venture 2

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Partner 1

Equity Group B

Assignment of Equity Group to Partners

Venture 1

Operator

Equity Group A

Partner 2

Partner 1

Operator

60%

40%

40%

40%

20%

Company A

Customer A

Customer B

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Cost Object

Data Model

JOA Joint Venture

Equity Group Equity Type

Partner Equity Share

Recovery Indicator

G/L Account

Date

Plant

Valuation Type

Partner

Customer Account

Vendor Account

Company Code

Cost centre

WBS Element

Order

Network

SAP AG 2002

Exercise 1.1: Review Joint Venture Master Data

1. Display joint venture partners2. Display a JOA3. Display a joint venture

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Corporate JOAs

Non-Operated JOAs

Operated JOAs

JOA Class

Company Code

Joint Oper. Agreement

JOA Class01 Operated02 Non-OperatedCP Corporate

JOA Class

JOA 3JOA 4

JOA 2

JOA 5

JOA 7JOA 6 JOA 9

JOA 8JOA 1

JOA Class is used to group JOAs

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Maintain a JOA

You can assign an alternative address to each area.

The applicable venture type is determined automatically.

You cannot change the equity group if JVA documents exist.

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Corporate Ventures

Non-Operated Ventures

Operated Ventures

Joint Venture Class

Company Code

Joint Venture

JV Class01 Operated02 Non-OperatedCP Corporate

JV Class

JV 3JV 4

JV 2

JV 5

JV 7JV 6 JV 9

JV 8

JV 1

JV Class is used to group joint ventures

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Venture Type

• Operated not taxed

• Operated taxed

• Non-operated, on-billed

• Non-operated

• Corporate

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Maintain Joint Venture

The Posting Method is used to determine the accounting treatment of a venture.

The Funding Group represents a group of ventures that are funded from the same set of bank accounts.

The assignment from equity type to equity group is based on the document date.

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Recovery Indicator

Recovery

Indicator

Identifies category of a joint venture transaction

• Indicates whether a particular revenue or expense is shared by venture partners

• Used to select data for reporting to venture partners

• Used to distinguish between joint and own revenues and expenditures

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Use of Recovery Indicator

Material Consumed

BI - Billable

NB - Non-Billable

AD - Adjustments

CB - Cutback

Material Consumed

BI - Billable

NB - Non-Billable

AD - Adjustments

CB - Cutback

1. Basis for sharing partner costs (cutback)

2. Basis for operational reporting (Operator Oriented)

CUTBACK30%

CUTBACK30%

Venture (Gross) Reporting

Venture (Gross) Reporting

Own (Net) Reporting

Own (Net) Reporting

Gross Exp.

Net Exp.

Billable Balances

Cutback posting

100

20

10

33-

100

20

10

33-

ExpenditureJV Billing

11033

130

97

SAP AG 2002

Exercise 1.2: Create Joint Venture Master Data

1. Add a new partner2. Create a JOA3. Create a joint venture

SAP AG 2002

JVA 1.4

Integration

This section describes the integration between JVA and other SAP R/3 components.

SAP AG 2002

What is the JVA Module?

CompanyCode

VentureEquityGroup

AccountCost

ObjectProfitCenter

RecoveryIndicator

CodingBlock

Set of Special Ledgers comprising Line Item and Balance tables fed almost entirely from standard Set of Special Ledgers comprising Line Item and Balance tables fed almost entirely from standard SAP modulesSAP modules

JVA Coding blockJVA Coding block is based on Joint Venture structures but also contains the key structures from the is based on Joint Venture structures but also contains the key structures from the standard financial and costing modules.standard financial and costing modules.

JVA captures JVA captures ALLALL financial and cost postings real time from standard modules such as FI, CO & MM financial and cost postings real time from standard modules such as FI, CO & MM and converts them to JV formatand converts them to JV format

It provides new processes specific to E & P and also amends standard ones to be compatible with the It provides new processes specific to E & P and also amends standard ones to be compatible with the JV structuresJV structures

It provides a full Trial Balance by Venture and Equity Group It provides a full Trial Balance by Venture and Equity Group

Effectively a new Finance Reporting ModuleEffectively a new Finance Reporting Module

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Integration

Accounting Interface

AMMM

FI

PS

CO

SD

HR

PM

JV Interface

CodingSplittingClearing

Accounting Document

JVDocument JV

Database

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Reporting with JVA

FI CO

JVA

PMMM PSAM

Financial ledgerAccount

Costing LedgerAccount + Cost Object

PSA

FINANCIAL DOCUMENT

BILLING

JV ledgerAcct + C/O + Venture

JV Processes

JV Billing ledger

PSA Reporting ledgerPSA

Open Item MgtAP, AR etc

Bank & Cash

Cost AllocationsManagement

ReportingBudgets & Plans

Finance ReportsCost Reports

Budgets & Plans

Partner BillingCash Statements

Invoices

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JVA Data Capture

FI Balance SheetFI Balance Sheet

FI Cost and IncomeFI Cost and Income

CO Cost allocationsCO Cost allocations

FIFI COCO

PSPSJVJV

CapturedCaptured

PCAPCA

Not Captured

Partly Captured

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JVA Activation

The JVA module is activated at The JVA module is activated at Company LevelCompany Level in SAP - specify: in SAP - specify:

Region - Region -

USAUSA

CanadaCanada

InternationalInternational

Billing Basis – Billing Basis –

CashCash

Expenditure Expenditure

InvoiceInvoice

Banking arrangements – Venture Bank Accounts and SwitchingBanking arrangements – Venture Bank Accounts and Switching

JVA Cutback Model -JVA Cutback Model -

Standard Standard

Operator as Partner modelOperator as Partner model

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Cost ObjectCost Object

Joint Venture Coding for Cost Object

Production Order

Network Order

Plant Maintenance

Order

Project Cost centre Internal Order

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

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Joint Venture Coding Fields

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

Joint Venture

Equity Type

Recovery Indicator

JIB/JIBE Class

JIB/JIBE Subclass A

JV Object Type

Accounting

Control

Reporting

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Accounting Documents

Vendor Invoice

FI Document

CO Document

JV Document

JV Document

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Joint Venture Coding for Assets

Fixed Asset Owning Cost centre

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

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Joint Venture Asset Posting

Accounting options for capitalisation:

1) Via a WBS or Order :

2) Direct to the Asset Accounts :

Accounts Payable WBS Assets

100 100

30

70 70

Accounts Receivable

30

Invoice

Cutback

Settlement

Accounts Payable Assets

100 100

30

Accounts Receivable

30

Invoice

Cutback

70

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Joint Venture Asset Posting

JV Document

Vendor Invoice

Asset Document

JV Document

Asset Master

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Plant

Joint Venture Coding for Material

Valuation Type

Project

Cost centre

Internal Order

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

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Joint Venture Material Posting

JV Document

Goods Receipt

Material Document

Accounting Doc JV Document

MM Assignments

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Default Joint Venture Coding for PM Orders

Project

Cost centre

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

Plant Maintenance

Order

Functional Location

Equipment

SAP AG 2002

Exercise 1.3: Create Integrated Master Data

1. Create a joint venture cost centre2. Create a joint venture project

SAP AG 2002

Unit 1 Summary

Understand the concepts and gain hands-on experience of mySAP.com Oil & Gas JVA

Perform JVA related functions, using Finance, Controlling, Project System, and Materials Management

Use sample companies to understand and apply JVA functions

You are now able to: