acctg training

April 11, 2023

“Confidential - For Internal Use Only. © 2005 Halliburton. All Rights Reserved.”

Accounting Overview

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Agenda• Month-end close • Profit Centers & Hierarchies

– How do transactions populate a Profit centers • PC Allocation Process, Entries and reports• Financial statements:

– Drilling down for details– Other reports available

• Changes to journal entry process: – Use of Internal orders and other new required fields – Intercompany changes – Tools available such as excel upload, intercompany entry

excel upload, etc. • Changes to Foreign Exchange revaluation entries

and impact • Any other questions

April 11, 2023


Profit Centers

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Questions?

• Any questions from the Total Overview class about Profit centers & PC Hierarchies?

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Profit Center Overview• Halliburton uses profit center as the primary key to

segregate and manage internal reporting• A profit center represents both the geographical

area and the product or services being delivered• Profit centers can cross many company codes as

they are used for business review and control rather than statutory reporting purposes

• Responsibility for Balance Sheet items is assigned using profit centers in addition to the management of profit and loss

• All cost objects have a profit center assigned to them

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Profit Center Naming Convention• Profit Center numbers consist of 10 digits, broken into 3

groups. The naming convention provides the meaning for each of these groups of digits which, when considered as a whole, give meaning to the profit center number.

– Digits 1-3 Country

– Digits 4-5 Natural Work Area (NWA), if designated (default is “10” if not)

– Digits 6-10 Sub-PSL/Function

• Therefore, a user can determine both geographical information and Sub-PSL/Function from the numbering sequence of a profit center

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Landmark PC’s10500 Software Related Product10501 Software Related Customer Support10502 Drilling & Completions10503 Subsurface10504 Product Optimization10509 Information Management Other10506 Managed Resources10505 Managed Services10507 Professional Services Other89000 Landmark Business Development10588 Hardware Related10163 Other ops73300 Indirect Support

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Profit Center Groups

• To provide the flexibility needed for management reporting purposes, profit centers are aligned into groups

• Profit center groups are set up to give views of financial activity by Business Unit, PSL, geography, or a combination of these

• Profit center groups are then aligned into further groupings known as “hierarchies”

• Every profit center is assigned to at least one profit center group

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Standard Hierarchy – “1”The Standard Hierarchy groups have a leading character of “1” and represent the PSL structure without reference to geography.

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“4” HierarchyThe “4” structure is Country/NWA by PSL

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“5” Hierarchy

The “5” structure is PSL by Geographic Region

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“F” Hierarchy

The “F” structure is Geographic Region by PSL

April 11, 2023


How do transactions populate a Profit Center?

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Overview

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Data Flow - Profit Center

• How do transactions populate Profit Center?– Posting to a cost object that is directly assigned to a profit

center. Example: Cost center– Goods movement postings. Materials are assigned to a

profit center at the plant level.– Posting to an object that is assigned to a cost object.

Example: Fixed Assets inherit the profit center of their assigned cost center; Maintenance orders inherit the profit center of their responsible cost center.

– Manual posting in FI to a balance sheet account.– Balance sheet adjustment (PC Allocation) for reconciliation

accounts.

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Cost Objects

• Cost objects represent the responsible party of the cost.

• Most cost is charged to a cost object (“who”) in addition to a cost element (“what”).

• A profit center is assigned to all cost objects.• Cost objects include:

• Internal Orders• Maintenance Orders• Production Orders

• Cost Centers• Sales Order Item• Work Breakdown

Structure (WBS)• Networks

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Data Flow – OTC Example

• All materials (service and stock) are assigned to a profit center at the plant level.

• Materials are brought into the sales order as items and the items inherit the profit center from the material.

• The Profit Center on the Sales Order item flows to the Delivery document and on to the Billing document.

• Substitution rule has been implemented for Landmark for sales outside of country to automatically change profit center based on information in the Sales order.

• The accounting documents generated from the Billing document includes the profit center from the items.

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Material Master – Sales:general/plantView via T-code MM03

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Sales order itemProfit center is transferred from plant/material to the sales order item (view via t-code VA03)

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Billing document itemProfit center is transferred from the sales order item to the billing document item. (view via T-code VF03)

~~~~~~~~~~~~~~

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FI Document from BillingProfit center is transferred from the Billing document item to the Accounting documents (FI, SPL, PCA) (view via t-code FB03)

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Things to note• Some transactions will be at default profit

center/cost center level – not everything is PSL specific– Tax expense– Foreign Exchange gains/losses– Tax payable accts– Cash

• However, a profit center is assigned to all Balance Sheet and P&L items.

• Challenge is for manual entries to Balance Sheet accounts– Not all accounts are set up to require profit center for

manual entries– However, if the profit center field is not populated, the

company code default or General_PC will be assigned

April 11, 2023


PC Allocation

Also known as PC Balancing

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Balance Sheet Readjustment• Balance Sheet Readjustment is the term that SAP uses.

This is known more commonly by several names:– PC Balancing– PC Allocation– PC Adjustment

• Entries made to Account Receivable customers and Accounts Payable Vendors accounts are posted with blank Profit Centers.

• Balance Sheet Readjustment re-posts the data into a separate general ledger account with the offsetting profit centers obtained from the entire journal entry.

• This allows more complete balance sheet reporting by product service lines.

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PC Allocation EntryOriginal Entry:

Dr. AR customer blank PC 1,000

Cr. Revenue PC 1016710002 (500)

Cr. Revenue PC 1016710003 (500)

The receivable would be allocated to both profit centers by the PC Allocation program posting the following entry:

Dr. 140010 PC 1016710002 500

Dr. 140010 PC 1016710003 500

Cr. 140010 blank PC (1,000)

Notice that the entry is in a separate account than Trade Receivables (140000).

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PC Allocation

• Entries to PC allocation accounts are actually made in summary by profit center, not for individual AR or AP documents.

• Entries are based open items within Customer and Vendor accounts.

• Inter-company accounts are no longer included in the PC Allocation program

• Generally the program is run only once a month for a company code during month end close. However, the program can be run again if ‘Overwrite’ is chosen.

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PC Allocation

Although the actual PC allocation entry is in summary, additional information is populated in other tables so that an analysis of individual documents can be performed.

There are two methods to review individual document information.

–Within the original document

–Profit Center reports:

–S_ALR_87013343 Receivables

–S_ALR_87013344 Payables

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Review Individual Document

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Balance Sheet Readjustment Rpt

Notice number – indicates first posting

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After Payment (clearing)

Note second posting – indicates item has cleared

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Running reports for PC AllocationWhen running reports to review PC allocation information, the general ledger account field should be populated differently dependant upon the module from which the report is being run:

Module

SPL/EC-CS PC Allocation Account (e.g., 140010) – no customer/vendor detail is available

PCA Reconciliation Account (e.g,140000) – detail available at customer/vendor level

For example, the ZARR/ZARP report is generated from PCA and therefore, the account to be entered is 140000 rather than

the PC Allocation account level

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PCA Reports

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PCA Receivable Report

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General InformationMany questions occur regarding why balances exist on non-

PSL specific profit centers. While each case should be reviewed on an individual basis, some factors may include:

• Lack of profit center or use of non-PSL specific profit center within journal entry:

• Examples include entries between customer or vendor accounts or portion of entry recorded to General_PC

• Certain Customer payment transactions are automatically recorded to General_PC by the PC Allocation program as it considers that these items will not be remaining open.

• Examples include short payments or payments which are posted to the customer account but not applied to specific invoices.

April 11, 2023


Financial Reports

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Overview

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Shared Folder ReportsThe major reports are executed rightly and saved as data extracts (report painter formats). These reports are linked to the Shared Folders in Business Workplace for easy user access:

Each report is run 5 times – once for each PC hierarchy.

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Report Menu

Custom Reports are assigned a transaction code and included on the report menu

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Drill-down Reporting

• Many reports generated from SPL will allow drill down to the transaction level.

• However, not all reports are set up to allow drilldown

• Additionally, in some cases, drill-down through the SPL report may not be as efficient as needed.

• In these cases, users may wish to execute reports directly from PCA:– KE5Z – Actual Line items– S_ALR_87009712 – Plan/Actual

April 11, 2023


ESG Financial Process Impacts

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Changes for GL accounts• To minimize the number of GL accounts used and to maximize

the use of system functionality, many GL accounts make use of many fields available in SAP such as personnel number, assignment field, reference key fields and internal orders

• These fields may be required or optional depending upon the account

• T-code ZGLSTATUS can be used to obtain information about an account and required fields

• However, some fields are required through validation rules which have been set up rather than via account configuration

• Examples include prepaid expenses, accrued liabilities, reserve accounts, short term lease expense

• These make use of statistical internal orders so that entries can be categorized without needing further GL accounts.

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Internal Orders• Can be statistical or settlement• Statistical are used as used to track cost for memorandum

purposes using the internal order field as “memo” field that allow further analysis and reporting without using new GL account.

• Settlement are used as additional cost collectors and then can be allocated to cost centers or other cost objects. These should be settled at the end of each month.

• Settlement internal orders are considered to be a cost object whereas statistical orders are only memorandum.

• Therefore if a statistical order is used, the transaction will still require a true cost object.

• Internal orders are specific to company codes• Internal orders can be set up by accountants, but GMD will also

set these up upon request.

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Internal Order Reporting

• Internal order is a field that can be included in Account line item detail analysis (FBL3N)

• For Settlement Internal orders, other reports can be run which show line items and settlement information:– KOB1 - Orders: Actual Line Items – S_ALR_87012993 - Orders: Actual/Plan/Variance

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Other Orders which may be used• A CO order is a cost collector, used to identify a

specific cost, usually of a short term nature and is normally settled to another object. It gives users the ability to view costs separately from the cost center or other cost objects.

– Maintenance Order – This order is used in the Plant Maintenance module to track equipment repair costs. It usually settles to the cost center which owns the equipment or to a sales order item.

– Production Order – This order collects cost from materials, labor, and overhead used in the creation of a product. It settles to inventory and increases stock quantity.

April 11, 2023


Intercompany

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Major changes in Intercompany

• All activity in customer and vendor accounts• No automatic settlement• CO transfer pricing program• Automatic withholding tax program

– Use of Reference Key 2 field– Intercompany category field– Trading Partner– Manual entries for credits

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Intercompany Accounts• Customer and Vendor accounts are used for virtually

all intercompany activity:– Cxxxx for entities active in ESG SAP system

• XXXX represents company code• Active means ESG SAP system is the transactional system of

the entity (i.e. does not include trial balance loads)

– Kxxxxxx for entities consolidated with ESG but not active on ESG SAP system

• Xxxxxx represents trading partner• Example, Landmark activities were recorded to

K-customer/vendor

– Jxxxxxx for entities not consolidated with ESG and not active on ESG SAP system, but still affiliated with ESG

• Xxxxxx represents trading partner• Example would be non-consolidated joint venture not active on

ESG SAP system

April 11, 2023


Intercompany WHT and Journal Entries

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Automated I/C Withholding Tax Program

• Because most intercompany transactions do not run through the normal AP process, standard SAP functionality to calculate and record withholding taxes on intercompany entries does not work

• Custom program has been developed to perform the calculation and recording of WHT on intercompany transactions

• The WHT entry is recorded separate from the intercompany entry

• The program is run each night for all intercompany transactions.

• IC WHT Program reviews the offsetting line items from the above accounts to gather information such as trading partner and intercompany category to be used in calculation.

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• Two fields on the intercompany transaction must be completed for each line of the entry:– Reference key 2 field– Trading partner

• The Reference key 2 field should contain a 2 digit number which represents the category of intercompany transaction

• This category has been mapped to tax categories used in Talisman by the regional tax managers.

• Use the trading partner and the category information, the program can then determine which tax rate should be used.

• The tax rates are downloaded from Talisman at the beginning of each month.

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Talisman

Programming Overview

SAP Intercompany Transaction

Country Treaty Country WHT TypeTax Rate

SAP Custom Programming

Company Code Amount IC CategoryTrading Partner

Map using Country code of Company Code *

RTMs map for each country

Program calculates withholding to be

recorded

*Note that exceptions to logic are identified by RTMS and appropriately programmed

April 11, 2023


New Field Requirements

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Required Fields

• With the implementation of the Withholding Tax Program, manual intercompany entries should now have two additional fields populated by the users:

– Reference Key 2 should be populated with the Intercompany category (2 digits required)

– Trading partner (6 digits required)

• These fields have been added to the ZFPT and ZFCPT Excel templates

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Intercompany Category• The Reference Key 2 field was made available for

input on intercompany transactions approx. 2 years ago as part of the Intercompany Categorization initiative.

• This field is used to help identify what type of transaction occurred on the intercompany document.

• This field is relevant for the line items offsetting the I/C payable or receivable.– Although the field is available on the I/C receivable or

payable line item, it is not used by any programs• The importance of this field is greater now because

it will be used by the intercompany withholding tax program to determine the proper rate to be used for related withholding taxes

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Intercompany Category (cont)

• This field is not currently required, but it will be required at some point in the future

• A monitoring report will be set up to review whether users are completing this field

• Users can find a list of categories and definitions of categories on the web at:http://houwapp025.corp.halliburton.com/st/suz/gac/sap/inc/icc/_Job_Aid_Categories_for_IC_Transactions.xls

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Trading partner

• The trading partner field represents the company code which is the partner in the transaction– In our previous example, company code 1100 was charging

company code 8078.– The trading partner for company code 1100 is 807800– The trading partner for company code 8078 is 110000

• The trading partner number used should normally not be the same as the company code of the transaction.– For example, the trading partner for an entry on company

code 1100 should normally not be 110000

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Trading Partner

• Currently trading partner field is automatically populated on the intercompany payable or receivable line item

• However, with the implementation of the withholding tax program, users will need to complete the field for all line items of the intercompany transaction

• This will allow the withholding tax program to review the line item and determine the proper country WHT rate

• This field is not currently required for all intercompany transactions, but will be at a future point

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How to Handle Multiple Trading Partners

• Because each line in the intercompany transaction should have it’s own trading partner, users should now be careful to not net transactions together.

• For example:– Company code 1100 needs to charge several

company codes for training expenses:• Company code 3087 150• Company code 8060 200• Company code 5010 100

– Total 450

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Multiple Trading Partners

• The entry should be recorded as follows:– Company code 1100

• Cr. 610500 Recoveries 150 TP 308700 Cat 16• Cr. 610500 recoveries 200 TP 806000 Cat 16• Cr. 610500 Recoveries 100 TP 501000 Cat 16• Dr. 141000 – C3087 150• Dr. 141000 – C8060 200• Dr. 141000 – C5010 100

• The entry should not be recorded as:• Cr. 610500 Recoveries 450 TP110000 Cat 16• Dr. 141000 – C3087 150• Dr. 141000 – C8060 200• Dr. 141000 – C5010 100

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Multiple Trading Partners (cont)

• This will result in additional lines being recorded, but it results in many benefits:– Transparency of transaction is improved as it is

clear exactly what is being charged to each trading partner

– Reporting of intercompany transactions by trading partner is improved

– Withholding taxes are correctly calculated by trading partner

– Invoice documentation is improved

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Other Considerations

• Currently, if the Reference Key 2 field is left blank by the user, the Intercompany Categorization program will complete it. However, the completion will be at month end – after the IC WHT program has run

• Therefore as new categories are implemented on the IC WHT program, users will need to become more disciplined in inputting the category at time of entry

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• The Intercompany Withholding Tax (IC WHT) Program considers all transactions from these accounts:– 141100 Intercompany Payable– 141150 Intercompany Interest - Payable – 141200 Intercompany Advances – 141400 Intercompany Notes - Payable – 141600 Payable to Unconsolidated Subs/Joint Ventures – 170300 Advances to Unconsolidated Subs/Joint Ventures

• Program will not look at entries to IC Receivable accounts. Therefore credits must be carefully posted.– Special logic will be used for 141200 I/C Advances to distinguish

payables from receivables• Program will not consider transactions without intercompany

category field completed.• Trading partner must be correct• Default rates are used where treaty rates have not been loaded

into Talisman

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Intercompany Journal Entries

• Whether recording the entry manually via F-02 or through an Excel template upload program (typically ZFPT), most users allow the system to record the Intercompany Receivable and Payable entries

• However, this can create a problem as users do not consider whether they are billing an expense or issuing a credit.

• The system does not understand the difference and therefore may not record the offsetting entry correctly

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How SAP Works

• Partner relationships are configured into the system such that:– The offset to a debit on Company Code A will be a

credit to Intercompany Payable– The offset to a credit on Company Code B will be

a debit to Intercompany Receivable.

• Therefore when posting corrections such as a credit, users cannot allow the system to record the Intercompany Receivable and Payable automatically

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Example

• Company Code 1100 is charging Company Code 8078 for training expenses of $150:– User enters the following:

• Cr. 610505 Recoveries (150) cc 1100• Dr. Training Expense 150 cc 8078

– The system records the following entries:• Company code 1100:

– Dr. 141000 I/C Receivable 150 TP 807800

– Cr. 610505 Recoveries (150)

• Company Code 8078 – Dr. Training Exp 150

– Cr. 141100 IC Payable (150) TP 110000

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Example (cont)• The Accountant realizes that the charge for training

should have been only $100 and needs to issue a credit:– If the following is entered by the Accountant:

• Dr. 610505 Recoveries 50 cc 1100• Cr. Training Exp (50) cc 8078

– Then the system will record the following entries:• Company code 1100:

– Dr. 610505 Recoveries 50– Cr. 141100 I/C Payable (50) TP807800

• Company Code 8078– Dr. 141000 I/C Receivable 50 TP110000 – Cr. Training Exp (50)

– This will be incorrect because the I/C Customer on company code 1100 should have been credited and the I/C Vendor on company code 8078 should have been debited.

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Correct Entry

• Therefore, when making credits or other similar adjustments, users should not allow the system to create the rest of the entry but rather should enter the full entry themselves:– In our example, the accountant should have recorded

the following complete entry:• Dr. 610505 Recoveries 50 Company Code 1100• Cr. 141000 I/C Receivable (50) TP807800 on CC1100• Dr. 141100 I/C Payable 50 TP110000 on CC8078• Cr. Training Exp (50) Company Code 8078

– This is the only way to correctly record the credit issued; do not take short cuts

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Upload

• Many users use the Excel Upload program ZFPT to record intercompany transactions.

• Because this t-code does not allow the posting key to be entered, it is not possible to use ZFPT to post an entry to an Intercompany Vendor or Customer.

• Therefore when issuing a credit such as in our example where entries must be made to the Intercompany Vendor or Customer, then a different upload program – ZFCPT – should be used.

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ZFCPT• ZFCPT is a relatively new t-code which has been

developed:– It allows use of a posting key and therefore entries to

Intercompany customers and vendors can be made using this template

– Entries should balance within the company code line items entered

– May also be used for entering transactions with intercompany entities not on the ESG SAP system.

– The template and a training document can be found at

http://houwapp025.corp.halliburton.com/st/suz/TOC7.html

April 11, 2023


CO Transfer Pricing

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Transfer Pricing

• Currently two different areas of transfer pricing is automated in the system:– Transfer of Inventory/materials

• Through Material ledger

– Transfer of services through activities in the Controlling module:

• Examples include CATS time entry, Assessment cycles (allocations), Internal Order settlement, GUB charges

• These activities are recorded in secondary cost elements

• Does not include manual journal entries or services charged via sales orders

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CO Transfer Pricing Program• Effective January 1, All transaction occurring

in Controlling module (CATS time entry, allocations, etc.) will be subject to 7% transfer pricing.

• However transfer pricing entries will be recorded at global default profit center and therefore will no longer be visible in management reports or cost centers

• CO transfer pricing job will be run at month end

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CO Transfer Pricing

To illustrate using an example…

Cost center 8303410212 in Company code 7141 UAE has incured $50,000 of costs that will be allocated to Company code 3268 EasyWell Norway

An assessment cycle is set up in SAP for cost center 8303410212 (company code 7141) to allocate (charge) 100% of the costs incurred to cost center 9303210212 (company code 3268).

Entry in CO:Dr. 900215 PSL support allocation 50,000 CC 9303210212

Cr. 900215 PSL support allocation (50,000) CC 8303410212

Note: this entry is not reflected (yet) in the FI module.

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…an example (continued)

In order to reflect the intercompany business event in FI, the ‘FICO Reconciliation program’ is run at month end. This is an FI entry only and does not impact management books in CO.

Company code 3268:

Dr. 610150 Cost Allocation 50,000 (no cc or pc)

Cr. 141100 I/C Payable – C7141 (50,000)

Company code 7141:

Dr. 141000 I/C Receivable – C3268 50,000

Cr. 610150 Cost Allocation (50,000) (no cc or pc)

CO Transfer Pricing

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CO Transfer Pricing


CO Transfer pricing program is run:

Company Code 7141:

Dr. 141000 I/C Receivable – C3268 2,500 Cr. 610710 I/C Services Markup Revenue (2,500) PC 1009994000

(To record markup transaction)

Company Code 3268:

Dr. 610700 I/C Services Markup Expense 2,500 PC 1009994000 Cr. 141100 I/C Payable – C7141 (2,500)

(To record markup transaction)

Note: GL 610710 and 610700 are new GL’s that have been recently created

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PC 1009994000 is shared across all company codes and does not show up on the management reports of company code 3268 or 7141

Because the revenue and expense are both recorded to the same profit center, the entry is eliminated from management books.

However, because the entries are recorded at a company code level, then the markup is retained for legal reporting.

CO Transfer Pricing

April 11, 2023


Changes with Remeasurement

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Remeasurement

• Also known as “revaluation”.• Landmark used “incremental” method of

recording.• ESG follows “full” method which has the

following impacts:– Remeasurement entries are reversed at the

beginning of the following month and then re-booked in full at the end of the month

– As open items which are remeasured are cleared, the foreign exchange gain/loss is recorded to realized gain/loss P&L accounts.

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