SAP Joint VentureAccounting (JVA)

SAP AG 2004

Oil & Gas Solution MapSuppliers &

PartnersCustomers& Channels

Exploration &Appraisal

Development &Production

HydrocarbonSupply & GasTransmission

Refining &Manufacturing

PrimaryDistribution

TerminalManagement

SecondaryDistribution

CommercialSales & Retailing

UpstreamExploration and Appraisal

E&P Contract ManagementLiquid and Gas ProductionAllocation and Settlement

Supply, Transmission & TradingBulk Supply Chain Planning and OptimizationBulk Supply Chain Operations and SchedulingBulk Supply Chain Execution and SettlementBulk Supply Chain Reporting and AnalyticsPhysical Oil and Gas Commodity Trading

Oil and Gas Paper Trading and Risk Management

Refining & ManufacturingRefining Operations

Lubes Manufacturing Operations

Sales Planning and Account Management

Hydrocarbon Products Transportation

Downstream Marketing & RetailingMarketing Planning and Execution

Opportunity to CashCustomer Service

Terminal Management

Service Station Fuel ManagementConvenience Retailing

Enterprise Asset and Service ManagementInvestment Planning, Design & Construction

Sourcing & ProcurementMaintenance Operations and Logistics

Enterprise Management & SupportAnalyticsFinancials

Human Capital ManagementCorporate ServicesOperations Support

SAP AG 2004

In the oil and gas industry, certain ventures are considered high risk,

demanding extensive capital investment and a long payback period. To

minimize risks, companies develop partnerships called joint ventures.

A joint venture consists of an operating partner (operator) and one or

more non-operating partners, who combine monetary or personnel

resources to share a project’s expenses and revenues.

The operator manages the venture, arranges venture activities, and

maintains accounting records. The operator remits venture expenses,

collects revenues, and distributes these to the partners, according to their

ownership shares.

This process is known as Joint Venture Accounting (JVA).

What is SAP JVA?

SAP AG 2004

SAP designed JVA especially for joint venture operations.

SAP JVA captures all expenditures and other joint venture transactions by

using functions from Financial Accounting (SAP FI), Controlling (SAP CO),

Asset Management (SAP AM), Materials Management (SAP MM), Plant

Maintenance (SAP PM), and Project System (SAP PS).

By working closely with customers and implementation partners, SAP

ensures that JVA facilitates efficient management of joint ventures.

What is SAP JVA?

SAP AG 2004

SAP JVA is the only SAP solution that allows you to track venture

expenditures on a venture by venture and partner by partner basis.

SAP JVA allows you to view venture information in real time, not just

at period end.

Using proven SAP FI-Special Ledger functionality as its basis, SAP

JVA ensures accurate calculations and reporting of venture activities

on a venture-by-venture basis.

Why SAP JVA?

SAP AG 2004

SAP JVA is fully integrated with:

Financial Accounting (SAP FI)Controlling (SAP CO)Asset Management (SAP AM)Materials Management (SAP MM)Production Planning (SAP PP)Plant Maintenance (SAP PM)Project System (SAP PS)

allowing you to capture all joint venture transactions by using

standard SAP functions.

The result is a streamlined workflow and reductions in errors.

Why SAP JVA?

SAP AG 2004

Detailed joint venture data capture in real time

Cash calls to/from partners

Partner billing for venture expenses and revenues

Overhead calculation, based on the Joint Operating Agreement

Allocations of billable and non-billable costs

Multi-currency processing

Farm-in/Farm-out and Equity Changes

SAP JVA Features and Benefits

SAP AG 2004

Joint Venture Data Capture

Captures and codes all transactions, including vendor invoices, inventory movements andallocations, with an option to produce balanced venture books

Cash Calls

Request cash payments from partners for future venture operations

Partner Billing

Calculates partner shares for venture expenses and revenues

Monitors partner cash calls and receivables

Produces a partner bill containing all relevant information

Overhead

Calculates different types of overhead, as agreed in the JOA

SAP JVA Functions

SAP AG 2004

Allocations

Distributes billable and non-billable costs (such as facility, payroll, and related expenses) tocost centers or projects throughout the allocation cycle

Multi-Currency Processing

Supports the multi-currency needs of typical venture activities

SAP JVA Functions

SAP AG 2004

Cutback

Cutback allocates all operating costs, carried by the operator during the accounting period,to the non-operating partners, according to their equity shares. This process typically occursat the end of the accounting period after all transactions are posted.

Suspense Processing

Suspense processing allows you to continue regular processing in the event of a dispute orsome other unscheduled disruption.

Equity Adjustment

Equity adjustment covers several business processes that require the creation of new equitygroups and different handling for historical cost. SAP JVA equity adjustment capabilitiesprovide functions that cover farm-in, farm-out, and re-determination, facilitating prior-periodand pre-cutback equity changes.

Joint Venture Billing

Joint venture billing allows you to invoice partners for expenditures and revenues, and toissue cash calls. You can send different levels of supporting information with the invoice.

SAP JVA Functions

SAP AG 2004

Partner Netting

Partner netting allows you to calculate the sum of a partner’s open expenses and cash callswithin the venture to a single residual entry of outstanding expenses. You can then post thatentry to the partner’s accounts receivable account for billing.

Asset and Material Transfer

Asset and material transfer capabilities allow you transfer assets and materials to jointventure properties at the current replacement price, rather than at historical cost.

Controlling

Controlling enables you to process assessments, distributions, and allocations. In SAP JVA,you can allocate various costs among multiple cost objects for distribution to the ventures.

Net Profit and Carried Interest Profit Partners

Net profit and carried interest profit partners allow you to allocate payments and a net profitinterest to a non-operating partner, and to set up a carried interest arrangement, ifnecessary.

SAP JVA Functions

SAP AG 2004

Non-Operated Ventures

Non-operated venture processing facilitates integrated handling of incoming, non-operatedinvoices with SAP accounts payable functions. You can record these invoices online. Inaddition, cash call features are available for non-operated ventures at the venture andproject level.

Inter-Company Functions

Inter-company functions allow you to book inter-company entries on the books of theoperating partner and any of its affiliated businesses. By identifying these relationships,through inter-company mappings of accounts and other relevant objects, SAP JVAautomates processing of inter-company joint venture transactions.

Balanced Books By Venture

Balanced books by venture allows you to produce balanced financial statements on aventure by venture basis. If a document without balancing-entries-by-venture is posted tothe joint venture ledger, the data capture process creates an inter-venture booking, tobalance the document by venture.

SAP JVA Functions

SAP AG 2004

Bank Account Switching

Bank account switching is common practice outside North America. Large ventures arefunded from one or more dedicated venture bank accounts. Depending on the venture, SAPJVA determines the bank account from which an invoice is paid. SAP JVA also producescorrespondence, notifying the bank to make all required transactions for the movement ofcash between accounts. In addition, bank account switching produces all requiredsettlement documents, and can calculate all applicable interest.

Audit Support

Audit support allows you to give non-operating partners detailed accounting transactionrecords in an electronic format to assist transaction audits. These records are based onoperator-defined selection criteria and can be restricted at multiple levels. JADErequirements are also supported.

SAP JVA Functions

SAP AG 2004

A JOA is a contract between venture partners that specifies the following:

Operator of well, property, project

Partners and working interests

Associated ventures

Allowable overheads and their treatment

Non-consent penalty percentages

Definitions

Interests

Joint Operating Agreement (JOA)

SAP AG 2004

JVA Business Objects: Venture

EG3

C75 % 25%

Venture A

EG4

EG1

33 1/3

EQTYPE 1Engineering

Design

EG6

B25%

A25 %

C25 %

D

EG2

25%BA

50 %D

25 %

EG5

EQTYPE 2

ConstructionEQTYPE 3

Production

B

A33 1/3

C33 1/3

33 1/3

B

A33 1/3

C33 1/3

33 1/3

25%BA

50 %C

25 %

25 %

A

2002

2003

2004

Ventures associateEquity Types and EquityGroups to define a specificjoint operation or purpose

SAP AG 2004

Operated (no tax)

Operated by the company managing SAP JVA

You cannot assign a tax code to this type of venture

Operated (with tax)

Operated by the company managing SAP JVA

You can assign a tax code to this type of venture

Non-Operated

The company managing SAP JVA holds a non-operated venture share

This company is billed by the operator for its share of venture expenses

Non-Operated On-BillingThe company managing SAP JVA sells part of its non-operated share of the venture tothird parties

Corporate VentureThe company managing SAP JVA holds a 100% interest

SAP JVA Business Objects: Five Venture Types

SAP AG 2004

Equity types connect equity groups to joint ventures

January February March April May June July August September October November December

Joint Venture 1Joint Venture 1

Equity Group A

Equity Type: DEV

01012003

Equity Type: PRO

Equity Group B

Equity Group C

2003

08012003

07012003

Equity Definitions

SAP AG 2004

.

A

EG3

C75 % 25%

Venture A

EG1

33 1/3

EQTYPE 1

EG2

25%BA

50 %D

25 %

Valid

EQTYPE 2

ConstructionEQTYPE 3

Production

B

A33 1/3

C33 1/3

33 1/3

33 1/3

3

EG4

EG5

B

A

C33 1/3

33 1/

25%BA

50 %D

25 %

EG6

B25%

A25 %

C25 %

D25 %

A

EG3

C75 % 25%

Venture A

EG1

33 1/3

EQTYPE 1Engineering

Design

EG2

25%BA

50 %D

25 %

Valid

EQTYPE 2

ConstructionEQTYPE 3

Production

B

A33 1/3

C33 1/3

33 1/3

3

EG5

B

A33 1/3

C33 1/3

33 1/

EG4

25%BA

50 %C

25 %

EG6

B25%

A25 %

C25 %

D25 %

New Processing Plant

Design

Joint Venture Integration with Cost Objects

A

A

Cost centre

Project

Construction Project

SAP AG 2004

Cost Center

PM Order

Internal Order

Project Prod Order

VentureAsset Plant

1 2

Joint Venture Integration with Cost Objects

SAP AG 2004

Cost ObjectCost Object

Joint Venture Coding for Cost Object

ProductionOrder

NetworkOrder

PlantMaintenance

Order

Project Cost centre Internal Order

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

SAP AG 2004

Recovery Indicator

Identifies category of a joint venture transaction

• Indicates whether a particular revenue or expense is shared byventure partners

• Used to select data for reporting to venture partners• Used to distinguish between joint and own revenues and

expenditures

Recovery indicator assignment & determination:

Default(Corporate)

Cost Object

G/L Account &Cost Element

Document Type

User Entry

MMCOFI

SAP AG 2004

Joint Venture Integration and Interface

AccountingInterface

SpecialLedger

Interface

AM

MMFI

PS

COSD

HR

PM

Accounting Document

Itm Account Cost Obj. Amount1 Vendor -117.502 Cost 1 CC-1 60.003 Cost 2 CC-2 40.004 Tax 17.50

JV Interface

Joint Venture DocumentJoint Venture DocumentItm Account Cost Obj. AmountVenture EqG RI1 Vendor CC-1 - 70.50JVI001 A01 BI1 Vendor CC-2 - 47.00JVI002 A01 BI2 Cost 1 CC-1 60.00JVI001 A01 BI3 Cost 2 CC-2 40.00JVI002 A01 BI4 Tax CC-1 10.50JVI001 A01 BI4 Tax CC-2 7.00JVI002 A01 BI

JV DATAJVT01

BILLINGJVT02

CUSTOMDATABASE

FI DATAGLT0

PP

SAP AG 2004

Joint Venture Vendor Invoice Posting - Example

Post Vendor Invoice

Accounting Doc

The expenses are assigned to the JV partners via the cost object assigned to the expense line items

JV Document

Cost Centre Assignment

SAP AG 2004

Asset Master

Joint Venture Asset Posting - Example

Vendor Invoice

JVA derives venture coding for an asset using the costcentre entered on the asset master record

Asset Document

JV Document

SAP AG 2004

Goods Receipt

Joint Venture Material Posting - Example

MM Assignments

JVA derives venture coding for material movements from a special stock cost object that is assigned toa plant and a valuation type (which is optional) associated with the plant.

Accounting Doc

Material Document

JV Document

JV Document

SAP AG 2004

Periodic Processes

Foreign Currency Valuation

Cost Transfers

Cost Allocation & Settlement

Overhead Calculations (PCO)

Equity Adjustments

Cutback

Joint Venture Close

Partner Netting Final Settlement

Corporate Close

Billing

SAP AG 2004

Assessments & DistributionsCost allocations are based on R/3 CO functions with JVA required enhancements,

including:Substitution of the recovery indicator (recovery indicator manipulation)Allocation of secondary costsRe-run of settlement

Cost Object B

Materials

Mail & CarriageTelecomsEntertaining

12Hotels8Travelling

Repairs & ServicingVehiclesLight & HeatingRent & Rates

Staff Salaries

80External Labour40Internal Labour

140Total

Distribution (through original cost element)Internal CO only

Cost Object B

140Assessment A

Materials

Mail & CarriageTelecomsEntertainingHotelsTravellingRepairs & ServicingVehiclesLight & HeatingRent & RatesStaff SalariesExternal LabourInternal Labour

140Total

Allocation (via secondary cost element)Internal CO only

Cost Object A

- 350Assessment A

Materials

Mail & CarriageTelecomsEntertaining

30Hotels20Travelling

Repairs & ServicingVehiclesLight & HeatingRent & RatesStaff Salaries

200External Labour100Internal Labour

0Total

40%

Unallocated Costs

40%

SAP AG 2004

Farm-In / Farm-OutA partner joins or leaves a venture

RedeterminationPartner shares are adjusted to reflect changes in business conditions, such as reserves

Funding Currency ChangeA funding currency is added or removed from a venture

Current and prior period equity adjustments handled

Equity Changes & Adjustments

SAP AG 2004

Suspense Processing

Suspense functionality supported for:Partner SuspenseEquity Group SuspenseProject/WBS Element Suspense

Specific costs are not charged to a venture but instead posted tosuspense accounts for the duration (year & period) a project remainsin suspense

Selection

GBU1Company Code

Venture JV0001 JV9999to

Project Suspense

Posting

2002Fiscal Year

12Period

31.12.2002Posting Date

Options

Test run

Set project in suspense Post Costs

Accounting DocumentAccounting Document

Itm Account Cost Obj. Amount1 O'head Admin - 50.002 O'head CC-1 50.00

Joint Venture DocumentJoint Venture Document

Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB2 O'Head CC-1 50.00JVI001 A01 BI

Joint Venture DocumentJoint Venture Document

Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB2 O'Head CC-1 50.00JVI001 A01 BI3 O'Head CC-1 0JVI001 A01 BS

JVA Project Suspense

SAP AG 2004

Overheads

International – Parent company overheadUS/Canada – Well related allocations

OverheadCost

Stepped Rate Rule

1%

2%

5%GBP 10 000

GBP 0

GBP 250 000

GBP 10 000 GBP 500

GBP 140 000 GBP 2 800

SAP AG 2004

Cutback

Venture A

EG2

Company Code50 % Partner B

25 %

Partner D25 %

AR / AP

Partner D25

ET1

AR / AP

Partner B25

Gross

Net

The cutback processallocates JV partners'expenses or revenuesaccording to theirworking interest ownership.

OperatingExp / Rev

50

OperatingExp / Rev

100

Cutback Processing

RI = BillCost Object

Venture A

SAP AG 2004

Cash Call Processing

Equivalent to down payments or pre paymentsCan be issued for future months (Reclassification)Request and cash receipts carried forward to billing processIntegrated with Accounts Receivable and Accounts Payable

Venture JV0001 EqG A01 FCurr NOK

Partner FCurr Amt Lcurr Amt

JVGBU1 600.00 46.74

JV5001 300.00 23.37

JV5101 100.00 7.79

Partner Shares

Cash Call Request:

FIDocument

Cash Call

Gross to venture/project

Net to venture/project/partner

AccountsRec.- Cash

CallsPartner A

600Accounts

Rec.- CashCalls

Partner B300

AccountsRec.- Cash

CallsPartner C

100

SAP AG 2004

JV BillingLedger

Billing

JV Integration Mgr.

StatementExp. Suppl

ExpenditureDetail

Inv. SupplDetail

Invoice

Joint Venture Billing

InternalAllocations

…

Costs

Orders

PayrollVendor

Invoices

AccountsReceivable

JV SummaryLedger

Cutback

JV Integration Mgr.Cash Calls

Paid CashCalls

PartnerPayments

CutbackInvoice

PartnerAdjustments…

JV Billing createsvarious customizedbilling documents tosend to your JVpartners

JV Integration Mgr.

SAP AG 2004

COTo Affiliate:

INVOICE

FI

A/P

FIDocument

Cash Call

Affiliated Inter-Company Setup

Cutback creates A/P entriesto operator on the books ofthe affiliated partner asconfigured in SAP JVA andSAP FI

Gross cash calls create A/Pentries on the books of theaffiliated partner, asdefined in configuring SAPJVA and SAP FI

Inter-Company Ventures

Cutback

IntercompanyProcessing

Cash Calls

SAP AG 2004

Enterprise

Business

AssetAssetManagementManagement

PurchasingPurchasing& Supply& Supply

MM

Management

Support

HumanHumanRes. PayrollRes. Payroll

HR ProjectsProjectsPS

BusinessBusinessPlanningPlanning ControllingControlling Finance &Finance &

AccountingAccountingIM FICO

Regulatory Information Data Warehouse Non-RegulatedInformationInformation

ManagementManagement

NetworkProvisioning

ServiceDelivery

RevenueManagementNetwork ProvisioningPSPM

QM

EC

AssetTransfers

GoodsIssues

Cutback

PP JointVenture

Accounting

PartnerBilling

Asset and Material Movements

JVAJVAMMAM

FIAM

SAP AG 2004

Stock help corporate or per venture

Stock pricesMoving average charged to venture and operator

Current replacement price (CRP) invoked to add stock handling fee

Plant or valuation definition

Joint Venture Billing

CRP

CompanyCompanyInventory at

MovingAverage

Price

CompanyCompanyProj/Asset at

MovingAverage

Price

Joint Venture Billing

CRP

Plant to Cost Center, Order, Project, Asset

Material Management Features

SAP AG 2004

JV Partner Auditing

Gross billable/all by venture/account

Gross billable/all by cost object

Gross billable/partner net by cost object

Gross billable/all by cost object foreign currency

Gross billable/partner net for JIB

Remaining cutback by cost object

Posted suspense overview

Gross non-operated by cost object

Venture/equity group/billing indicator

Partner/billing indicator

Standard JVA Reports:

Billing Reconciliation Extract:

Reconciliation

Ledger 4B and 4DJVA BillingBalances

Ledger 4A and 4CJVA Balances

StatementExp. Suppl

ExpenditureDetail

Inv. SupplDetail

Invoice

SAP AG 2004

Online transaction for incoming invoices for non-operated venturesInput forms, defined in JVA configuration, control the layout of the input screensInput form includes the SAP coding block information (account, cost object,asset)

Incoming cash calls are handled with the cash call functionsNon-operated venture processing is fully integrated with SAPaccounts payable functions

Non-Operating Ventures

InvoiceInvoiceData Entry

Transaction

Cash CallCash CallCash Call

Transaction

R/3

AccountsPayable

Non-operatingnet share

SAP AG 2004

Main FeaturesBalanced books by venture

Venture specific bank accounts v. central disbursement account

Funding currency defined for each venture

Bank reconciliation and switching

Exchange differences for each venture

Cash and Banking

SAP AG 2004

Integrates with FI, MM, and AM, which streamlines workflow and greatly

reduces errors

Supports joint audit data exchange (JADE) reports, online and in real time,

reducing audit headcount, time, and expense

Ensures full compliance with all standard overhead methods and

calculations (US and international)

Provides complete drill down capability for reporting all ventures, all

authorization for expenditures (AFEs) tied to JOA, overhead analysis,

cutback, and billing

Key Drivers:

Maximize Assets, Minimize Overhead

SAP JVA Business Benefits

SAP AG 2004

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