secondary ledger implementation in oracle r12

Tales from the Battle Front:

How a Secondary Ledger was

implemented against all odds

Prithis Das – Dynamique Solutions LLC

NCOAUG | March 12, 2015

Presenter’s background - Prithis Das

• In the Oracle EBS arena since 1997

• Over 22 years of business process improvement experience

• Consulting experience with Big 5 and other major organizations

• Oracle Certified Specialist in General Ledger

• Chartered Accountant and Management Accountant from India

• Authored and presented papers on Subledger Accounting, Web ADI, Reports Manager at several OAUG and local events

• Currently on a major R12 enhancement assignment

• Contact:

• Cell: +1.630.3649457

• Email: [email protected]

• Linked In: www.linkedin.com/in/prithisdas/

• Web: www.dynamique.us

Dynamique Solutions LLC

mailto:[email protected]

http://www.linkedin.com/in/prithisdas/

AGENDA

Agenda

• Case Study background

• Business Requirements for a Secondary (Cash Basis) Ledger

• Solution Overview for Secondary Ledger

• Secondary Ledger Setup

• Challenges encountered and unique situations

• Accounting Calendar issue

• Accounting Adjustments for External systems posting into Oracle

• Receivables

• Payables

• Prepayments

• Fixed Assets solution for Secondary Ledger

• Other implementation considerations


CASE STUDY BACKGROUND

Case Study Background

• 120 + year old Engineering company• Preferred consultants for major power utilities across the world

• Revenues from large consulting projects

• Oracle Applications customer since 1997• General Ledger, Receivables, Payables, Purchasing, HR, Assets

• Projects is maintained on a custom-developed Projects system with interfaces to EBS

• Currently on 12.1.3

• Significant number of legacy systems with interfaces with Oracle EBS

• Single Ledger• Accrual basis

• Need to maintain Cash-basis books

• Cash-basis financial statements maintained on spreadsheets

• Several interfaces post directly into General Ledger, skipping Subledgers


BUSINESS REQUIREMENTSFor Secondary (Cash Basis) Ledger

Business Requirements

• Secondary Ledger with Cash Basis accounting method

• Cash transactions should be posted automatically into Secondary Ledger

• Common Chart of Accounts, Calendar

• Accounting Adjustments for External systems posting directly into GL

• Secondary Ledger needs only 2 segments

• Balancing segment (Company)

• Natural Account segment

• Other segments can be populated with a dummy “999…” value

• Fixed Assets to post into Cash Basis Ledger for all transactions

• Not standard Cash Basis functionality in Oracle

• Prepayments must be accounted to expense accounts when they are paid


SOLUTION OVERVIEWFor Secondary (Cash Basis) Ledger

Solution Overview

Business Requirement Solution

Cash transactions should be posted

automatically into Secondary Ledger

Secondary Ledger with Cash Basis as the Accounting Method

- Seeded Cash Basis accounting method as a starting point

Common Chart of Accounts, Calendar Setup Secondary Ledger with the same COA, Calendar

Accounting Adjustments for Legacy

systems posting directly into Oracle GL

Account Derivation Rules for Secondary Ledger

Secondary Ledger needs only 2

segments

ADRs with Rules for Balancing and Natural Account segments

Remaining segments deriving constant “dummy” values

Cross Validation Rules adjusted to accommodate new CCIDs

with “dummy” values

Fixed Assets to post into Cash Basis

Ledger

New Tax Book linked to Secondary (Cash Basis) Ledger

GL Posting allowed to Secondary Ledger

Prepayments must be accounted to

expense accounts when they are paid

Custom Account Derivation Rules

Disabling of some standard functionality to use custom

solution


SECONDARY LEDGER SETUP

Secondary Ledger Setup

• Accounting Setup Manager



Default is “Yes” for Other-Other


ACCOUNTING CALENDAR ISSUE

Accounting Calendar issue

• Missing Date issue in Calendar

• First attempt to configure a new Secondary Ledger resulted in a show-stopper


Accounting Calendar issue

• Missing Date issue in Calendar

• Caused due to missing date 29-Feb-2000

• Oracle gave a datafix in 2000 which apparently fixed the issue

• However, issue still affects creation of new Ledgers in R12

• Calendar Validation report does not catch the issue

• Calendar was fine for existing Ledger

• Calendar could not be used for new Primary or Secondary Ledger

• Our design was based on using the same Calendar, Chart of Accounts

• Sev1 SR was opened with Oracle

• Oracle issued datafix to correct the Calendar


ACCOUNTING ADJUSTMENTSfor External systems posting into Oracle

- Oracle Receivables





• Accounting adjustments for External systems posting directly into Oracle GL









Business Requirement – Accounting Adjustments - Receivables

External

Client

Invoicing

System

Oracle

Receivables

Oracle

General

LedgerInterface

Revenue Journals

Receipts

InvoicesInvoices


Business Requirement – Accounting Adjustments

Receivables example

Primary Ledger

Accrual Basis

Secondary Ledger

Cash Basis

Standard Oracle Client’s Instance Standard Oracle Client’s Instance

Revenue Journals

Import from Client

Invoicing System

Dr. Receivables

Cr. Revenue

AR Invoice Dr. Receivables

Cr. Revenue

Dr. Receivables

11010

Cr. Revenue 11010

Cash Receipt

(when payment is

due)

Dr. Cash

Cr. Receivables

Dr. Cash

Cr. Receivables

11010

Dr. Cash

Cr. Revenue

Dr. Cash

Cr. Receivables

11010

ADR

Dr. Cash

Revenue 32899


Solution – Accounting Adjustments (AR)Solution

Configure a new Subledger

Accounting Method

- Copy of Standard Cash

Configure a new Application

Accounting Definition

- Copy of “Receivables Default

Cash Basis” AAD




Accounting Method- Copy of Standard Cash




Cash Basis” AAD

Configure a new Journal Line

Definition- Copy of “Receipt – Basis Journal

Lines Definition”






Accounting Definition- Copy of “Receivables Default

Cash Basis” AAD



Lines Definition”


Type- Replace Receipt Application to

Revenue








Cash Basis” AAD



Lines Definition”


Type- Replace Receipt Application to

Revenue



Configure a new Account

Derivation Rule- Account segment

- XXSL Receivables Account

Replaced by Revenue



Configure a new Account

Derivation Rule- Account segment

- ADR: XXSL Receivables Account

Replaced by Revenue

- Use a Constant (Revenue)

account = 32899



Invoice

Primary Ledger

Dr. Receivables 11010

Cr. Revenue 11010



Receipt

Primary Ledger

Dr. Cash

Cr. Receivable 11010

Receipt

Secondary (Cash Basis) Ledger

Dr. Cash

Cr. Revenue 32899


ACCOUNTING ADJUSTMENTSfor External systems posting into Oracle

- Oracle Payables


Payables example

Primary Ledger

Accrual Basis

Secondary Ledger

Cash Basis


Labor cost Journals

Import from Projects

Accounting System

to Oracle GL

Dr. Labor Expenses

Cr. Payroll Clearing

Payroll Journals

Import from Payroll

(ADP) system to

Oracle GL

Dr. Payroll Clearing

Cr. Net Payroll

Cr. Employee FICA

……

Cr. Etc.

AP Invoices Dr. Net Payroll

Dr. Employee FICA

….

Cr. Payables Liability



Payables example

Primary Ledger

Accrual Basis

Secondary Ledger

Cash Basis


Payment of AP

Invoices to ADP

Dr. Payables Liability

Cr. Cash

Dr. Net Payroll

Dr. Employee FICA

….

Cr. Cash

ADR

Dr. Labor Expenses

Cr. Cash


Solution – Accounting Adjustments (AP)Solution





- Copy of “Cash Basis” AAD


Definition XXSL Cash,

Payments All- Copy of “Cash, Payments All”







- Copy of “Cash Basis” AAD


Definition XXSL Cash,

Payments All- Copy of “Cash, Payments All”


Type- Replace Item Expense JLT



Configure a new Account Derivation

Rule

- Account Segment

- XXSL Item Expense Distribution

Account - Cash Basis




Rule

- Account Segment



Create Mapping Sets between

Payroll Liability Accounts and Labor

Expense Accounts




Rule

- Account Segment





Expense Accounts

Create Conditions to drive the ADRs




Rule

- Account Segment





Expense Accounts

Create Conditions to drive the ADRs

Put “Catch-all” ADR at the bottom,

and one-off ADRs at the top in order

of priority

- Catch-all ADR will not have

conditions



Payment of ADP Payroll invoice

Secondary (Cash Basis) Ledger

Dr. Labor Expense Accounts

(various)

Cr. Cash


ORACLE ASSETS SOLUTIONSecondary (Cash Basis) Ledger





• Accounting Adjustments for Legacy systems posting directly into Oracle GL









Solution – Fixed Assets

• Standard Cash SLAM does not account for Fixed Assets

There are no inflows or outflows

of Cash in an Asset transaction

(Depreciation, Adjustment,

Retirement)

Purchase of an asset has already

been part of the Payables

process

The client required accounting of

Assets in the Secondary Ledger

(Cash Basis) for Tax purposes

using different depreciation

methods.



• Existing Tax Book cannot be re-assigned to post to the Secondary Ledger



• Alternate Ledger could not be the Secondary (Cash Basis) Ledger

“List of values contains no entries”.



• Solution to meet Business Requirement

Custom Cash Basis Subledger

Accounting Method (SLAM)

Based on Oracle’s “Standard Cash” accounting method

Add the “Assets Standard Accounting”

AAD to the custom SLAM

Else, Oracle will not know how to account for Assets

transactions in the Secondary (Cash Basis) ledger.

Setup new Tax Book in Assets module Associate to the Corporate Book which posts to the

Primary Ledger

Allow GL Posting

Assign the Secondary (Cash Basis) ledger for posting

Migrate all assets from the old Tax

Book to the new Tax Book

This amounts to a re-implementation of the Tax Book

Run Initial Mass Copy and Periodic Mass copy to process

assets in the new Tax Book

Process new Tax Book till current month



• Custom Cash-Basis SLAM based on Standard Cash

Add the “Assets Standard

Accounting” AAD to the SLAM.

Else, Oracle will not know how to

account for Assets transactions in

the Secondary (Cash Basis)

ledger.



• Tax Type Cash Asset Book with GL Posting Allowed



• Process Assets in Both Asset Books to post to both Ledgers


PREPAYMENTS SOLUTIONfor Secondary (Cash Basis) Ledger





• Accounting Adjustments for Legacy systems posting directly into Oracle GL









Solution – Prepayments

Primary Ledger

Oracle “Standard Accrual” Basis

Secondary Ledger

Cash Basis

When Prepayment invoice is created

DR Prepayment

Cr AP Liability


No accounting

When Prepayment invoice is paid

DR AP Liability

CR Cash


DR Expense

CR Cash

When Standard invoice is entered and

matched to Prepayment (each month)

DR Expense

CR Prepayment



No accounting

Business Requirement• Prepayments must be accounted to expense accounts when they are paid

• Even if expensed over multiple periods in Primary Ledger, expensed

when paid (fully in first period) in Secondary Ledger


Dr. Prepayment

Cr. Cash




Dr. Expense

Cr. Prepayment



Primary Ledger

Oracle “Standard Accrual” Basis

Secondary Ledger

Oracle “Standard Cash” Basis


DR Prepayment

Cr AP Liability


No accounting


DR AP Liability

CR Cash


DR Prepayment

CR Cash



DR Expense

CR Prepayment



DR Expense

CR AP Liability

DR AP Liability

CR Prepayment

Standard Oracle – does not meet specific business requirement



Create new Subledger Accounting Method

(SLAM)

Copy from “Standard Cash”

Create Account Derivation Rule (ADR) to

debit Expense when Cash flows out

- Payments Event Class

Use Prepayment Account on Supplier to drive

the Expense account

Use Mapping Sets:

- Prepayment A/C AAA = Expense A/C PPP

- Prepayment A/C BBB = Expense A/C QQQ

Use Condition:

- To determine which Mapping Set is to be

used

Disable standard Journal Line Type “Prepaid

Expense - Cash Basis”

Setup Mapping Sets and Conditions

Solution to meet Business Requirement


Solution – PrepaymentsSolution


Accounting Method




- Copy of Cash Basis AAD




Accounting Method






Definition- Copy of Cash, Payments All JLD




Accounting Method






Definition- Copy of Cash, Payments All JLD

Disable “Prepaid Expense –

Cash Basis” Journal Line Type

(JLT)



Create new JLT replacing

“Prepaid Expense – Cash Basis”

Create new ADR to replace

Prepayment account with

Expense account







Expense account

Create Mapping Sets for groups

of Prepayment accounts and

Expense accounts







Expense account

Create Mapping Sets for groups

of Prepayment accounts and

Expense accounts

Multiple mapping sets used

instead of single mapping set to

facilitate grouping of similar

Prepayment accounts



• Condition to dictate which

Mapping Set (and therefore

which Expense account) to

be used



Prepayment createdDr Prepayment

Cr AP Liability



Primary Ledger (Accrual):

Prepayment paidDr AP Liability

Cr Cash

Secondary Ledger (Cash):

• Prepayment paid• Dr Expense

• Cr Cash




Prepayment amortized

Dr Expense

Cr AP Liability


Prepayment amortized

Dr AP Liability

Cr Prepayment


OTHER IMPLEMENTATION

CONSIDERATIONS

Other Implementation Considerations

• Over 50 ADRs (mostly in Payables, few in Receivables) were required to

re-class accounts from Primary Ledger to Secondary Ledger

• Many of these ADRs used Mapping Sets and Conditions

• No custom sources were used for the ADRs

• Initial balances for Secondary Ledger were uploaded through WebADI

• Financial Statement Generator Reports were created/updated to report on

the Secondary (Cash Basis) Ledger

• Ledger Set was setup along with Data Access Set to give certain

responsibilities access to both Ledgers

• “Parallel run” for first quarter to verify that Secondary Ledger was

accounting cash transactions correctly.


• Prithis Das

• Email: [email protected]

• Linked in: www.linkedin.com/in/prithisdas/

• Web: www.dynamique.us

• Cell: +1.630.3649457


http://www.linkedin.com/in/prithisdas/

http://www.dynamique.us/

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