Subledger Accounting Cost Management Details

Subledger accounting in R12 is an enhanced accounting process. The SLA process allows customers to personalize the process for specific events. The user sets the rules to be followed. Accounts are still defined the same way as prior application versions via the same forms. Organizations are defined the same way. If there are no rules entered into the SLA engine, the accounts defined the traditional way will be used to generate the journal entries posted to GL. All setups to use preR12 functionality are automatic. The default base setup is US GAAP. This uses the traditional account definitions. This is delivered and works out of the box.

SLA uses events for processing transactions. An event is the recording of a change of status in the transaction life cycle, i.e., invoice approved, payment received, period close, etc. This allows for a clear separation between transactions and accounting representation. Events are the bridge between transactions and journal entries, so product teams are involved for coordinating actions based on event models.

R12 Subledger Accounting Rules:SLA uses a rules-based accounting engine that posts entries into GL. The rules used by the engine are user defined. The rules are stored in a common repository for all subledger applications. A subledger application would be a product area, such as Inventory, Payables, Receivables, Purchasing, etc. 

The R12 SLA process has created a common accounting process to be used across all applications. This allows the customer to have a single method for defining accounting behaviors.

The engine supports the use of multiple currencies. This also allows for various audit tools and reports to be used when reviewing GL postings. 

The SLA process allows for the display of the inventory valuation accounts to be seen for a user defined date range. The engine also allows the accounting department to maintain control over accounting and chart of accounts for the ledgers used.

When rules are created, the rules engine will override user entered accounts that might be incorrect. This is important to control user errors that can occur within a period. The rules will automatically redirect the costs to the correct account. The rules can be created for most item attributes to allow for granularity of costs if so desired.

After the rules are established, the Cost Management âÃÂàSLA responsibility allows for the creation of the user-defined accounting � � � � �data. The request group related to this process includes all SLA processes as well as standard accounting processes.     For inventory transactions, a transaction would be received or costed. The transaction will then be  passed to GL via the Create Accounting âÃÂàCost Management program.� � � � �            So for Misc receipt:                User creates misc receipt

                Cost Manager processes transaction                Create Accounting - Cost Management  Inventory Category process is run            This validates the accounts to be used as per any rules that have been defined.            If no rule defined for a transaction event then the default account value set for the organization is     used.             If the setting were final and post, the details would be transferred to GL. If no transfer to GL was indicated and the setting was final and post, then the Transfer to GL process still needs to be run via CSTGLTRN - Transfer Journal Entries to GL.             Transfer and Post to GL are recommended to be included in Create Accounting- Cost Management when creating the accounting for the transactions. An exception would be Draft mode.

Create Accounting âÃÂàReceiving� � � � �          This process is tied to the Purchasing responsibility.         Process Category is not a parameter for this request as only receiving transactions can be processed from Purchasing. It will default with Process Category of Receiving.

Create Accounting âÃÂàCost Management� � � � �          This process is tied to the Cost Management âÃÂàSLA process and uses the following Process Categories:� � � � �        Inventory                         Receiving         Work in Process             Third Party Merge        Manual

The process then completes or shows errors that need correction.

Create Accounting âÃÂàCost Management Parameters:� � � � �

Ledger  Required; limits accounting events to the chosen ledger If profile option SLA: Enable Data Access Security in Subledgers = Yes, only the ledgers included in the SL Access Sets assigned to the responsibility is on the LOV

Process Category Optional; Restricts events selected to particular process category. The program selects events with event types that are part of the event class assigned to the process category.

End Date Required; End date for the program to use. Will only process those events with event dates on or before the end date.

Mode Optional; Determines if entries created in Draft or Final mode.Draft Mode âÃÂÃÂTransfer to GL, Post in GL, and GL Batch Name � � � � �fields are disabled as the draft entries cannot be transferred to GL; It is recommended to run in draft first to check for errors

Errors  Required; Limits the creation of accounting to those events that previously failed. If set to Yes the program will process all events with the status of error.

Report Optional; determines if the report showing the results of the SLA program is in summary or detail.

Transfer to GL  Required if mode = Final; Determines if the subledger journal entries are transferred to GL. Journal Import is not launched if set to Yes

Post in GL Required if mode = Final or Create Accounting is set to No

GL Batch Name Optional; user entered batch name appears in transferred GL Subledger journal entries. Transfer to GL must be set to Yes

Included User Transaction Identifiers

Required; identifies the org each accounting entry belongs to 

The Create Accounting - Cost Management request creates accrual journal entries, accrual reversals, and multi-period journal entries.        To transfer the details to GL:                1- Set the parameter in the Create Accounting to Yes                2- If parameter is set to No, then the Transfer to GL process must be run manually as this will only create accounting but no values are passed to GL.

There is an option to make the journal entry and post the journals automatically at the time of submitting the Create Accounting program itself.

This option is used by setting the profile SLA: Disable Journal Import to "NO" .This will be the most preferred setting for this profile option and this indicates that Journal Import will ALWAYS accompany the transfer of data from Subledger. Another main implication of this value is that, on failure of Journal Import, the data will be rolled back to SLA tables and hence there will not be any data in GL_INTERFACE.

If you want to do the transfer to GL separately from creating accounting in the subledgeryou can use the Create Accounting Program to create the accounting in the subledger only and then run a different program CSTGLTRN - Transfer Journal Entries to GL to transfer the journal and post to GL

CSTGLTRN - Transfer Journal Entries to GL - Cost ManagementThis is used to transfer final journal entries to GL that were processed by the Create Accounting process but not transferred for some reason.        To View Accounting Events                Cost Management SLA Responsibility                SLA > Inquiry                Tools Menu Options                        Then select Accounting Events, Journal Entries, or Journal Entry Lines to open.

        You can also view the Account Journal Entries and Accounting Events from the View         Transaction Windows:                View Receiving Transactions                View Material Transactions                View Resource Transactions

The function Tools > Options is only available if SLA is being used for the transaction.If there is no SLA being used, the distributions button will show the transaction details.

Basic Steps to Build Accounts:These steps are needed for each different journal line type that is going to be used. For example, Inventory valuation, Receiving valuation, WIP valuation, Cost of Goods Sold.

    Step 1 Create Account Derivation Rule (ADR)

    Step 2 Define conditions required for the ADR created

    Step 3 Create Journal Line Definitions (JDL) for an event class               a- query the LOV of seeded event classes               b- copy the seeded event class using the Copy Definition button               c- replace existing ADR in the Journal Line type form with the new ADR                   this is in the Line Assignments sections, using Line Type

    Step 4 Create new Applications Accounting Definition (AAD)               a- query for the seeded AAD               b- copy from this to create a new AAD               c- associate the new JLD assignments created in Step 3               d- validate the definition. If successful continue to next step or continue creating the JLDs required. If unsuccessful, check the setup for all steps above before moving to next steps

    Step 5 Associate the new AAD with the Subledger Accounting Method (SLAM)               a- query SLAMs to view existing methods               b- for the existing AAD enter an end date to stop this from being used               c- attach the new AAD with the start date

     Step 6 Assign the SLAM to the Ledger

Accounting Methods Builder

                                            Ledger                                                |                        Subledger Accounting Method (SLAM)

                                                |                        Application Accounting Definition (AAD)                                                |                                    Journal Line Definition (JLD)                                                |                       -------------------------------                      |                                              |                       Journal Line Types                           Account Derivation Rule            (JLT)                                                (ADR)                                                                          |                                           Sources                                                |                                    Transaction Objects 

The process is built from the bottom up.

Ledgers replace Set of Books.The 3CâÃÂÃÂs is now known as the 4CâÃÂÃÂs:� � � � � � � � � �Chart of AccountsCalendarCurrencyAccounting convention

This allows for accounting to be used at the local level (by country) and also by the line of business (sales, consulting, etc). The Ledger and Ledger Sets (group of Ledgers) use the Multi-Org Access control (MOAC) that is expanded in R12.

Examples of  Subledger Methods (SLAMs)       US GAAP       FRENCH GAAP       Cash Basis Accounting       Accrual Basis Accounting

The following SLAMS are seeded in Oracle:       Standard Accrual       Standard Cash       Encumbrance and US Federal

Product teams are responsible for the following:

    Identify transaction entities with accounting impacts    Define event types that correspond to different status in the lifecycle    Create events for transactions when passing from status to another âÃÂæthis is transparent to the customer although the creation is� � � � triggered by the user action.    Define transaction objects that provide data that SLA uses to create journal entries    Population of transaction objects is the responsibility of product teams

SLA Team is responsible for the following:     Defining data model for events     Develop/Maintain programs and APIs that create and maintain events and related objects     Processing events as part of the Create Accounting programs

Events

Event Entities have Event Classes. Each Event Class has Event Types.There are four Main Entities for Cost Management:

Inventory:     Material Accounting Events      Event Classes:         PO Delivery in Inventory        Sales Order Issue        Internal Order to Expense       WIP Material        Consigned Inventory Ownership Transfer        Miscellaneous         IntraOrg transfer        Direct Interorg Shipment        Direct Interorg Receipts        Intransit Interorg Shipment âÃÂàFOB Shipment� � � � �        Intransit Interorg Receipt âÃÂàFOB Receipt� � � � �        All other intransit interorg transactions        Material cost update        Retroactive price adjustment        Logical Intercompany         WIP Material Lot

Purchasing/Receiving 

     Write Off Accounting Events     Receiving Accounting Events

Work in Process:    WIP Accounting Events    Event Class:        WIP Absorption        Event Type:             Resource Absorption             Resource Overhead Absorption             Scrap Absorption         Outside Processing        Event Type:             OSP Transaction             ShopFloor Delivery for Direct Items             IPV transfer to Work Order        WIP Variance          Event Type:              Period Close Variance              Job close Variance              Final Completion Variance         WIP Lot         Event Type:              WIP Lot Split              WIP Lot Merge              WIP Lot Update Quantity              WIP Lot Bonus         WIP Cost Update          Event Type:              WIP Cost Update

The Work in Process list above shows the Main Event Entity is WIP Accounting.The Event Classes are then listed with each Event Type that is part of the Event Class.

Definitions:

Accounting Methods Builder This is the process that created a SLAM and assigns it to the Ledger.

Ledger The ledger determines the rules that are applied when accounting is generated. Ledgers replace Set of Books. Each Operating Unit is associated with a Primary Ledger. Multiple Legal Entities can be tied to a Ledger through the accounting set up flow. Multiple SLAMs can be assigned to a Ledger. There can be a primary and Secondary ledger setup that can use different accounting methods in each ledger.

Subledger Accounting Method (SLAM) This is the subledger accounting method that is built and assigned to a Ledger. This will be created via the Accounting Methods Builder and includes all the details needed to created the appropriate journal entries.

Application Accounting Definitions (AAD) The application accounting definitions is made up of the Journal Line Definition, Journal line types, and Accounting Derivation Rules. These are developed using the event classes and types. A new AAD can be created or a seeded AAD can be used. The details are assigned and validated to be certain the setup at this level is correct.

Journal Line Definitions (JLD)JLT, ADR and JED are combined to create the JDL for an event. These can be shared across AADs and can be used to create sets of line assignments for event classes and types.

For Cost Management, The Journal Entry Description is not seeded by default in Costing application accounting definition.  This has been submitted as an enhancement request.

Journal Line Types (JLT) The types are defined for each particular class to be used. These must be assigned to the Journal Line Definition (JDL) to be used. These determine the journal entry line options to be used. These options include identifying the natural side used (debit, credit, gain/loss), accounting class, summarization, and other conditions that will cause the rule to create a journal entry.

Account Derivation Rule (ADR) This is used to determine the accounting combinations that will be used for the journal entries. Various rules can be defined. These can be defined by segment, accounting combination, or value set. The simplest way to derive an account is to establish the account as a constant value-use the account combination that is defined in the accounting chart of accounts.

Mapping Sets These sets are optional and user defined. If the user determines that the seeded details are insufficient, then mapping sets can be setup to allow for more specialization in the accounts. This is not supported by development as this would require customization. Seeded details are supported as they are provided by Oracle code.

Transaction Objects/Sources Transaction objects and sources carry transaction information into the rules defined for the accounting chart of accounts.

Event: An event is the recording of a change of status in the transaction life cycle, i.e., invoice approved, payment received, period close, etc. These are defined for eachSLAM used. Event classes and event types are used to create the events to be used

Event Class This classifies the types of transactions that are to be accounted for. An example of an event class is WIP Variance.

Event Type This defines actions that are possible for an event class that has potential accounting significance. Examples for the WIP Variance Event CLASS would have event TYPES defined for Period Close Variance, Job Close Variance, and Final Completion Variance

What is Subledger Accounting for Cost Management?

Subledger Accounting Cost Management -Overview 

Subledger accounting in R12 is an enhanced accounting process. The SLA process allows customers to customize the process for specific events. 

***IMPORTANT NOTE***: 

If there are NO rules entered into the SLA engine, the accounts defined the traditional way will be used to generate the journal entries posted to GL. The only difference is that the Transfer to GL is run via the Create Accounting process. The process can be run for draft or final. 

Upgrade to R12 SLA is automated and migrates the legal accounting data for the current fiscal year. The customer can migrate Cost Management â SLA for historical transactions for a selected number of periods.�  With SLA, account generation is now centralized as opposed to each application being responsible for its own accounting. This causes the setup steps for SLA to be the same across products, i.e., Payables, Receivables, and Cost Management.

Benefits of SLA include: - For customers users define and manage accounting parameters in once centralized place. Users do not have to have different setups for each subledger application. - Gives customers flexibility to address different and changing accounting requirements to meet business needs - Allows users to define all components of the journal entry in a simple way as opposed to generating accounting through logic embedded in the accounting programs. - Allows users to change accounting rules in response to new legal requirement changes in business practices or acquisition of new companies. - Users can easily control and modify accounting rules. SLA tracks all changes and ensures the programs creating the journal entries are using the latest rules. This is called Compilation and is a PL/SQL package that validates and checks the rules that are being used. - SLA rules can be date based. So journal entries can be created according to rules depending on accounting date of the transaction. 

SLA Engine SLA uses a rules-based accounting engine that posts entries into GL. The rules used by the engine are user defined. The rules are stored in a common repository for all subledger applications. A subledger application would be a product area, such as Inventory, Payables, Receivables, Purchasing, etc. The R12 SLA process has created a common accounting process to be used across all applications. 

This allows the customer to have a single method for defining accounting behaviors. For R12, the subledger application for Inventory and Purchasing are combined into the subledger Cost Management. The SLA process allows for the display of the inventory valuation accounts to be seen for a user defined date range. The engine also allows the accounting department maintain control over accounting and chart of accounts. 

When rules are created, the rules engine will override user entered accounts that might be incorrect. This is important to control user errors that can occur within a period. The rules will automatically redirect the costs to the correct account. The rules can be created for most item attributes to allow for granularity of costs if the customer requires this level of detail. 

Pre-R12 Accounting Process: A transaction is received and accounted for in the local subledger -or- A transaction is costed and accounted for in the local subledger The transaction is specifically passed to GL via the Transfer to GL process. View Accounting Windows will then show the details for these transactions.

R12 Subledger Accounting Process: After the Rules are established, the Cost Management ât SLA responsibility allows for the creation of the user-defined accounting data. �The request group related to this process includes all SLA processes as well as standard accounting processes. A transaction would be received or costed. 

The transaction will then be passed to GL via the Create Accounting Cost Management program. The process categories for this include:     Inventory     Manual     Receiving     Third Party Merge     Work in Process 

The Create Accounting - Cost Management request creates accrual journal entries, accrual reversals, and multi-period journal entries. To transfer the details to GL: 1- Set the parameter in the Create Accounting to Yes 2- If parameter is set to No, then the Transfer to GL process must be run manually. 

View Accounting Windows will then allow the details be displayed for these transactions. To View Accounting Events    Cost Management SLA Responsibility       SLA > Inquiry          Tools Menu Options              Then select Accounting Events, Journal Entries, or Journal Entry Lines to open. 

The Transaction Number refers to various event classes including, receiving accounts, PO number for Period End Accruals, transaction id

from rcv_transactions, accrual write offs, material account events transaction_id from mtl_material_transactions, WIP account events transaction_id from wip_transactions. Also you can view the Account Journal Entries and Accounting Events from the following View Transaction Windows:     View Receiving Transactions     View Material Transactions     View Resource Transactions 

The Use of the Tools > Options is only available if SLA is being used for the transaction. If there is no SLA being used, the distributions button will show the transaction details. 

For the Cost Management application, Oracle ships three application accounting definitions. These include:  

   1- Cost Management - US GAAP    2- Cost Management Encumbrance US GAAP with Encumbrance Accounting    3- Federal costing Supports Federal requirements 

The Cost Management application accounting definition comes shipped with the standard accrual accounting method. When the customer creates a new ledger, they have to associate it with the subledger accounting method to be used.

All setups to use preR12 functionality are automatic. The default base setup is US GAAP. This uses the traditional account definitions. This is delivered and works out of the box. 

Specific Steps for SLA: 1. Create Account Derivation Rule (ADR) 2. Copy Journal Line Definition (JLD). 3. Assign ADR to JLD's Journal Line Type (JLT). 

    *Perform above steps for all JLDs.     *Following are one time setups: 

4. Copy Application Accounting Definition (AAD) and set chart of accounts. 5. Assign JLDs created (in step 2) to corresponding Event Class and Event Type. 6. Validate AAD. Either through screen ('Validate' button) or using Concurrent program ('Validate Application Accounting Definition'). 7. Resolve any issues determined during validation. Verify output file. 8. Copy Subledger Accounting Method (SLAM) and set chart of accounts. 9. Locate and end date (Oracle owned) AAD assigned to this SLAM. 10. Assign SLAM to Ledger. 

SLA uses events for processing transactions. An event is the recording of a change of status in the transaction life cycle, i.e., invoice approved, payment received, period closed, etc. This allows for a clear separation between transactions and accounting representation. Events are the bridge between transactions and journal entries, so product teams are involved for coordinating actions based on event models. 

4 Main Entities for Cost Management (preseeded): Material Accounting Events  WIP Accounting Events Receiving Accounting Events Write Off Accounting Events 

Profile Options for SLA: SLA: Enable Subledger Transaction Security in GL SLA: Enable Data Access Security in Subledger SLA: Additional Data Access Set SLA: Allow Reports Journal source Override *These first 4 are used by GL for overall setup of SLA for GL 

SLA: Enable Diagnostics This is only enabled when there are errors in the Create Accounting process. The value is set to Yes and then the Create Accounting process is run again. The details are then captured and can be reported in the Transaction Objects Diagnostic Report. Because of performance issues, the profile option needs to be reset right away to turn this off and the System Administrator can run the Purge Transaction objects Diagnostics process to clean up the tables.

CST: Receiving Accounting Option This profile option controls whether the Receiving Transactions Processor creates the accounting entries online or if the transaction accounting entries need to be created via the Create Accounting process. 

Cost Management- SLA Responsibility This is a new responsibility that allows for the setup of SLA and also to access the Create Accounting Cost Management process. The Create Accounting process that can be used for receiving transactions are Create Accounting Cost Management    ...  Use Process Category = Receiving   OR Create Accounting Receiving. 

This last process, Create Accounting Receiving, is part of Purchasing responsibility and can only be run for receiving transactions. 

For Accrual reconciliation:---------------------------The R12 Accrual reconciliation process will use the accounting entries from SLA as SLA is the source of truth for the real accounting entries. Hence the accrual load can not report any transactions prior to SLA upgrade start date.

Most users processing the receiving transactions would use instead of the Create Accounting - Cost Management is run via the Cost Management SLA responsibility.  This responsibility should have more security and restrictions from users. 

Project Manufacturing and SLA- For the GL posting option set to manufacturing, the cost collector will continue to post the transaction information just as before. The cost collector will pick the account information from mtl_transaction_accounts and wip_transaction_accounts. So if the user has set up any account derivation rules in SLA, they will not be respected by the cost collector. 

For the other setup option, i.e when GL posting is set to Projects, depending on whether the auto accounting option has been set to yes or no, the accounts will be passed in or not passed in. If the auto accounting rule option has been set to Yes, no accounts will be passed to Oracle Projects by the cost collector. In this case, the user is responsible for setting the auto accounting rules in Oracle projects setup to derive the accounts. If the auto accounting option has been set to No, the accounts will continue to get passed in just as before (from MTA and WTA). However, the cost collector will pass in the distribution link from MTA and WTA to Oracle projects. This distribution link will enable Oracle projects to link the distributions created in SLA tables back to the MTA and WTA tables. The distribution links are stored in the columns inv_sub_ledger_id and wip_sub_ledger_id in the MTA and WTA tables. 

Periodic Average Costing and SLA - Presently there is no support for SLA for Periodic Average Costing. This is on the enhancement list but as of 12.0.4, this is not supported. 

Some Reports that have been changed:     CSTRSCCR Supply Chain Cost Rollup     CSTREIVR - Elemental Inventory Value Report

With Implementation of Subledger Accounting Architecture feature in R12, the role of Cost Group/Sub Inventory is limited to maintaining the Unit Cost in the Reports. All the Account Generation for Transaction will be taken care by SLA Engine rules. So all account-related information has been removed from the valuation reports.

The following cost hook is impacted: CSTSCHKB.pls. The SLA setups will take the place of the std_cost_dist_hook, which allows the user to modify the accounts that are used for distributions. This will no longer be used as the user can use standard SLA process for this. 

Troubleshooting suggestions: 

1- Review logfile for the Create Accounting Cost Management 2- Enable FND: Debug to provide more details 3- Review the Transaction Objects Diagnostic Report 4- Confirm transactions are costed successfully via cost Manager 5- Check if the Create Accounting Cost Management process is successful when using traditional accounts. 6- Run the Subledger Period Close Exceptions Report and review errors, if any.