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Overview of the New Financial Architecture in Oracle E-Business Suite Release 12

Mary Burns

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracles products remains at the sole discretion of Oracle.

Agenda
What We Set Out To Address Release Twelve: The Global Release Global Architecture MultiOrg Access Control Subledger Accounting Ledgers and Ledger Sets Ledger Considerations Global Business Functions Legal Entities Accounting Set Up Manager E-Business Tax Advanced Intercompany Banking Model

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What we set out to address

Doing Business Globally is Complex

Top Drivers of Complexity

1 2 3 4 5 6 7 8

National and International Laws & Regulations Actions by Competitors Changing Customer Requirements Industry Standards and Regulations Tax Codes Changing Workforce Attitudes International Reporting Standards Language and Cultural Differences
Direct impact on Finance

Globalization is unstoppable. Regardless of geography, industry or income, companies are globalizing to gain new customers and access new markets. Is this a good thing? Nearly two-thirds of the CEOs we surveyed are positive about the impact that globalization will have on their organizations over the next three years.
Source: 9th Annual Global CEO Survey Globalization and Complexity; PwC 2006

Source: PWC, 9th Annual Global CEO Survey

Make it Simpler to do your job

Control Costs by Managing Complexity
Major Focus

Standardizing operating practices and controls Standardizing policies and business rules Standardizing and integrating finance systems Adopting best practices Optimizing the finance organization and its reporting structure Reducing reliance on spreadsheets
Source: PWC Management Barometer

69% 66% 59% 58% 52%

50%
Senior executives say simplification is driving the Finance agenda

33%

Make it Easier to do Your Job

How Finance Spends its Time
26%

% Yet To

47%

50% 60%

Improve processes or rationalize technologies Standardize policies, rules, and processes across the entire enterprise Implement a shared services model *

27%

73%

Transactional Activities Control Activities Decision Support, Performance Mgmt

80%

Adopt best practices or simplify processes across the entire enterprise

The Agile CFO, IBM Business Consulting Services, 2005 * Deloitte Consulting, 2006

Customers:
Centralize, Simplify, Standardize
Work Globally, to be more competitive
Think Globally, to make the right decisions Manage Globally, to lower cost and increase performance
A$+$
Easy Reporting Transparent Audit, Reconciliation & Drilldown Corp. Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Joint Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Parent Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar National Compliance Local Regulation National COA Local Calendar

Financial Data for Management - and Compliant

Analytics

+$

Comprehensive and compliant processing

Controlled Transaction Entry

How Financials Release 12 Can Help

The Global Business Release WORK GLOBALLY
To Be More Competitive

THINK GLOBALLY
To Make the Right Decisions

MANAGE GLOBALLY
To Lower Cost & Increase Performance
Integration Data Management Reporting

Financial Control & Reporting

Credit-to-Cash Procure-to-Pay Treasury & Tax Travel & Expense Asset Management

Performance Management Profitability Management Business Intelligence

Global:
1. Of, relating to, or involving the entire earth; worldwide: global peace; global monetary policies, etc. Comprehensive; total: a... global, generalized sense of well-being

2.

Governance, Risk & Compliance

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Release Twelve
The Global Business Release:

A New Financial Architecture

Global Financial Architecture

6 Major Initiatives
1. 2. Ledger and Ledger Sets Multi-Org Access Control Subledger Accounting Tax Engine Intercompany Bank Model
Multi-Org Access Control
Dr Cr

General Ledger Ledger & Ledger Sets

Subledger Accounting (SLA)

3. 4. 5. 6.

Tax Engine

Inter Company

Bank Model

Inventory

Receivables Payables

Projects

Work in Process

Purchasing

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Multi-Org
Access Control
Work Think Manage

MOAC: Multi-Org Access Control

Role based access to Operating Units

Perform multiple tasks across operating units without changing responsibilities

Belgium
Legal Entity

Holland
Legal Entity

Denmark
Legal Entity

Functional Tasks
Order Management Dunning, Collections, Billing Requisition, Demand & Purchase Orders Receiving & Drop Ship Invoice Receipt, Disbursement Customer Data Management Accounting Setup

Belgium
Operating Unit

Holland
Operating Unit

Denmark
Operating Unit

Responsibility SingleResponsibility Responsibility

Responsibility

Purpose Built Cross OU Desks Shared Services

Shared Service
Order Management

Product Reference
Order Management Receivables Procurement Supply Chain Management Payables Trading Community Architecture Accounting Setup Manager

Dunning, Collections, Billing

Requisition, Demand & Purchase Orders Receiving & Drop Ship Invoice Receipt, Disbursement Customer Data Management Accounting Setup

Multiple Organization Access Control

Summary of Changes Security Profiles for data security
MO: Security Profile List of operating units for a responsibility Defined in HR

OU field on UI
all transactions setup data specific to OU, like transaction type

Enhanced Multi-Org Reporting and Processing

Ledger/Ledger Set parameter on accounting reports and processes OU parameter on other standard reports and processes For example: submit the Payables Open Interface Import w/OU param null to import all records across all OUs

Multi-Org Access Control

In practice
Select Operating Units In daily use

Select Classify Operating Unit Organization classification

as operating unit

Run Reports Across Operating Units

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Subledger Accounting

Work Think Manage

Centralized Accounting Policies

Greater Control, Transparency and Auditability
Internal control and compliance with multiple accounting policies through user-defined accounting rules
3rd Party Systems
Dr
Cr

General Ledger General Ledger

Centralized Accounting Model, Rules, Engine and Repository

Single source of truth for all subsystem accounting activity with a common data model and repository Accounting, reconciliation and reporting facilitated by centralized data model

Inventory
3rd Party Systems Work in Process

Receivables

Projects

Streamline closing process with common posting engine Auditable and transparent entries accessible with full drilldown

Purchasing

Payables

Subledger Accounting
Centralized Rules, Common Repository: Global Control
Ledger French Rules Plan Comptable French Calendar

What it is

Some Benefits

EUR

Accounting Rules SarBox & 8th Dir. User Editable Subledger Daybooks

(Journals) Subledger Balancing Reports, inquiries, open items, et cetera Multiple Representations Common Posting to GL Ledgers Real time or Periodic

Faster, Easier
Reconciliation Corporate Rules = Accounting Standardization Local Rules = Improved Local Compliance Automate Apples to Apples Adjustments Improved Auditability Improved Internal Control

Dr

Cr

Subledger Accounting

Payables Invoice

Subledger Accounting
Transaction Level Compliance
National Daily Journal Requirements Internal Control: Central Definitions, Eliminate overrides
Policy Enforcement in Volume Processing

Transparent Accounting Rules Debits & Credit at the point of the event Automate Foreign Operation adjustments Event Class: Invoices Reconciliation Event: Invoice Approved Ledger: France (EUR) Platform GL Date: 20-Sep-2005 Description: Office supplies In accordance Type Account with the Asset purchase 01.9100010.100 Underlying Misc expense 01.9100020.100 Misc expense 01.9100020.200 Records Misc expense 01.9100020.300
VAT 01.3100060.000 Accounts Payable 01.7000010.000

Description

Debit

Credit

Paris: furniture 10,000 Paris: supplies 400 Nantes: supplies 100 Nice: supplies 300 VAT@17% 1,836 ABC Supplies 12,636

12,636 12,636

Ticked & Tied

SLA Controls that GL Balances and SLA Balances tie, and that both tie to the document (invoice, payment, etc.) sources
GENERAL LEDGER Cash Receivables Inventory Assets Prepayments Payables Accruals Shares Previous Results Balance Sheet Sales COGS R&D S&M G&A-Fin G&A-IT G&A-HR Period Income Income Statement
Closing Balance

Opening Balance

Debit

Credit

Closing Balance

100 1,000,000 500,000 100,000 1,000 (750,000) (250,000) (100,000) (501,100) -

3,500,000 3,000,000 1,200,000

2,750,000 3,500,000 1,500,000

2,800,000

2,700,000 50,000

10,500,000 1,500,000 300,000 300,000 300,000 150,000 150,000 300,000 24,000,000

10,500,000 3,000,000

24,000,000

750,100 500,000 200,000 100,000 1,000 (650,000) (300,000) (100,000) (501,100) (3,000,000) 1,500,000 300,000 300,000 300,000 150,000 150,000 300,000 -

Opening Balance SUBLEDGER ACCOUNTING Receivables Customer Customer Customer Customer Customer Total One Two Three Four Five 250,000 350,000 100,000 100,000 200,000 1,000,000

Debit

Credit

150,000 250,000 1,500,000 800,000 300,000 3,000,000

400,000 450,000 1,400,000 750,000 500,000 3,500,000

150,000 200,000 150,000 500,000

General Ledger
SLA Detail

Payables Vendor Vendor Vendor Vendor Total I II III IX (250,000) (100,000) (150,000) (250,000) (750,000) 1,000,000 75,000 725,000 1,000,000 2,800,000 900,000 50,000 775,000 975,000 2,700,000 (150,000) (75,000) (200,000) (225,000) (650,000)

Multiple Accounting Representations

Global Compliance Statutory and Stock Market
Ledger A French Rules Plan Comptable French Calendar Ledger B US GAAP US COA US Calendar

Multiple Ledgers

EUR

EUR

or
Dr Cr

Subledger Accounting

Payables Invoice

Single subledger transaction can create multiple accounting representations and in multiple currencies

Chose to use an alternative Ledger or just an Adjustment Ledger or segment

SLA keeps the Subledgers & GL tied out

Keep the auditors happy!

Subledger Applications

Accounting Configurations

Journal Entry Setup

General Ledger

Accounting Events

Accounting Program

Subledger Journal Entries GL Journal Entries and Balances

Subledger Accounting Service

Reconciled: Transactions (& adjustments) Docs, SLA, GL in synch Subledger Balances

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Ledgers and Ledger Sets

Work Think Manage

Ledger
One Repository of Financial Truth

Ledger B US GAAP US COA US Calendar

EUR

Implements the 4 Cs: Accounting Method Chart of Accounts Calendar Currency

The balance on Creditors (COA) is 4.2M Eur (Currency) on March 31, 2006 (Calendar) according to IAS/IFRS definitions (Accounting Method)
Reporting Currency

Ledger Sets
Global Information At A Glance

Ledger A French Rules Plan Comptable French Calendar

Ledger B US GAAP US COA US Calendar

EUR

EUR

Reporting Currency

Ledger Sets
Global Information At A Glance
Ledger Set Share: Chart of Accounts Calendar
Ledger C

Ledger A French Rules Plan Comptable French Calendar

Ledger B US GAAP US COA US Calendar

US GAAP US COA US Calendar

USD

EUR

EUR

Ledger D US GAAP US COA US Calendar

Key benefits to many Ledgers in one set

Decision-driving business information always available Simpler processing and General Ledger management Data and definitions that can be shared and secured

AUD

Reporting Currency

Currency in Release 12
Transaction Currencies Accounting Currency in Primary Ledger Reporting Currency in Primary Ledger More Accounting Currencies in Secondary Ledgers
For every transaction OR For SLA Posting level / GL activity level

Balance level Translation or Remeasurement in Ledgers within Ledger sets, run at one click Balance & Activity level Translation or Remeasurement in Financial Consolidation Hub Enhanced Revaluation
[Functional Currency term dropped: conflicts with IAS 21 / FAS 52]

Data Access, Definition Access

Data Access Sets
Grant and tailor access to Ledgers and Balancing Segment Values (i.e. Companies, Stores, Branches, etc.) Privileges View GL Manager France Ledger Canada Ledger US Ledger Write Accountant

Definition Access Sets separate from data security

Share, restrict definitions; privileges to view, modify, etc.

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Ledger Considerations

Ledger Sets Work them your way

Management

Ledger Set US Ledger Set Legal Ledger US1 Legal Ledger US2 Legal Ledger US3 Adjustment Ledger US Corporate Ledger Set

adjustments eliminations

UK Ledger Set Legal Ledger UK1 Legal Ledger UK2 Adjustment Ledger UK Adj Ledger Corporate

Automate GAAP / IAS adjustments in an adjusting ledger Eliminate within a Set with GCS Consolidate Formally in FCH

Set of 26 Ledgers in one country Euro Zone in One Ledger Set My Corporate Set in US GAAP Statutory Set for Country Y Subs

Map from a non-conforming COA with a GCS Ledger

Division X Worldwide Ledger Set

When to use a Secondary Ledger, an Adjusting Segment or an Adjusting Ledger?

Adjusting Segment
Corp. wants GL balances per Parent GAAP Subsidiary books are pretty similar to parents No inventory National chart of accounts is clearly related to IAS IFRS or GAAP balances National Controllership - Corp GAAP known Balances are enough (Full drill down available)

Adjusting Ledger
Corp. wants Just the adjustments, thank you Mapping gets us most of the way to Parent Inventory is the big difference Manageable series of reclassifications Regional Controllership - Corp GAAP administered See theyve been properly adjusted to our rules

Secondary Ledger
Corp. wants a complete Parent GAAP & Currency edition of the Subs books
Subsidiary books are quite alien to parents Inventory is one of the big differences National chart of accounts is radically different from corporate Parent Controllership Mexico plant, US parent Every petty cash slip

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Global Business Functions

Work Think Manage

Legal Entity: Your Registered Companies

Legal Authorities
Countries, States, Local, Agencies, Taxation, Registrars, Regulators...

Public Company (ultimate parent)

Subsidiary Public Company Company (regional parent) Subsidiary Company Subsidiary Company (business parent) Subsidiary Company

Regulates

Complies

Legal Entities
Registered Companies, Funds, Partnerships Inc. LLC. Ltd. SA. GmBH. Etc. exist in the outside world

Subsidiary Company

Managed & analyzed by

Subsidiary Company

Subsidiary Company

Management Orgs
Divisions, LOBS, Plants, Cost Centers, Whatever = Decision Making Tags

Parent companies (LEs) own or control subsidiaries (LEs) No outside ring - must pick an LE LEs create commercial transactions

LEs: Why and What?

Why We Care LEs pay the taxes - need tax registrations Trade between LEs needs intercompany LEs own the money and bank accounts What weve done Addresses, Officers, etc. Enabled First Party stamp Added Establishments: map Registrations to Authorities GRE/LE not touched Authorities as TCA parties LE Configurator

LEs file the accounts, take care of accounting

LEs comply with whatever needs compliance: legal in LE

Tabulate your Registered Companies and other forms of LE

Setup and maintain: Legal Entities, Establishments, Jurisdictions, Legal Authorities, Legal Addresses

Where LE fits in
Transaction Taxes Complies & Files, Pays
Registrations Files with Authorities
Exists Locally

Actual Registered Companies, etc.

Business Group
GRE/LE

Legal Entity
Accounts for itself in a Ledger or BSVs

Maintains its Subledger Documents in many OUs Default Legal Context (DLC)

Et Cetera, 11i

Operating Units

Establishments
Files Registrations with Authorities

Legal Entity:
Vehicle for compliance

Ledger

Get the LE Right

Compliance Falls Into Place Transaction Actual Registered Lets put LEs to work Business Taxes Companies, etc. Isolate legal compliance from management needs Group Complies & your registered companies Track GRE/LE Files, Pays Make your compliance flow more easily
Maintains Et Cetera, 11i its Subledger Accounting Setup Manager Registrations Documents Operating Files Assign books, bookkeeping rules and currency management with Authorities in many OUs Units to your registered companies Default Legal Exists EBusiness Tax Context (DLC) Locally Have your registered companies calculate, file, and pay the Accounts transaction taxesfor itself they owe

Legal Entity

in a Ledger Establishments business between and across your registered companies Do Files
with full legal documentation

Intercompany Bank Model

or BSVs

Legal Entity:

Ledger their money to pay Registrations Have your registered companies useVehicle for compliance with Authorities their bills, et cetera

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Accounting Setup Manager (ASM)

Work Think Manage

Centralized Set-up
Accounting Setup Manager

Define Legal Entities & Associated Rules Ensure Complete & Accurate Setup via Online Checklist Define Multiple Ledgers for Rules & Currencies One Place to manage Your Global Accounting Rules, Currencies, Ledgers, And Ledger Sets

Set Accounting Rules for All EBS Apps

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E-Business Tax

Work Think Manage

Centralized Global Tax

Less Complex Global Tax Compliance
Business Needs
Tax content for certain countries Automation Vertex and Taxware integration for U.S. Integrity checks during setup process Constant Changes in Tax Laws and Regulations Date effective setup Tax rules flow for change or creating rules Tax simulator for setup, rules, and transactions Tax registrations and tax reporting codes Local Compliance Tax lines determine applicable taxes Configurable tax reporting templates Single set up for all Oracle applications Information Visibility Use of E-Business Suite components such as trading partner geography, trading partner classification, legal entity, inventory item categorization, and accounting event.

Solution

Oracle E-Business Tax

Processing taxes for transactions and reporting
Transactions

Purchasing Parties Payables Places Products Sales Orders Processes

Determine Applicable Regimes Taxes

Compliance, Assurance

Efficiency, Global Visibility

Single Interface for Transactions

Calculate Tax Amount

Tax Status & Rate

Taxable Basis

Transparent Integration with Tax Partner Services

Extensible

Service Oriented Architecture

Receivables

Tax Reports
- PDF, HTML, RTF - Security enabled

Tax Transactions

Taxes, Rules

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Advanced Intercompany (AGIS)

Work Think Manage

Advanced Global Intercompany System

Address the Top Barrier to a Fast Close
Advanced Global Intercompany System

Web UI

Subledger Invoices & Documents

Open Interfaces / API Generate subledger invoices Excel (Web ADI) Control transaction entry with Intercompany Calendar Fully Configurable Approval Rules Flexible Security Model Centrally defined Intercompany Accounts XML Publisher Reports Online Reconciliation Reporting

Dr

Cr

General Ledger

Subledger Accounting

Receivables

Payables

AGIS at Work
Rebilling a Corporate Cost from an USA HQ
GL Entries created for US subsidiaries AP and AR Invoices created for France and Italy

Inter Company

California Company

General Ledger Entries

Subledger Invoices & Documents

Illinois Company

New York Company

France Company

Italy Company

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Banking Model

Work Think Manage

Centralized Banking
Shared Services Disbursements
Bank account is now associated with LE entity rather than Operating Unit
OU C

LE
OU A

OU B

Single bank account serves multiple Operating Units Any and all Operating Units associated with a ledger can be permitted to use the bank account

Inventory

Receivables

Projects

Work in Process

Purchasing

Payables

Assets

Plus
Centralized Credit Card Model Credit Card Encryption Supplier & Customer Banks in TCA

Bank Model: Example of What You Can Do

Pay invoices from different OUs with 1 instruction
OU A

New Payments Module New Bank Model New Bank & Credit Card Features

OU B

OU C

Single Payment Instruction

Bank

Payments

Sub Ledger Accounting

Invoices

Banks

Legal Entity

Operating Units

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Sharing Services

Work Think Manage

All Together: Easier To Share Services

Central processing, Distributed impact
Formal SSCs At home or overseas Call Centers, Outsourcing Offshoring, SAS 70, On Demand Ledger and Ledger Sets Subledger Accounting Intercompany, Tax Engine MOAC across LEs, Bank Internal Controls Manager

SSCs (Formal) SLAs & Tax Inter-LE

Informal Service Sharing Ledgers & Ledger Sets Process Efficiency Ledgers with Decentralized Depts. Balancing Segments Shared Service Centralized Depts.. MOAC across OUs Infrastructure Normal Business Intercompany (Serves Informal and Formal) Organizational Access Practice Bank Model Cross Org Processes Tax
Banking Model Inter Unit Accounting

What the Architecture Gets You

Work Globally
Global Order Desk Global Procurement Global Billing Global Dunning
Release 12 Subsidiary LEs.

Company

Company

Company

account for themselves in Ledgers, and

Think Globally
Global Ledger Sets worldwide insight Global Reporting

Ledger Set

manage their subledger data in Operating Units

Multi-Org Access Control

Manage Globally
Global Accounting Rules Global Set-up Global Integration

Inventory

Receivables Payables

Projects

Work in Process

Purchasing

Share Services, maintain privacy

Exploit Cross-OU Processes
Yesterday: An LE Group in 1 SoB with 1 OU - no partitioning

R12: Introduce partitioning without sacrificing processes

Ledgers in Ledger Sets, New OUs

Inventory Inventory Work in Process Work in Process Receivables Projects Inventory Work in Process Receivables Projects

MOAC

Purchasing

Payables

Assets

Purchasing

Payables

Assets

Release 12: The Global Business Release

Work Globally, to be more competitive
Think Globally, to make the right decisions Manage Globally, to lower cost and increase performance
XML Publisher Reporting DBI, FCH
General Ledger

Corp. Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Joint Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Parent Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar National Compliance Local Regulation National COA Local Calendar

A$+$

OICM Ledger Sets, Ledgers SLA, Tax

+$

Profitability Mgr, EPB

Subledger Transactions

Intercompany, Bank, Payments

MOAC, +300 Features TCA, LE

QUESTIONS