R12: GL: Case Study on Creating a Ledger in Oracle General Ledger

Product: Oracle General Ledger Product Version: 12.X.X
This document was authored by an Oracle customer and has not been subject to an independent technical review.

Recently we made presentations to a client about the R12 features in Oracle General Ledger. The client was interested in knowing various new features in R12 for their financial modules. We started with the General Ledger Application’s Ledger feature. This document details the steps we performed as part of our Demo to create a Ledger in R12 of Oracle General Ledger. We also noted down the observations of the new features for ease of implementation and requirement gathering. We illustrated the Ledger definition cycle by tying the following 4 C’s: 1 Calendar 2 Currency 3 Chart of Accounts 4 Convention (Accounting Convention also known as Subledger Accounting Method) Observation: There is no set of books in R12, instead a Ledger had to be created. In addition to the 3 C’s of Calendar, Chart of Accounts and Currency which were the components of Set of Books in R11i, R12 introduced a 4th C, Convention. The Convention represents the accounting method used at subledger level like Accrual basis of accounting or Cash basis of accounting The following are the major steps we performed during our demo of a Ledger creation and usage: 1. Defining Accounting Flexfield 2. Defining Legal Entity 3. Defining Ledger 4. Completing mandatory Accounting Options 5. Assigning a Ledger to a Responsibility 6. Using the Ledger

1. Defining Accounting Flexfield We all know that the accounting flexfield indicates the accounting representation of a company’s financial data. The client wanted the financial information to be represented in the structure: Company. Cost Center. Account. Intercompany which we used for our Demo. Navigations -> • • Value Set: GLSuperuser>Setup>Financials>Flexfields>Validation>Sets Values: Superuser>Setup>Financials>Flexfields>Key>Values>Choose Application as General Ledger, Title as Accounting Flexfield, Structure as <User Define>,Segment<user defined>

Observations: Before we assigned segments, WE HAD to enable “Allow Dynamic Inserts” Option for the Accounting Flexfield until the Accounting Setups were done (this can be later disabled if required), otherwise, we faced issues when assigning the Retained Earnings account in Step 4 to be discussed later

The following are the further attributes for the above segments Segment Length Format Validation Flexfield Qualifier Type Company 2 Char Independent Balancing Cost Center 3 Char Independent Cost and Secondary Tracking Account 4 Char Independent Natural Intercompany 2 Char Independent Intercompany Ensured the following: a) Minimum of one value for each segment had been defined b) A value in the Natural Account with Type as ‘Ownership/Stockholder's Equity’ was used for Retained Earnings c) If Dynamic Insert was not to be enabled, the proposed retained earnings account was to be created manually in the Setup > Financials > Combinations form.

2. Defining Legal Entity Legal Entity had to be defined to store the legal and statutory information for the client’s business. Though it was not a mandatory step in defining a Ledger and or completing the setup options, from the client’s reporting and legal obligations, Legal Entity was required for our demo. Observations: • In prior releases Set of Books definition a.k.a Ledger definition did not link with that of legal entity, but in this release we could define all the important organizations at the time of defining ledger only • Legal Entity has the same meaning as in prior releases Navigation GL Superuser>Setup>Financials>Accounting Set up Manager>Accounting Setups

Unlike the prior application releases’ majority set up screens being form based, the Accounting set up manager is a user friendly HTML based interface guiding the user in performing all the steps. The first screen is a multi screen use screen which allowed users create/update both legal entities and Accounting setups.

Since we started from the scratch, we navigated to click on Create Accounting Setup, and then the Assign Legal Entities screen opened up as shown below:

The above screen was also a multi use screen that allowed us to query the predefined Legal Entities as well as create new legal entities. Then we clicked on Create Legal Entities button to open the Create Legal Entities screen which appeared as below:

Observations • A completed legal entity is required for assigning balancing segment values as part of completing the Accounting Set up Options • A Legal Entity is required for associating an Operating Unit where Oracle Subledgers are used in the Organization • For usage / definition of Ledger, usage of Legal Entity is not a prerequisite, so we can have ledgers which are not associated to any Legal Entity.

3. Defining a Ledger Once we defined the legal entity, the next step was the creation of a ledger. As mentioned earlier we found Ledger in R12 is effectively the substitution for Set of Books in prior releases. We ensured the following prerequisites before defining a ledger • • • • • Chart of Accounts has been defined – Done above Functional Currency has been enabled or defined and enabled – used the seeded USD currency Accounting Calendar has been defined – Used the seeded Accounting/Month combination Convention – Used the seeded Accrual basis of accounting convention Retained Earnings code combination has been defined

Since it was the first ledger, it became a Primary ledger. The following is the Define Accounting Representations screen

Here, we defined the ledger attributes like • Chose a name for the Primary Ledger • Associated o Chart of Accounts o Accounting Calendar o Currency o Subledger Accounting Method(User defined or Seeded) if using Oracle subledgers

Clicked on Finish once the information we entered Correct

4 Define Accounting Options In the Accounting Options we did the following

In the Ledger options, we did the following:

Once we completed the Required ( those marked with *) and the optional steps depending on what features we intended to use, the last step showed all the information for review before we Finished the setups

Once we clicked on Finish, we were back to the Accounting Options screen

We noticed that the name of the Ledger Options changes to the Ledger Name we defined and that all other set up steps are enabled for Update (this will not be the case before the completion of the Ledger Options) The Reporting Currencies Option Reporting currencies are additional currency representations of ledgers. Reporting currencies can be used for supplementary reporting purposes, such as consolidation or management reporting. Reporting currencies can be maintained at the following currency conversion levels: • Balance Level: The Balance level reporting currency is maintained only for GL account balances by using translation to convert the balances from the ledger currency to the reporting currency. This is same as Translation in earlier versions of Oracle General Ledger • Journal Level: The Journal level reporting currency is maintained for GL journal entries and balances when you post journals in your primary or secondary ledger. This type of reporting currency is maintained using the General Ledger Posting program. This is same as the Thin MRC in 11i Version of General Ledger • Subledger Level: The Subledger level reporting currency is maintained for primary ledgers only. They maintain a currency representation of the primary ledgers' subledger journals, journal entries, and balances. This type is maintained by Oracle Subledger Accounting (SLA) and the GL Posting program. This is the Multiple Reporting Currencies Feature in earlier releases of Oracle General Ledger (From R12 Oracle General Ledger User Guide for reference purposes)

We specified for this option, the • Reporting Currency - INR • Currency Conversion Level - Balance and • Currency Translation Options – Corporate for Period Rates

Once we clicked on Finish, we were back to the Accounting Options screen

The above screen reflects the updated status for the Reporting Currencies Option. The Balancing Segment Values Assignments Option was found to be a new feature in R12. This was used to tie the Legal Entity/Ledger to the balancing segment values. We observed the following: a) What was assigned at LE level automatically flowed to the Ledger level b) The one assigned at the Ledger level stayed at Ledger level c) Whatever was assigned to the legal Entity were the only VALID subledger values. d) Some forms still displayed all the balancing segment values (but at some stage or the other validation was done to ensure that only those attached to an LE/Ledger are used in the system) - Journal entry form displayed all the segment values, but on completion threw up a message that “The particular BSV is not valid for that ledger” e) If nothing was assigned to the LE/Ledger, all the values of the balancing segment were valid When we clicked on the update icon for this option and clicked on add balancing segment values button, the system showed all the values for the segment which is qualified as the Balancing Segment in our chart of accounts, we chose one of the value(s) and click on complete.

Once we clicked on Finished, we are back to the Accounting Options screen

The above screen reflects the updated status for Balancing Segment Values Assignments Option. The Operating Units Options is relevant if Oracle Subledgers are used in the Organization. By using this option, we defined a new operating Unit and associated with a Legal Entity and Ledger. This form gave us the option to access the Define Organizations form and complete the other information related to an operating Unit.

Once we clicked on Finish, we were back to the Accounting Options screen

The above screen reflects the updated status for Operating Units Option. The next option Intercompany Accounts is used if there are transactions across legal entities which have balancing segment values associated to them. Since we had defined only one Legal Entity this option was not applicable to us The next option Sequence is used to generate numbers for Journal entries. We were not using sequences, so this optional step was ignored.

5. Assigning the Ledger to a Responsibility The above steps prepared the ledger for transaction processing. The next step was to associate the ledger to a responsibility. We found a new profile option that has been introduced for this. We associated the ledger to a responsibility using the system administrator responsibility via the “GL Data Access Set” profile option. This is a system generated value (basically the ledger name) which was to be established at the appropriate level (Site, Application, Responsibility or User) for access to the appropriate responsibility. The GL Data Access Set Profile option is a new option introduced in R12. This profile option determined what ledgers a user of a responsibility has an access to. Observations: Unlike R11i, where each responsibility can have access to only one set of books, in R12, users can have access to multiple ledgers via a ledger set. This feature long with other new features like Data Definition set, Multi Org Access Control (MOAC) have taken the access, security and usage features to a new dimension. 6. Using the Ledger Once the profile option had been established tying the Ledger and the responsibility, the ledger was operational. User could choose the responsibility which will give access to the ledger. The very first time the user accessed the ledger, he had to open the First ever open period via GL Responsibility>Setup >Open/Close, the system prompted the user to confirm the very first open period specified while filling the Ledger options, once confirmed, a concurrent request spawned setting that period as the very first period for the ledger. Then the transactions and other feature usage of Oracle General Ledger could be executed.

R12: Financials Implementation Guide R12: Oracle General Ledger User Guide
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