Intracompany Whitepaper

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Intracompany Balancing-Release 12 Page1

Intracompany Balancing In Release 12

An Oracle White Paper
May 2008

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TABLE OF CONTENTS

EXECUTIVE OVERVIEW.3
INTRODUCTION3
SCOPE.3
1. Settting up a New Ledger.5
2. Defining Intracompany Balancing Rules..15
3. Entering Intracompany Transactions20
4. Level of Summarization..36
5. Clearing Company Balancing Segment Value42
6. Balancing Segment Values to Legal Entity..47
7. Balancing Segment Values to Ledger..53
8. Technical Reference59

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EXECUTIVE OVERVIEW

The purpose of this document is to provide users an overview of the intracompany setup in
release 12. We also hope that this document would help you build an understanding on the
intracompany accounting in release 12.

INTRODUCTION

Intra Company balancing rules are used to create balancing lines on journals between balancing
segment values either within the same legal entity, or where there is no legal entity context. Intra
Company balancing rules are used when more than one balancing segment value exists on a
transaction or journal entry. Journal in General Ledger cannot be posted when the debit and
credit amounts for each balancing segment value do not net to zero. These journals can be
balanced automatically by setting up the balancing rules and enabling the option to balance
cross-entity journals.

SCOPE

The scope of this document is to help you understand the setup steps required for using
Intracompany Balancing for a Ledger. This paper would discuss the intracompany setup
for the following scenarios:

A) Intracompany rules for Ledger without Legal Entity
B) Intracompany rules for Ledger with Balancing Segment Values (BSVs)
assigned to Legal Entity
C) Intracompany rules for Ledger when BSVs are assigned to Legal Entity and Ledger

The information provided in this document is relevant for Release 12.

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Overview

Journal entries with multiple balancing segment values are termed as Intracompany journals.
Intracompany balancing occurs within a single legal entity or within a group of balancing segment
values mapped to a ledger. Intracompany balancing adds additional journal entries to make the
journals balance by each balancing segment value

Enabling Intracompany balancing legder setup option helps in balancing the intracompany
journals automatically using the user defined balancing rules. Intracompany journals have to be
balanced manually if the option Enable Intracompany balancing is not selected. Journals not
balanced by each balancing segment value would fail with Error 10 Showing unbalanced
intercompany journal entry and Error 16 Unable to balance intercomapny accounts upon
posting.

Intracompany balancing can be defined for each of the debit balancing segment value and credit
balancing segment value. A default rule can also be defined with a default debit and credit
account that can be used for balancing intracompany journals with multiple balancing segment
values.

Intracompany balancing can balance the intracompany journal either in summary or detail.
Intracompany balancing also facilitates the use of a clearing balancing segment value that can
act as a trading partner for all other balancing segment values.

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1. Settting up a New Ledger

Create New Accounting structure: INTRACOMPANY OPERATIONS

Navigation: Setup->Financials->Flexfields->Key->Segments

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Define the segments for the structure INTRACOMPANY OPERATIONS
assign same value set for company segment and the Intercompany segment


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Assign Flexfield Qualifiers to all the segments including the Intercompany
Segment


The intercompany segment is the accounting flexfield segment that has the intercompany
segment qualifier assigned to it. The intercompany segment qualifier is optional and this segment
shares the same value set as the balancing segment.

The intercompany segment may be used to keep track of the trading partner and this segment is
only used in intracompany balancing

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Compile the Flexfield Definition


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Define Segment Values for Company Segment

Navigation: Setup->Financials->Flexfields->Key->Values

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Define Segment Values for Department Segment


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Define Segment Values for Account Segment


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Create a Primary Ledger without a Legal Entity

Navigation: Setup->Financials-> Accounting Setup Manager->Accounting Setups

Create Accounting Setup->Define Accounting Representations->Complete Accounting
options

Update Ledger: Ledger Definition

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Enable Intracompany Balancing and complete the Accounting Options

Navigation: Setup->Financials->Accounting Setup Manager->Accounting Setups

Query the Ledger

Update Ledger ->Ledger Options

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Assign the Ledger to the Responsibility Operations Intrasuper User

Navigation: System Administration: Profile->System

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2. Defining Intracompany Balancing Rules


Query the Ledger Operations-No LE

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Update the Intracompany Balancing Rules

Click on update Intracompany Balancing Rules. Select Define Rules for No Legal Entity

Note: The rules have to be defined to No Legal Entity, as there is no legal entity assigned to the
ledger Operations-No LE

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Create Rule for No Legal Entity by clicking the Create Rule tab

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Create Rule for Source Manual and Category Adjustment

In the above scenario, the intracompany rule is defined for the debit balancing segment 01 and
the credit balancing segment 02. For the source manual and category adjustment, if a transaction
happens between balancing segment values 02 and 01, debiting balancing segment 02 and
crediting 01, then the first rule defined between the balancing segments 01 and 02 would be
used. For the rest of the transactions, the rule defined for All Other-All Other would be used. In
other words, if there are no rules specifically defined for different balancing segment values
separately, then All Other-All Other would be used. Intracompany balancing rules can also be
defined with only All Other-All Other combination. Intracompany rule for All Other All Other is the
mandatory default rule to be defined to complete the intracompany rules setup.

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Complete the Clearing Options .The setup is not complete without the Clearing
Balancing Segment Value

Select Options and then select the clearing balancing segment value and click Apply

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3. Entering Intracompany Transactions

Scenario: 1

Enter a journal for the Source Manual and Category Adjustment.

Navigation: Journal->Enter

In the above scenario, the transaction is between the balancing segment value 02 and the
balancing segment value 01. The journal belongs to source Manual and category Adjustment.

Balancing segment 02 requires a credit account and balancing segment 01 requires a debit
account for balancing. From the intracompany rule defined for source Manual and category
Adjustment the debit account for debit balancing segment 01 is 01.001.1026.02 and credit
account for credit balancing segment 02 is 02.001.1027.01.The posting program would use these
two accounts for balancing the above journal.

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Journal after Posting


Note: The intracompany rule defined for source Manual and category Adjustment would apply
only for the journals with the source Manual and category Adjustment.

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Scenario: 2

Define Intracompany Rule for Source Manual and Category Other




Note: The intracompany balancing rules defined for category Other would apply to all the
categories for which there are no balancing rules specifically defined.

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Journal created for Source Manual and Category Adjusting


In the above scenario, the intracompany transaction entered between the balancing segment
values 01 and 02 for the source Manual and category Adjusting

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The above journal used the intracompany rules defined for source Manual and category Other as
there are no rules specifically defined for the source Manual and category Adjusting. The
balancing segment 01 required a credit account and balancing segment 02 requires a debit
account for balancing. There are no rules specifically defined for each balancing segment value.
The All Other All Other rules defined for source Manual and category Other would apply for the
above journal.

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Define Intracompany Rule for Source Manual and Category Addition




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Select the Clearing Balancing Segment Value for Source Manual and Category
Addition

Note: Default Rule would be available in the Default Options only when the option Use for
Many to Many Journals Only is selected for the Clearing Balancing Segment Value
and when the default rule for the combination All Other-All Other is defined.

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Scenario: 3

In this scenario the following Intracompany Transactions would be discussed.

One to One Intracompany

The transaction between two balancing segment values with only one balancing
segment value with net debit and only one balancing segment value with net credit.

One to Many Intracompany

The transaction where one balancing segment value transacts with many balancing
segments and where there is one balancing segment value with net debit and many
balancing segment values with net credit.

Many to One Intracompany

The transaction where many balancing segment values transacts with one balancing
segments and where there is one balancing segment value with net credit and many
balancing segment values with net debit.

Many to Many Intracompany

The transaction where many balancing segment values transact with many other
balancing segment values and where there are many balancing segment values with
a net debit and many balancing segment values with a net credit.

Intracompany balancing follows an order for evaluating the intracompany rules to be used for
balancing any intracompany journal. Intracompany rules defined specifically for a debit
balancing segment value and a credit balancing segment value would take precedence over
all other rules. Intracompany rules explicitly defined for two balancing segment values would
be checked first for balancing the journal.

If the rules were not defined explicitly for the balancing segment values, then the
intracompany balancing would check for the balancing rule defined between an explicit debit
balancing segment value and a default value followed by intracompany rule between a
default value and an explicit credit balancing segment value. If the intracompany rules are not
defined for the above three cases, then the intracompany balancing would check for the rules
defined for the debit balancing segment value All Other and the credit balancing segment
value All Other.

Intracompany rule defined for the debit balancing segment value All Other and the credit
balancing segment value All Other is called the default rule. This default rule can be used if
the same debit and credit account have to be used while balancing the transactions of
different balancing segment values. If the default rule is used the appropriate trading partner
balancing segment value replaces the balancing segment of the account combination defined
in the intracompany balancing rule.

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One to One Intracompany Journal for the Source Manual and Category Addition


In the above journal the transaction is between the balancing segment values 01 and 02 for the
source Manual and category Addition.

The balancing segment 01 requires a credit account and the balancing segment 02 requires a
debit account for balancing. The credit account for 01 is 01.003.1025.02 and the debit account for
02 is 02.003.1017.01.

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The intracompany balancing rule defined between the debit balancing segment value 02 and the
credit balancing segment value 01 are used for the above journal.

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One to Many Intracompany Journal for the Source Manual and Category Addition


In the above journal, the intracompany transaction is between the balancing segment value 01
and the balancing segment values 02 and 03 for the source Manual and category Addition.

The balancing segment 01 requires a credit account for balancing the transaction entered against
the balancing segments 02 and 03. For balancing the transaction entered with 02, the posting
would use the account 01.003.1025.02 and for balancing transaction entered with 03, it would
use the account 01.003.1027.03. Similarly, the balancing segment 02 and 03 also require debit
accounts for balancing the transactions entered against balancing segment value 01. Balancing
segment value 02 would use the account 02.003.1017.01 and balancing segment value 03 would
use the account 03.003.1019.01 for balancing the transaction entered with balancing segment 01.

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The intracompany rules defined between the debit balancing segment value 02 and credit
balancing segment value 01 and the intracompany rules defined between the debit balancing
segment value All Other and credit balancing segment value 01 are used for the above journal.

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Many to One Intracompany Journal for the Source Manual and Category Addition


In the above journal the intracompany transaction is between the balancing segment values 01,
02 and balancing segment value 03 for the source Manual and category Addition

The balancing segment 01 would use the account 01.003.1027.03 for balancing the transaction
entered with 03. Balancing segment 02 would use the account 02.003.1031.03 for balancing the
transaction entered with 03. Balancing segment value 03 would use the account 03.003.1019.01
for balancing transaction entered with 01 and the account 03.003.1026.02 for balancing the
transaction entered with 02.

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The posting used the intracompany rules defined between debit balancing segment value All
Other and credit balancing segment value 01 and the intracompany rules defined between debit
balancing segment value All Other and credit balancing segment value All Other for balancing the
above journal

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Many to Many Intracompany Journal for the Source Manual and Category Addition


In the above journal, the intracompany transaction is between the balancing segment values 01,
02, 03 and 04 for the source Manual and category Addition.

For Source Manual and Category Addition, the clearing balancing segment value is set as Use for
many to many journals only and default option is set as Default Rule. The default rule is the rule
defined between the debit balancing segment value All Other and credit Balancing segment value
All Other .

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As default rule is selected for Many to Many intracompany journals, the posting used the
rules defined for the combination All Other-All Other

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4. Level of Summarization

The Level of Summarization is Summary Net for the Intracompany Balancing Rule
defined for Source Manual and Category Adjustment




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Journal entered with two balancing segments and four journal lines


The above journal has both debit and credit for each of the balancing segments 01 and 02 and
the level of summarization is Summary Net.

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The Summarize Net option of an intracompany balancing rule would summarize the amount for
each of the balancing segment and would add an intracompany line for the net amount. In the
above journal, the net amount for balancing segment values 01 and 02 is 100. So, intracompany
line added for net amount of 100 for each of the balancing segment values.

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The Level of Summarization changed to Detail for the Intracompany Balancing
Rule defined for Source Manual and Category Adjustment




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Journal entered with two balancing segments and four journal lines


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The detail option of the intracompany balancing rule added one intracompany balancing line for
each of the journal lines. For four original lines there are four intracompany lines added by
posting program.

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5. Clearing Company Balancing Segment Value

Define rule for Source Manual and Category Expenditures




Clearing balancing segment value allows to define one company to act as the trading partner for
all other companies in the organization for certain intracompany transactions.

Note: If balancing segment values are assigned to legal entity and/or ledger then assign an
additional balancing segment value as a clearing balancing segment value.

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Clearing balancing segment value is selected as Use for All Journals with Default
Clearing balancing segment as 03

Note: The Clearing Balancing Segment Value can be used for all the journals or only for Many
to Many Journals.

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Enter manual journal for source Manual and Category Expenditures


The above intracompany journal belongs to source Manual and category Expenditures for which
the default clearing balancing segment value is 03.

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The default balancing segment is 03. The original amounts would first be transferred to the
clearing balancing segment 03. The original debit of the account 01.001.10004.00 would be
debited to the account 03.001.1015.01 and the original credit of the account 02.002.1008.00
would be credited to the account 03.001.1023.02. The natural accounts 1015 and 1023 are used
from the debit account and credit account of the intracompany rule defined for the source manual
and category expenditures.

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Clearing Balancing Segment Value can also be entered manually at the time of
creating the journal.




If default option is selected as Manually Entered Clearing Balancing Segment Value, then the
clearing balancing segment value can be selected in the journal header at the time of entering the
journal. The clearing balancing segment value can be selected at the time of journal entry even if
a default balancing segment value is given while defining the intracompany balancing rule.

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6. Balancing Segment Values to Legal Entity

Scenario: 4 Intracompany rules for Legal Entity with Balancing Segment Value


Query the Ledger Operation with LE

Update Intracompany Balancing Rules

The ledger Operations with LE has a legal entity Legal Entity BSV with two balancing
Segment values 01 and 02 assigned to it.

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Intracompany balancing rules to be defined for Legal Entity BSV

Intracompany rules have to be defined to Legal Entity BSV as the balancing segment values are
assigned only to the legal entity. In this scenario, rules for No legal entity is not relevant as there
are no balancing segment values assigned to ledger.

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Define Intracompany rules for the Legal Entity

Create Intracompany Balancing Rules for Legal Entity Legal Entity BSV for Source
Other and Category Other

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Clearing Balancing Segment Value for Source Other and Category Other

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Journal before Posting


In the above scenario, the journal is between the balancing segment values 01 and 02. The
balancing segment values 01 and 02 are assigned to legal entity with the name Legal Entity
BSV

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As the balancing segment values 01 and 02 are assigned to the legal entity Legal Entity BSV
the posting program would use the intracompany balancing rules defined for the legal entity
Legal Entity BSV for the source Other and category Other for balancing the above journal.

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7. Balancing Segment Values to Ledger

Scenario: 5- Assign Balancing Segment Value to Ledger Operations with LE



Update Balancing Segment Value Assignments

In this scenario, the balancing segment values 01 and 02 are assigned to Legal Entity BSV and
balancing segment values 03 and 04 are assigned to the ledger Operation with LE.

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Define Intracompany Rules for No Legal Entity



Update Intracompany Balancing Rules

Define rules for Legal Entity BSV for intracompany transaction between the balancing segment
values 01 and 02. Define rules for No Legal Entity for intracompany transaction between the
balancing segment values 03 and 04.

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Intracompany Rules for Source Other and Category Other for No Legal Entity

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Clearing Balancing Segment Value

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Journal before Posting


In the above scenario, the intracompany transaction is between the balancing segment values 03
and 04 which are assigned to the ledger with the name Operations with LE

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The posting used the intracompany rules defined for No Legal Entity for balancing the above
journal, which is between the balancing segment values assigned to the Ledger.

Note: A transaction between a balancing segment value assigned to legal entity and a balancing
segment value assigned to a ledger is not allowed.

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8. Technical Reference

Intracompany rules defined for any source and category are stored in the following two tables:

FUN_BALANCE_OPTIONS

This table stores the ledger, journal source and category information for which the Intracompany
balancing rules have been defined. These rules are used by the Intercompany Balancing API to
balancing Intracompany journals. This table also gives the clearing balancing value option
selected for a particular source and category.

FUN_BALANCE_ACCOUNTS

This table stores the intracompany accounts defined between each trading and transacting
balancing segment value. These accounts are used by the Intercompany Balancing API to
balancing Intracompany journals

The table FUN_BALANCE_OPTIONS and the table FUN_BALANCE_ACCOUNTS are linked by
a Template_id.

The posting program uses the package FUN_BAL_UTILS_GRP while creating the intracompany
lines. The pls files for the package FUN_BAL_UTILS_GRP are fungbalutilb.pls and
fungbalutils.pls. The pls files are located at $FUN_TOP/patch/115/sql.

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White Paper Title: Intracompany Balancing In Release 12
[May] 2008
Author: Lakshmi Sammeta, ISC
Contributing Authors:
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
www.oracle.com
Oracle is a registered trademark of Oracle Corporation. Various
product and service names referenced herein may be trademarks
of Oracle Corporation. All other product and service names
mentioned may be trademarks of their respective owners.
Copyright 2001 Oracle Corporation
All rights reserved.

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