SAP Joint Venture Accounting (JVA

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SAP AG 2004

What is SAP JVA?
In the oil and gas industry, certain ventures are considered high risk, demanding extensive capital investment and a long payback period. To minimize risks, companies develop partnerships called joint ventures. A joint venture consists of an operating partner (operator) and one or more non-operating partners, who combine monetary or personnel resources to share a project’s expenses and revenues. The operator manages the venture, arranges venture activities, and maintains accounting records. The operator remits venture expenses, collects revenues, and distributes these to the partners, according to their ownership shares. This process is known as Joint Venture Accounting (JVA).

SAP AG 2004

What is SAP JVA?
SAP designed JVA especially for joint venture operations. SAP JVA captures all expenditures and other joint venture transactions by using functions from Financial Accounting (SAP FI), Controlling (SAP CO), Asset Management (SAP AM), Materials Management (SAP MM), Plant Maintenance (SAP PM), and Project System (SAP PS). By working closely with customers and implementation partners, SAP ensures that JVA facilitates efficient management of joint ventures.

SAP AG 2004

not just at period end. Using proven SAP FI-Special Ledger functionality as its basis. SAP AG 2004 . SAP JVA allows you to view venture information in real time.Why SAP JVA? SAP JVA is the only SAP solution that allows you to track venture expenditures on a venture by venture and partner by partner basis. SAP JVA ensures accurate calculations and reporting of venture activities on a venture-by-venture basis.

Why SAP JVA? SAP JVA is fully integrated with: Financial Accounting (SAP FI) Controlling (SAP CO) Asset Management (SAP AM) Materials Management (SAP MM) Production Planning (SAP PP) Plant Maintenance (SAP PM) Project System (SAP PS) allowing you to capture all joint venture transactions by using standard SAP functions. SAP AG 2004 . The result is a streamlined workflow and reductions in errors.

based on the Joint Operating Agreement Allocations of billable and non-billable costs Multi-currency processing Farm-in/Farm-out and Equity Changes SAP AG 2004 .SAP JVA Features and Benefits Detailed joint venture data capture in real time Cash calls to/from partners Partner billing for venture expenses and revenues Overhead calculation.

SAP JVA Functions Joint Venture Data Capture Captures and codes all transactions. inventory movements and allocations. including vendor invoices. as agreed in the JOA SAP AG 2004 . with an option to produce balanced venture books Cash Calls Request cash payments from partners for future venture operations Partner Billing Calculates partner shares for venture expenses and revenues Monitors partner cash calls and receivables Produces a partner bill containing all relevant information Overhead Calculates different types of overhead.

payroll. and related expenses) to cost centers or projects throughout the allocation cycle Multi-Currency Processing Supports the multi-currency needs of typical venture activities SAP AG 2004 .SAP JVA Functions Allocations Distributes billable and non-billable costs (such as facility.

according to their equity shares. Joint Venture Billing Joint venture billing allows you to invoice partners for expenditures and revenues. This process typically occurs at the end of the accounting period after all transactions are posted. Equity Adjustment Equity adjustment covers several business processes that require the creation of new equity groups and different handling for historical cost.SAP JVA Functions Cutback Cutback allocates all operating costs. Suspense Processing Suspense processing allows you to continue regular processing in the event of a dispute or some other unscheduled disruption. carried by the operator during the accounting period. to the non-operating partners. facilitating prior-period and pre-cutback equity changes. and to issue cash calls. SAP JVA equity adjustment capabilities provide functions that cover farm-in. farm-out. SAP AG 2004 . You can send different levels of supporting information with the invoice. and re-determination.

You can then post that entry to the partner’s accounts receivable account for billing. if necessary. Asset and Material Transfer Asset and material transfer capabilities allow you transfer assets and materials to joint venture properties at the current replacement price. In SAP JVA. rather than at historical cost.SAP JVA Functions Partner Netting Partner netting allows you to calculate the sum of a partner’s open expenses and cash calls within the venture to a single residual entry of outstanding expenses. distributions. and allocations. Net Profit and Carried Interest Profit Partners Net profit and carried interest profit partners allow you to allocate payments and a net profit interest to a non-operating partner. you can allocate various costs among multiple cost objects for distribution to the ventures. and to set up a carried interest arrangement. SAP AG 2004 . Controlling Controlling enables you to process assessments.

cash call features are available for non-operated ventures at the venture and project level. SAP AG 2004 . By identifying these relationships.SAP JVA Functions Non-Operated Ventures Non-operated venture processing facilitates integrated handling of incoming. In addition. non-operated invoices with SAP accounts payable functions. SAP JVA automates processing of inter-company joint venture transactions. You can record these invoices online. Balanced Books By Venture Balanced books by venture allows you to produce balanced financial statements on a venture by venture basis. If a document without balancing-entries-by-venture is posted to the joint venture ledger. through inter-company mappings of accounts and other relevant objects. the data capture process creates an inter-venture booking. Inter-Company Functions Inter-company functions allow you to book inter-company entries on the books of the operating partner and any of its affiliated businesses. to balance the document by venture.

Depending on the venture. notifying the bank to make all required transactions for the movement of cash between accounts. Audit Support Audit support allows you to give non-operating partners detailed accounting transaction records in an electronic format to assist transaction audits. SAP JVA also produces correspondence. bank account switching produces all required settlement documents. and can calculate all applicable interest. In addition.SAP JVA Functions Bank Account Switching Bank account switching is common practice outside North America. SAP AG 2004 . Large ventures are funded from one or more dedicated venture bank accounts. SAP JVA determines the bank account from which an invoice is paid. JADE requirements are also supported. These records are based on operator-defined selection criteria and can be restricted at multiple levels.

property.Joint Operating Agreement (JOA) A JOA is a contract between venture partners that specifies the following: Operator of well. project Partners and working interests Associated ventures Allowable overheads and their treatment Non-consent penalty percentages Definitions Interests SAP AG 2004 .

JVA Business Objects: Venture Venture A EQTYPE 1 Engineering Design A EQTYPE 2 Construction EQTYPE 3 Production 2002 33 1/3 B C 33 1/333 1/3 33 1/3 EG1 A 50 % B 25% D 25 % A 50 % C 25 % B 25% Ventures associate Equity Types and Equity Groups to define a specific joint operation or purpose 2003 EG2 EG4 A A 25 % D 25 % C 25 % B 25% A 75 % C 25% 2004 EG3 33 1/3 B C 33 1/3 33 1/3 EG5 EG6 SAP AG 2004 .

SAP JVA Business Objects: Five Venture Types Operated (no tax) Operated by the company managing SAP JVA You cannot assign a tax code to this type of venture Operated (with tax) Operated by the company managing SAP JVA You can assign a tax code to this type of venture Non-Operated The company managing SAP JVA holds a non-operated venture share This company is billed by the operator for its share of venture expenses Non-Operated On-Billing The company managing SAP JVA sells part of its non-operated share of the venture to third parties Corporate Venture The company managing SAP JVA holds a 100% interest SAP AG 2004 .

Equity Definitions Equity types connect equity groups to joint ventures 2003 January February March April May June July August September October November December Joint Venture 1 Joint Venture 1 Equity Type: DEV Equity Group A 01012003 08012003 Equity Group C Equity Type: PRO 07012003 Equity Group B SAP AG 2004 .

EG5 EG6 Venture A EQTYPE 2 EQTYPE 3 Production Construction Project A 33 1/3 B C 33 1/333 1/3 33 1/3 EG1 Valid A 50 % D B 25% A 50 % B 25% 3 C 25 % 25 % EG2 A A 75 % C 25% EG4 A 33 1/3 B C 33 1/ 33 1/3 A 25 % D 25 % C 25 % B 25% EG3 EG5 EG6 SAP AG 2004 .Joint Venture Integration with Cost Objects New Processing Plant EQTYPE 1 Venture A EQTYPE 2 Construction EQTYPE 3 Production Design Cost centre A 33 1/3 B C 33 1/333 1/3 33 1/3 EG1 Valid A 50 % D B 25% 25 % A 33 1/3 B 50 % 25% 3 D 25 % EG2 A A 75 % C 25% C EG4 A B 33 1/3 33 1/ D 25 % C 25 % A 25 % B 25% Construction Project EQTYPE 1 Engineering Design EG3 .

Joint Venture Integration with Cost Objects Cost Center Internal Order Asset Venture 1 Plant 2 Project Prod Order PM Order SAP AG 2004 .

Joint Venture Coding for Cost Object Cost Object Cost Object Project Cost centre Internal Order Joint Venture Equity Type Recovery Indicator JV Object Type Plant Maintenance Order Production Order Network Order JIB/JIBE Class JIB/JIBE Subclass A SAP AG 2004 .

Recovery Indicator Identifies category of a joint venture transaction • • • Indicates whether a particular revenue or expense is shared by venture partners Used to select data for reporting to venture partners Used to distinguish between joint and own revenues and expenditures Recovery indicator assignment & determination: FI User Entry Document Type G/L Account & Cost Element Cost Object Default (Corporate) CO MM SAP AG 2004 .

00 10.70.50 .00 60. Venture EqG RI 1 1 2 3 4 4 Vendor Vendor Cost 1 Cost 2 Tax Tax CC-1 CC-2 CC-1 CC-2 CC-1 CC-2 JVI001 JVI002 JVI001 JVI002 JVI001 JVI002 A01 A01 A01 A01 A01 A01 BI BI BI BI BI BI Amount .00 40.00 Accounting Document Itm Account Cost Obj.47.00 17.50 JV Interface Special Ledger Interface FI DATA GLT0 JV DATA JVT01 BILLING JVT02 CUSTOM DATABASE SAP AG 2004 . Amount 1 2 3 4 Vendor Cost 1 Cost 2 Tax CC-1 CC-2 -117.00 40.Joint Venture Integration and Interface FI CO PS HR AM Accounting Interface MM Joint Venture Document Joint Venture Document SD PM PP Itm Account Cost Obj.50 60.50 7.

Joint Venture Vendor Invoice Posting .Example The expenses are assigned to the JV partners via the cost object assigned to the expense line items Post Vendor Invoice Cost Centre Assignment JV Document Accounting Doc SAP AG 2004 .

Example JVA derives venture coding for an asset using the cost centre entered on the asset master record Vendor Invoice Asset Master JV Document Asset Document SAP AG 2004 .Joint Venture Asset Posting .

Goods Receipt MM Assignments Material Document JV Document Accounting Doc JV Document SAP AG 2004 .Joint Venture Material Posting .Example JVA derives venture coding for material movements from a special stock cost object that is assigned to a plant and a valuation type (which is optional) associated with the plant.

Periodic Processes Foreign Currency Valuation Cost Transfers Cost Allocation & Settlement Overhead Calculations (PCO) Equity Adjustments Cutback Joint Venture Close Partner Netting Final Settlement Corporate Close Billing SAP AG 2004 .

350 0 20 30 100 200 Cost Object B Materials Internal Labour External Labour Staff Salaries Rent & Rates Light & Heating Vehicles Repairs & Servicing Travelling Hotels Entertaining Telecoms Mail & Carriage 40% 40% Assessment A Total 140 140 Total 140 Total SAP AG 2004 . including: Substitution of the recovery indicator (recovery indicator manipulation) Allocation of secondary costs Re-run of settlement Distribution (through original cost element) Internal CO only Unallocated Costs Allocation (via secondary cost element) Internal CO only Cost Object B Materials Internal Labour External Labour Staff Salaries Rent & Rates Light & Heating Vehicles Repairs & Servicing Travelling Hotels Entertaining Telecoms Mail & Carriage 8 12 40 80 Cost Object A Materials Internal Labour External Labour Staff Salaries Rent & Rates Light & Heating Vehicles Repairs & Servicing Travelling Hotels Entertaining Telecoms Mail & Carriage Assessment A .Assessments & Distributions Cost allocations are based on R/3 CO functions with JVA required enhancements.

such as reserves Funding Currency Change A funding currency is added or removed from a venture Current and prior period equity adjustments handled SAP AG 2004 .Equity Changes & Adjustments Farm-In / Farm-Out A partner joins or leaves a venture Redetermination Partner shares are adjusted to reflect changes in business conditions.

Venture EqG RI Amount 1 O'Head Admin C00001 A01 NB . Amount Admin .50.00 JVA Project Suspense Joint Venture Document Joint Venture Document Itm Account Cost Obj.Suspense Processing Suspense functionality supported for: Partner Suspense Equity Group Suspense Project/WBS Element Suspense Specific costs are not charged to a venture but instead posted to suspense accounts for the duration (year & period) a project remains in suspense Set project in suspense Project Suspense Selection Company Code Venture GBU1 JV0001 to JV9999 Post Costs Accounting Document Accounting Document Itm Account 1 O'head 2 O'head Cost Obj. Venture EqG RI Amount 1 O'Head Admin C00001 A01 NB .50.12.00 2 O'Head CC-1 JVI001 A01 BI 50.00 0 Options Test run SAP AG 2004 .2002 2 3 Joint Venture Document Joint Venture Document Itm Account Cost Obj.00 CC-1 50.00 Posting Fiscal Year Period Posting Date 2002 12 31.00 O'Head O'Head CC-1 CC-1 JVI001 JVI001 A01 A01 BI BS 50.50.

Overheads International – Parent company overhead US/Canada – Well related allocations Cost Stepped Rate Rule GBP 140 000 GBP 250 000 Overhead 1% GBP 2 800 2% GBP 10 000 GBP 10 000 GBP 0 5% GBP 500 SAP AG 2004 .

Venture A Cutback Company Code 50 % Partner B EG2 25 % ET1 Partner D 25 % Net Operating Exp / Rev 50 AR / AP Partner B 25 AR / AP Partner D 25 SAP AG 2004 .Cutback Processing Gross Operating Exp / Rev 100 Cost Object RI = Bill Venture A The cutback process allocates JV partners' expenses or revenues according to their working interest ownership.

Cash Calls Accounts Rec.37 7..00 100.Cash Calls Partner B 300 SAP AG 2004 ..Cash Call Processing Equivalent to down payments or pre payments Can be issued for future months (Reclassification) Request and cash receipts carried forward to billing process Integrated with Accounts Receivable and Accounts Payable Cash Call Request: Gross to venture/project Net to venture/project/partner Partner Shares FI Document Venture JV0001 EqG A01 FCurr NOK Partner JVGBU1 JV5001 JV5101 FCurr Amt 600.79 Accounts Rec.74 23.Cash Calls Cash Call Partner C Partner A 100 600 Accounts Rec..00 Lcurr Amt 46.00 300.

Joint Venture Billing Payroll Vendor Invoices Internal Allocations Accounts Receivable JV Integration Mgr. JV Integration Mgr. Suppl Detail Invoice JV Summary Ledger Cutback JV Billing Ledger … JV Integration Mgr. Suppl Expenditure Detail Inv. … Orders Costs JV Billing creates various customized billing documents to send to your JV partners Billing Statement Exp. Cash Calls Paid Cash Calls Partner Payments Cutback Invoice Partner Adjustments SAP AG 2004 .

as defined in configuring SAP JVA and SAP FI SAP AG 2004 .Inter-Company Ventures Affiliated Inter-Company Setup FI Document Cutback CO To Affiliate: INVOICE Cutback creates A/P entries to operator on the books of the affiliated partner as configured in SAP JVA and SAP FI Intercompany Processing FI A/P Cash Call Cash Calls Gross cash calls create A/P entries on the books of the affiliated partner.

Payroll MM Projects Business AM Asset Transfers Network PM PS Provisioning MM Goods Issues JVA Cutback Support JVA Partner Billing Service Network Provisioning Delivery PP Revenue Management Joint Venture Accounting SAP AG 2004 .Asset and Material Movements Regulatory IM Information Data Warehouse CO Non-Regulated Information EC Management Business Planning Controlling FI Finance & Accounting Enterprise FI Asset AM Management HR Management Purchasing QM & Supply PS Human Res.

Project. Order.Material Management Features Stock help corporate or per venture Stock prices Moving average charged to venture and operator Current replacement price (CRP) invoked to add stock handling fee Plant or valuation definition Plant to Cost Center. Asset Company Inventory at Moving Average Price Joint Venture Billing CRP Joint Venture Billing CRP Company Proj/Asset at Moving Average Price SAP AG 2004 .

Suppl Expenditure Detail Inv.JV Partner Auditing Standard JVA Reports: Gross billable/all by venture/account Gross billable/all by cost object Gross billable/partner net by cost object Gross billable/all by cost object foreign currency Gross billable/partner net for JIB Remaining cutback by cost object Posted suspense overview Gross non-operated by cost object Venture/equity group/billing indicator Partner/billing indicator Billing Reconciliation Extract: Reconciliation Statement Exp. Suppl Detail Invoice Ledger 4B and 4D JVA Billing Balances Ledger 4A and 4C JVA Balances SAP AG 2004 .

Non-Operating Ventures Online transaction for incoming invoices for non-operated ventures Input forms. defined in JVA configuration. cost object. asset) Incoming cash calls are handled with the cash call functions Non-operated venture processing is fully integrated with SAP accounts payable functions Invoice Da Tra ta En nsa try ctio n R/3 Accounts Payable Nonoperating net share Cash Call all h C ction s Ca nsa Tra SAP AG 2004 . control the layout of the input screens Input form includes the SAP coding block information (account.

central disbursement account Funding currency defined for each venture Bank reconciliation and switching Exchange differences for each venture SAP AG 2004 .Cash and Banking Main Features Balanced books by venture Venture specific bank accounts v.

MM. and billing SAP AG 2004 .SAP JVA Business Benefits Key Drivers: Maximize Assets. cutback. and expense Ensures full compliance with all standard overhead methods and calculations (US and international) Provides complete drill down capability for reporting all ventures. online and in real time. and AM. overhead analysis. reducing audit headcount. all authorization for expenditures (AFEs) tied to JOA. Minimize Overhead Integrates with FI. time. which streamlines workflow and greatly reduces errors Supports joint audit data exchange (JADE) reports.

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