Accounting in Oracle Treasury

An Oracle White Paper

March 2007
 TABLE OF CONTENTS
1. Introduction…………………………………………………………………2
2. Setup for Accounting………………………………………………………..2
2.1 Setup Company Profiles……………………………………………..5
2.2 Setup System Parameters…………………………………………….5-6
2.3 Setup Journal Entry Actions…………………………………………6-7
2.4 GL Accounts………………………………………………………...7
2.5 Intercompany Accounts……………………………………………...7
2.6 Journal Structures……………………………………………………8
2.7 Query by GL Account………………………………………….……9-11
2.8 Copy GL Accounts……………………………………………..…...12
3. Sample Journal Entry Structures…………………………………………….13-19
4. Accounting Methods………………………………………………………..20
5. Accounting Batches…………………………………………………………20
6. Batch Periods……………………………………………………………….21
7. Revaluations…………………………………………………………….…..21-26
8. Accruals…………………………………………………………………….26-28
9. Daily Journals……………………………………………………………….28-31
10. Transfer to General Ledger…………………………………………………31-34
11. Example Accounting……………………………………………………….35-41
12. Automating Accounting Process……………………………………………42-43
13. Hedge Effectiveness Testing………………………………………………..44
13.1 Setup…………………………………………………………….….45-47
13.2 Hedge Eligibility Revaluation………………………………………..48
13.3 Hedge Item Revaluation…………………………………………….48
13.4 Effectiveness Testing……………………………………………….48-51

Accounting in Oracle Treasury Page 1

Introduction

Financial accounting is concerned with the preparation of financial statements for decision
makers such as stockholders, suppliers, banks, government agencies, owners and other
stakeholders. The fundamental need for financial accounting is to report the results to
interested users. Treasury Management is fast emerging as a specialization in many
companies and the accounting function is being delinked from the finance function. Oracle
Treasury helps you meet the critical planning, processing, and reporting requirements of
global treasury operations. Correctly accounting for treasury transactions is of great
importance because of the impact on your organization’s financial results. This becomes
more pronounced for Treasury as it involves cash flows.

Oracle Treasury has the ability to automatically generate accounting entries and pass them
seamlessly to Oracle General Ledger. This process comprises the following four steps:

1. Perform revaluations (optional)

2. Generate accruals and amortizations
3. Generate daily journals
4. Transfer journals to General Ledger

You can post journal entries for cash flow amounts (that is, non-revaluation and non-accrual
journal entries) on a daily or weekly basis, and post journal entries for your
revaluation/accrual deals on a separate timeline. The posting of cash flow amounts does not
require performing revaluations or generating accruals prior to generating daily journals.

Setup for Accounting

Before creating the accounting entries, the following setup needs to be in place. The setup
should be complete and correct in all respects to ensure that the accounting is generated
comprehensively. Hence it is of utmost importance that the setup is made properly. In this
section we will discuss:
1. Setup Company profiles
2. Setup System parameters
3. Setup Journal entry actions

Setup Company Profiles

Navigate to Setup->Parties->Company profiles form. Use the Parameters tabbed region to

set up the parameters for revaluation and accounting rules that apply to the company.

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Here is a brief explanation of the parameters and how they affect accounting.

Parameter Value Description

Accounting - Yes (default) or Determines whether or not your company must
Perform Deal No. perform Revaluations as part of the accounting
Revaluation process. Choose Yes if you want the company to
perform revaluations. Choose No if you do not
want the company to perform revaluations.
Accounting - Spot, Corporate, Sets the default General Ledger daily exchange rate
Exchange Rate Type or custom used by the company.
defined rate type.
Accounting - Journal Summary Sets the default method the company uses to
Transfer Method (default) or transfer their journal entries to General Ledger. If
Detail you choose Detail, the transaction details are
transferred to General Ledger. If you choose
Summary, summary amounts are calculated and
transferred to General Ledger.
Accounting - Journal No Change Sets the default method the company uses to
Transfer in Closed (default) or Next handle journal entries that fall into a closed period.
Period Open If you choose No Change, the transaction details
are left as is and are transferred to General Ledger.
You must resolve any errors that occur in General

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 Ledger. If you choose Next Open, the journal
entries are placed in the next open period and then
transferred to General Ledger.
Accounting - Allow Yes (default) or Determines whether or not the company wants to
Unbalanced Journal No allow users to transfer unbalanced journals to
Transfer General Ledger. f you choose Yes, the Treasury
Journal Transfer process leaves the Treasury
journals date unchanged, but transfers to the GL
Interface Table the start date of the next open GL
period.
Accounting - Custom defined Sets the default suspense account used the
Suspense Account suspense account company uses for suspense journals.
Accounting - Settlement Date Determines which deals are eligible to be selected
Trade/Settlement Accounting for revaluation and accrual processes. For example,
Date Method (default) or if the parameter is set to Settlement Date
Trade Date Accounting, a deal whose settlement date falls after
Accounting the revaluation batch end-date is not revalued. If
the parameter is set to Trade Date Accounting, the
trade (deal) date of your deals is compared against
the batch end-date when determining if they are to
be included in the batch or not.
External - Unique, user- If the company uses a service provider to reconcile
Subscriber FX entered, foreign exchange settlements between the company
Match ID subscriber ID and its counterparties, use this parameter to enter
the company's FX Match ID. For example, FXAB-
12345.
Interest - Interest Both Days, First Determines the number of days to be used in the
Includes Day, or Last Day interest calculation. The default Interest Includes
parameter for your company’s deals is populated
based on your selection here. Day counting options
include:
First Day: Interest is charged for the start date but
not the maturity date.

Last Day: Interest is charged for the maturity date

but not the start date.

Both Days: Interest is charged for both the start

date and the maturity date.

Note: First Day and Last Day produces the same

interest amount at the time of deal entry; however,
with accruals, they may provide different accrual
amounts depending on the accrual batch period
selection.

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Interest - Interest Nearest, Round Determines the rounding method to be used in
Rounding Down, or Round interest calculation. The default Interest Rounding
Up parameter for your company’s deals is populated
based on your selection here.
Revaluation - Default Set Sets the default market data set that the company
Default Market Data (default) or wants to use for revaluation purposes.
Set custom defined
set
Revaluation - Future Exclude (default) This parameter is dependent on the Accounting -
Dated NI Deal Trade/Settlement Date Method parameter. It
Revaluation determines the method the company wants to use
to discount negotiable instrument deals with future
dated settlement transactions (deals that have a
settlement date after the current system date or
revaluation date). If the Trade parameter is set to
Settlement, then this parameter should be set to No
Revaluation before Settlement Date. If the Trade
parameter is set to Trade, then this parameter
should be set to either Yes Revaluation before
Settlement Date to Settlement Date, or to Yes
Revaluation before Settlement Date to Revaluation
Date.
Revaluation - FRA Physical Start Determines which date the company wants to use
Discount Method Date or to discount Forward Rate Agreement deals to
Revaluation Date calculate gain or loss. You can choose to discount
to the deal's physical start date, or to the deal's
revaluation date.
Revaluation - FX Settlement Date Determines which date the company wants to use
Discount Method or Revaluation to discount foreign exchange deals to calculate fair
Date (default) value. You can choose to discount to the deal's
settlement date or to the revaluation date.

Setup System Parameters

System parameters define settings for the operation and control of Treasury and are usually
set at the time of implementation. You can update them after implementation as needed. For
the purposes of accounting we review the following parameters.

Parameter Value Description

Accrual Days Forward or Sets the range of dates for accruals to either all
Adjustment Type Arrears dates prior to the accrual date (Forward), or to all
(default). dates up to and including the accrual date
(Arrears).

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Validation Required Yes or No Determines whether the journal process creates
for Accounting (default). journals for validated deals and transactions only
or all deals and transactions.
Settle to Other than Yes or No If set to Yes, allows settlements to be paid to
Counterparty Bank (default). parties other than the counterparty.
Account
Receive to Other Yes or No Allows settlements to be received from or settled
Than Company Bank (default). to parties/accounts other than the company
Account accounts.
Treasury Report Currency short Sets the standard currency used in Treasury
Currency form. USD
(default).

Setup Journal Entry Actions

The Journal Entry Actions window accessed through the form Setup->System->Journal
Entry Actions helps to define the General Ledger accounts that are used to generate
accounting entries for each combination of deal type, deal subtype, product type, and
portfolio within a company. To ensure a balanced ledger, it is critical that accounts and
journals are set up completely and correctly. This screen has the following tabs:
1. GL Accounts.
2. Intercompany Accounts.
3. Journal Structures.
4. Query by GL Account.
5. Copy GL Accounts.

GL Accounts
The GL Accounts tabbed region is used to define General Ledger accounts for each
company. You can add new accounts and review existing accounts, but you cannot change
or delete existing accounts in this form. The available General Ledger accounts derive from
the set of books associated with the company. If you want to define a new General Ledger
account, enter a General Ledger account alias in the GL Account column. Treasury
populates the fields with the General Ledger account number and description. In the
Treasury Reference field, you can enter your own description to identify this GL account.
The Treasury reference that you enter appears alongside the GL account number in the list
of values throughout Treasury.

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Intercompany Accounts
Intercompany accounts help when the organization has several affiliates and subsidiaries and
needs to track transactions from and to these entities. The Intercompany Accounts tabbed
region is used to review and update the intercompany accounts for intercompany funding
deals within a company. These intercompany accounts are used for intercompany transfers
and interest charges. The bank code, currency, account number, and account name of each
intercompany funding deal is the counterparty bank account that is used in intercompany
deals between the company and the counterparty. In the Principal GL field, enter the
General Ledger account that you want to use for posting the principal for that company. In
the Interest GL field, enter the General Ledger account that you want to use to posting
interest for that company.

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Journal Structures

Use the Journal Structures tabbed region is used to set up the actual journal structure. Here
you define for each applicable company name, the daily journal entries that you want to
generate automatically for each combination of deal type, deal subtype, product type, and
portfolio. You must update journal entries whenever you create a new product type or
portfolio or when you unauthorize a product type.

Firstly query the first Deal Type, Deal Subtype, Product Type and Portfolio combination
that you want. If the journal values do not appear for the selected combination, you can
copy values from another combination that has the same deal type by placing your cursor in
the Date Type field and choosing the Copy Journal Details button. Enter or change the Date
Type, Amount Type, and Action Code as required. If you want the journal action to refer to
the general ledger number related to the company's cash flow bank account, select the Bank
GL check box. Otherwise, enter an account number in the GL Account field. If this is an
intercompany funding deal, direct journal actions to either the principal or the interest
General Ledger account number by selecting the Prin GL or the Int GL check box. These
check boxes are only available for non-accrual and non-revaluation date types. Identify the
action as a Debit or Credit. If necessary, enter the effective dates for this journal action. You
can enter a future date in the ‘Effective From’ field to pre-define a journal action. You can
use the ‘Effective To’ field to deactivate a journal action after the date you specify.

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The following is the deal type, date type, amount type combinations allowed for journals
structure setup.

Deal Date Types Amount Types

Type
FX DEALT, VALUE, ROLLPRE BUY, SELL
REVAL (if company parameter CCYUNRL, CCYREAL, UNREAL, REAL
Accounting: Perform Hedge
Effectiveness Testing is set to
NO)
REVAL (if company parameter CCYUNRL, CCYREAL, UNREAL, REAL,
Accounting: Perform Hedge NRECUNR, NRECCYU
Effectiveness Testing is set to
YES)
RECLASS RECUNRL, RECREAL, RECCYUN,
RECCYRE
FXO ACCRUAL PREMADJ
DEALT, VALUE, SETTLE, FXOBUY, FXOSELL, PREMIUM
PREMIUM, EXPIRY
REVAL REAL, UNREAL, CCYREAL
ONC ACCRUAL INTADJ
REVAL CCYREAL
COMENCE, DEALT, PRINFLW, INTSET, TAX, INTRFND
SETTLE, REFUND
IG ACCRUAL INTADJ

Accounting in Oracle Treasury Page 9

Deal Date Types Amount Types
Type
BALANCE, COMENCE, BAL, PRINFLW, COMPOND, INTSET
DEALT, INTCOMP, SETTLE
REVAL CCYREAL
TMM REVAL UNREAL, REAL, CCYREAL, CCYUNRL
ACCRUAL INTADJ
COMENCE, DEALT, INITIAL, PRINFLW, INTSET,
SETTLE, RATESET INTRFND, TAX, INITIAL
RTMM ACCRUAL INTADJ
COMENCE, DEALT, PRINFLW, INTSET, BALOUT,
SETTLE FACEVAL, SETTLE, WRTEINT,
WRTEOFF, WRTEON
REVAL REAL, UNREAL,
NI ACCRUAL EFFINT, INTADJ, DISCREV
COMENCE, DEALT, BALCOM, BAL_FV, COMENCE, INT,
MATURE INTL_FV, ORIGCOM
REVAL UNREAL, REAL, CCYREAL
BOND ACCRUAL CPMADJ, SLDISC, SLPREM, SLUAMD,
SLUAMP
REVAL UNREAL, REALMTM, REALAMC,
CCYREAL, CCYAMRL
COMENCE, COUPON, INT, DISC, PREMIUM, COMENCE,
DEALT, MATURE INTL_FV, COUPON, BAL_FV, TAX
FRA ACCRUAL INTADJ
COMENCE, DEALT, SETTLE, FACEVAL
MATURE, SETTLE,
RATESET
REVAL UNREAL, REAL, CCYREAL
IRS ACCRUAL INTADJ
REVAL CCYREAL, UNREAL, REAL
COMENCE, DEALT, PRINFLW, INTSET, INITIAL, FACEVAL
SETTLE
BDO COMENCE, DEALT, PREMIUM, FACEVAL, SETTLE
EXPIRY, MATURE,
PREMIUM, SETTLE
ACCRUAL PREMADJ, SLDISC, SLPREM
REVAL UNREAL, REAL, CCYREAL
IRO ACCRUAL PREMADJ, INTADJ
COMENCE, DEALT, FACEVAL, PREMIUM, SETTLE
EXPIRY, MATURE,
PREMIUM, SETTLE
REVAL UNREAL, REAL, CCYREAL
SWPT ACCRUAL PREMADJ, INTADJ
N

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Deal Date Types Amount Types
Type
REVAL UNREAL, REAL, CCYREAL
DEALT, COMENCE, FACEVAL, PREMIUM, SETTLE
EXPIRY, PREMIUM,
SETTLE
CA ACCRUAL INTADJ
REVAL CCYREAL, CCYUNRL
SETTLE INTSET
BALANCE (date type not BAL (amount type not available)
available)
IAC VALUE AMOUNT
STOC DEALT, COMENCE, COMENCE, DIVEXP, DIVSET
K SETTLE, DIVDAT,
PAYMENT
REVAL UNREAL, REAL, CCYREAL

Oracle Treasury creates journal entries for brokerage fees also. Setting up date type-amount
type combinations does not do this. There is a screen on the brokerage setup form to assign
GL account. This is where the GL accounts for journal entries are determined. The
offsetting GL account is derived from the cash GL account on the bank account out of
which the fee is settled. Note that brokerage fees are journalized only after they are settled
(authorized for settlement).

Query by GL Account
You can review the deal combinations that were set up for a specific General Ledger
account. To do this enter the company code of the company whose General Ledger account
you want to review and choose the Query by GL Account tab. The Find GL Accounts
window appears. Select a General Ledger account and choose the Find button. The journal
entry actions for that General Ledger account appear.

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Copy GL Accounts

If you are setting up several companies with similar sets of journals, you can copy a set of
journals from a company you have already set up. To copy a general ledger account, enter
the company code of the company you are setting up and choose the Copy GL Accounts
tab. In the Copy From Company field, select the company that has the journals you want to
copy and then choose the Copy Journals button. Update the appropriate General Ledger
accounts and the effective dates.

Accounting in Oracle Treasury Page 12

Sample Journal Entry Structures

The following are sample treasury accounting configurations for illustration purposes only.
In many cases, the following accounting templates have not been fully tested and may not
produce journal entries that are 100% correct. Also, these journal structures may not satisfy
your unique accounting requirements or cover all possible scenarios. You should use this
only as an example of one possible set up and thoroughly test whatever final configuration
you define. Oracle does not intend to imply that following these sample set ups will result in
proper accounting entries for your company.

Deal Type IG - Intercompany Funding

Subtype FUND

Amount Action Bank Prin Int

Date Type Type Code GL GL GL Db/Cr GL Acct
COMENCE PRINFLW REC * Db
COMENCE PRINFLW REC * Cr
ACCRUAL INTADJ POS Db Intercompany Interest Expense
ACCRUAL INTADJ POS Cr Accrued Interest
INTCOMP COMPOND PAY Db Accrued Interest
INTCOMP COMPOND PAY * Cr
SETTLE INTSET PAY Db Accrued Interest
SETTLE INTSET PAY * Cr
REVAL CCYREAL GAIN * Db

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REVAL CCYREAL GAIN Cr Realized Currency Gain/Loss
REVAL CCYREAL LOSS Db Realized Currency Gain/Loss
REVAL CCYREAL LOSS * Cr
INTCOMP COMPOND PAY * Db
INTCOMP COMPOND PAY Cr Accrued Interest

Deal Type IG - Intercompany Funding

Subtype INVEST

Amount Action Bank Prin Int

Date Type Type Code GL GL GL Db/Cr GL Acct
COMENCE PRINFLW PAY * Db
COMENCE PRINFLW PAY * Cr
ACCRUAL INTADJ POS Db Accrued Interest
ACCRUAL INTADJ POS Cr Intercompany Interest Expense
INTCOMP COMPOND REC * Db
INTCOMP COMPOND REC Cr Accrued Interest
SETTLE INTSET REC * Db
SETTLE INTSET REC Cr Accrued Interest
REVAL CCYREAL GAIN Db Realized Currency Gain/Loss
REVAL CCYREAL GAIN * Cr
REVAL CCYREAL LOSS * Db
REVAL CCYREAL LOSS Cr Realized Currency Gain/Loss
INTCOMP COMPOND REC Db Accrued Interest
INTCOMP COMPOND REC * Cr

Deal Type ONC - Short Term Money

Subtype INVEST

Date TypeAmount Action Bank Debit/Credit GL Account

Type Code GL
ACCRUAL INTADJ POS DR accrued interest receivable
ACCRUAL INTADJ POS CR Interest Income (short term)
COMMENCE PRINFLW DECRS * DR
COMMENCE PRINFLW DECRS CR Short term investment
COMMENCE PRINFLW INCRS DR Short term investment
COMMENCE PRINFLW INCRS * CR
SETTLE INTSET SETTLE * DR
SETTLE INTSET SETTLE CR accrued interest receivable
SETTLE INTSET COMPGRS DR Interest Income (short term)
SETTLE INTSET COMPGRS CR accrued interest receivable
REVAL CCYREAL GAIN DR Interest Income (short term)
REVAL CCYREAL GAIN CR Realized Currency Gain/Loss
REVAL CCYREAL LOSS DR Realized Currency Gain/Loss
REVAL CCYREAL LOSS CR Interest Income (short term)

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Deal Type IRS - Interest Rate Swap (Should be similar to TMM - Wholesale Term
Money)
Subtype FUND

Date Type
Amount Action Bank Debit/Credit GL Account
Type Code GL
REVAL UNREAL GAIN Db Liability Account
REVAL UNREAL GAIN Cr Unrealized Gain/Loss
REVAL UNREAL LOSS Db Unrealized Gain/Loss
REVAL UNREAL LOSS Cr Liability Account
ACCRUAL INTADJ POS Db Interest Income/Expense
ACCRUAL INTADJ POS Cr Accrued Interest
SETTLE INTSET Db Accrued Interest
SETTLE INTSET * Cr
DEALT INITIAL INCRSE Db Clearing Account
DEALT INITIAL INCRSE Cr Liability Account
COMENCE INITIAL INCRSE * Db
COMENCE INITIAL INCRSE Cr Clearing Account
COMENCE PRINFLW INCRSE * Db
COMENCE PRINFLW INCRSE Cr Liability Account
COMENCE PRINFLW DECRSE Db Liability Account
COMENCE PRINFLW DECRSE * Cr
REVAL CCYREAL GAIN Db Liability Account
REVAL CCYREAL GAIN Cr Currency Gain/Loss
REVAL CCYREAL LOSS Db Currency Gain/Loss
REVAL CCYREAL LOSS Cr Liability Account

Deal Type IRS - Interest Rate Swap (Should be similar to TMM - Wholesale Term
Money)
Subtype INVEST

Amount Action Bank

Date Type Type Code GL Db/Cr GL Acct
REVAL UNREAL GAIN Db Asset Account
REVAL UNREAL GAIN Cr Unrealized Gain/Loss
REVAL UNREAL LOSS Db Unrealized Gain/Loss
REVAL UNREAL LOSS Cr Asset Account
ACCRUAL INTADJ POS Db Accrued Interest
ACCRUAL INTADJ POS Cr Interest Income/Expense
SETTLE INTSET * Db
SETTLE INTSET Cr Accrued Interest
DEALT INITIAL INCRSE Db Asset Account
DEALT INITIAL INCRSE Cr Clearing Account
COMENCE INITIAL INCRSE Db Clearing Account

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COMENCE INITIAL INCRSE * Cr
COMENCE PRINFLW INCRSE Db Asset Account
COMENCE PRINFLW INCRSE * Cr
COMENCE PRINFLW DECRSE * Db
COMENCE PRINFLW DECRSE Cr Asset Account
REVAL CCYREAL GAIN Db Asset Account
REVAL CCYREAL GAIN Cr Currency Gain/Loss
REVAL CCYREAL LOSS Db Currency Gain/Loss
REVAL CCYREAL LOSS Cr Asset Account

Deal Type Stock - Equity Investments

Subtype BUY

Date Type Amount Action Bank Debit/Credit GL Account

Type Code GL
DEALT COMENCE Debit Investments
DEALT COMENCE Credit AP – Due to Broker
SETTLE COMENCE Debit AP – Due to Broker
SETTLE COMENCE * Credit
DECLARE DIVEXP POS Debit AR – Due from Broker
DECLARE DIVEXP POS Credit Dividend Revenue
DECLARE DIVEXP REV Debit Dividend Revenue
DECLARE DIVEXP REV Credit AR – Due from Broker
PAYMENT DIVSET * Debit
PAYMENT DIVSET Credit AR – Due from Broker
REVAL UNREAL GAIN Debit Valuation Allowance
REVAL UNREAL GAIN Credit Unrealized Gain/Loss
REVAL UNREAL LOSS Debit Unrealized Gain/Loss
REVAL UNREAL LOSS Credit Valuation Allowance
REVAL REAL GAIN Debit Unrealized Gain (Loss)
REVAL REAL GAIN Credit Valuation Allowance
REVAL REAL GAIN Credit Realized Gain (Loss)
REVAL REAL GAIN Debit Investments
REVAL REAL LOSS Debit Valuation Allowance
REVAL REAL LOSS Credit Unrealized Gain (Loss)
REVAL REAL LOSS Debit Realized Gain (Loss)
REVAL REAL LOSS Credit Investments

Deal Type Stock - Equity Investments

Subtype SELL

Date Type Amount Action Bank Debit/Credit GL Account

Type Code GL
DEALT COMENCE Debit AR – Due from Broker

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DEALT COMENCE Credit Investments
SETTLE COMENCE * Debit
SETTLE COMENCE Credit AR – Due from Broker

Deal Type Bond - Fixed Income Securities

Subtype BUY

Date Type Amount Type Action Bank Debit/Credit GL Account

Code GL
DEALT INTL_FV Debit Marketable Securities
DEALT INT Debit Accrued Interest
DEALT DISC Credit Unamort Premium (Disc) - Mkt. Sec
Adjunct
DEALT PREMIUM Debit Unamort Premium (Disc) - Mkt. Sec
Adjunct
DEALT COMENCE Credit Payable - Due to Broker
COMENCE COMENCE * Credit
ACCRUAL SLDISC POS Debit Unamort Premium (Disc) - Mkt. Sec
Adjunct
ACCRUAL SLPREM POS Credit Unamort Premium (Disc) - Mkt. Sec
Adjunct
ACCRUAL SLDISC POS Credit Other Income (Expense)
ACCRUAL SLPREM POS Debit Other Income (Expense)
COMENCE COMENCE Debit Payable - Due to Broker
ACCRUAL CPMADJ POS Debit Accrued Interest
ACCRUAL CPMADJ POS Credit Interest Income
COUPON COUPON * Debit
COUPON COUPON Credit Accrued Interest
COUPON COUPON Debit Receivable - Due from Broker
COUPON COUPON Credit Receivable - Due from Broker
REVAL <REALAMC> GAIN Credit Other Income (Expense)
REVAL <REALAMC> LOSS Debit Other Income (Expense)
REVAL <REALAMC> GAIN Debit Unrealized Gain (Loss)
REVAL <REALAMC> GAIN Credit Unrealized Gain (Loss)
REVAL <REALAMC> LOSS Debit Unrealized Gain (Loss)
REVAL <REALAMC> LOSS Credit Unrealized Gain (Loss)
ACCRUAL <SLUAMD> REV Debit Unamort Premium (Disc) - Mkt. Sec
Adjunct
ACCRUAL <SLUAMP> REV Credit Unamort Premium (Disc) - Mkt Sec
Adjunct
MATURE <BAL_FV> * Debit
MATURE <BAL_FV> Credit Marketable Securities
MATURE <BAL_FV> Debit Receivable - Due from Broker
MATURE <BAL_FV> Credit Receivable - Due from Broker
COUPON TAX Debit Withholding Tax Expense

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COUPON TAX Credit Accrued Interest

Deal Type Bond - Fixed Income Securities

Subtype SELL
Date Type
Amount Action Bank Debit/Credit GL Account
Type Code GL
DEALT INTL_FV Credit Marketable Securities
DEALT INT Credit Accrued Interest
DEALT COMENCE Debit Receivable - Due from Broker
COMENCE COMENCE * Debit
COMENCE COMENCE Credit Receivable - Due from Broker

Deal TypeNI - Discounted Securities (example 1)

Subtype BUY
Date Type
Amount Action Bank Debit/Credit GL Account
Type Code GL
COMENCE COMENCE Debit Marketable Securities
COMENCE COMENCE * Credit
ACCRUAL <EFFINT> POS Debit Interest Receivable
ACCRUAL <EFFINT> POS Credit Interest Income (Expense)
REVAL UNREAL GAIN Debit Marketable Securities:
Contra - Gain/Loss
REVAL UNREAL GAIN Credit OCI - Gain/Loss
REVAL UNREAL LOSS Credit Marketable Securities:
Contra - Gain/Loss
REVAL UNREAL LOSS Debit OCI - Gain/Loss
REVAL REAL GAIN Credit Marketable Securities:
Contra - Gain/Loss
REVAL REAL GAIN Debit OCI - Gain/Loss
REVAL REAL GAIN Credit Other Income (Expense)
REVAL REAL LOSS Debit Marketable Securities:
Contra - Gain/Loss
REVAL REAL LOSS Credit OCI - Gain/Loss
REVAL REAL LOSS Debit Other Income (Expense)
ACCRUAL <EFFINT> REV Credit Interest Receivable
MATURE BAL_FV * Debit
MATURE <BALCOM> Credit Marketable Securities

Deal Type NI - Discounted Securities (example 1)

Subtype SELL

Amount Type Action

Date Type Bank Debit/Credit GL Account
Code GL
COMENCE COMENCE * Debit

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COMENCE <ORIGCON> Credit Marketable Securities

Deal Type NI - Discounted Securities (example 2)

Subtype BUY

Date Type
Amount Action Bank Debit/Credit GL Account
Type Code GL
COMENCE COMENCE * Credit
COMENCE INT Credit Mkt. Securities Contra -
Unamortized Discount
COMENCE INTL_FV Debit Marketable Securities
ACCRUAL <EFFINT> POS Debit Mkt. Securities Contra -
Unamortized Discount
ACCRUAL <EFFINT> POS Credit Interest Income
REVAL UNREAL GAIN Debit Mkt. Securities Contra -
Gain/Loss
REVAL UNREAL GAIN Credit OCI Gain/Loss
REVAL UNREAL LOSS Credit Mkt. Securities Contra -
Gain/Loss
REVAL UNREAL LOSS Debit OCI Gain/Loss
REVAL REAL GAIN Credit Mkt. Securities Contra -
Gain/Loss
REVAL REAL LOSS Debit Mkt. Securities Contra -
Gain/Loss
REVAL REAL GAIN Debit OCI Gain/Loss
REVAL REAL GAIN Credit Other Income (Expense)
REVAL REAL LOSS Credit OCI Gain/Loss
REVAL REAL LOSS Debit Other Income (Expense)
MATURE BAL_FV * Debit
MATURE BAL_FV Credit Marketable Securities

Deal Type NI - Discounted Securities (example 2)

Subtype SELL

Date Type
Amount Type Action Bank Debit/Credit GL Account
Code GL
COMENCE COMENCE * Debit
COMENCE INTL_FV Credit Marketable Securities
COMENCE <DISCREV> Debit Mkt. Securities Contra -
Unamortized Discount

Accounting in Oracle Treasury Page 19

Accounting Methods

When running the accounting process you can choose to generate journals of two kinds:
• Non-Revaluation/Non-Accrual Related Journal Processing
• Revaluation/Accrual Related Journal Processing

"Non-Revaluation/Non-Accrual Related Journals" creates journal entries for "cash"

amounts (principal transfers, interest settlements, deposits, etc.). If you select this type in the
Batch Source region, then you will be required to enter a Cutoff Date in order to generate
journals. A Cutoff Date allows you to specify up until what date you want to journalize
"cash" amounts. If you want to capture everything, set this date equal to today's date (future-
dating is not allowed). If you set the Cutoff Date equal to, say, March 1, 2003, only those
"cash" amounts in the system that are dated March 1, 2003 or prior will be journalized. Non-
Revaluation/Non-Accrual Related Journal Processing can be run any time and does not go
through the revaluation, accrual cycle.

The second batch type is called "Revaluation/Accrual Related Journals" and it creates
journal entries for all amounts ("cash", revaluation, accrual). The pre-requisite for this type
of a journal batch is, thus, the creation of Revaluation and/or Accrual batch. If you select
this batch type in the Batch Source region, then you will be required to enter a Batch ID that
has been generated when you finished running Revaluation and/or Accruals.

Accounting Batches

You start the accounting process by creating an accounting batch. An accounting batch
consists of a batch ID, a batch period (date range for the transactions included in the batch),
and a set of transactions that fall within the batch period. You can create an accounting
batch and generate journals in one step for non-revaluation and non-accrual journal entries.
If you are performing revaluations and/or generating accruals, then after you create an
accounting batch, you must authorize the batch at each step of the accounting process. For
example, once you complete revaluations you must authorize the batch before you can begin
accruals for that same period. Similarly, the accruals batch must be generated and authorized
before you can generate any journals for that date range. You cannot change or delete an
authorized accounting batch because it may affect the accounting process. If you have
authorized the revaluations and accruals for a batch, you can only delete the batch or make
any changes to the revaluations for the batch after you unauthorize both the revaluations
and accruals. If you want to make changes to the accruals, you must first unauthorize the
accruals. Once a batch has been transferred to General Ledger, you cannot unauthorize,
make changes, or delete the batch.

The table below lists the statuses that must exist before you can change or delete an
accounting batch. For example, if you want to change revaluations for an accounting batch,
the batch can have revaluations generated for it but the revaluations cannot be authorized.

Accounting in Oracle Treasury Page 20

Can Change or Delete an Status of Status of Status of Daily
Accounting Batch at . . . Revaluations Accruals Journals

Revaluations Generated - Yes Generated - Generated - No

Authorized - No No Transferred - No
Authorized -
No
Accruals Generated - Yes Generated - Generated - No
Authorized - Yes Yes Transferred - No
Authorized -
No
Daily Journals Generated - Yes Generated - Generated - Yes
Authorized - Yes Yes Transferred - No
Authorized -
Yes

Batch Periods

The start and end dates of the batch period are automatically populated based on the end
date of the previous batch and the length of the periods that are defined in the company
accounting calendar. Typically a period is one month. You can edit the period end date as
required. For example, you can create a batch period of one day or two weeks in length. The
first time you create a batch, the start date for the batch period is the date of the oldest
transaction and the end date is the current system date. The dates covered by batch periods
must be consecutive, unique and gapless. Each date must appear in a batch, and the same
date cannot appear in two different batches. For example, if you create a batch for the
period June 1 to June 15, you cannot create another batch for the period June 1 to June 30,
or start the next batch on June 17. Instead, you must either create another batch that covers
all of the remaining dates (for example, a batch for June 16 to June 30) or delete the existing
batch and create a new batch that covers all of the dates (June 1 to June 30).

Revaluations

Revaluation is the process of adjusting the rates and prices of your financial instruments to
reflect the current market value and calculate the realized or unrealized profit and loss. This
is an optional step in the accounting process and is the first step only if the Accounting -
Perform Deal Revaluations company parameter is set to Yes. If this option is set to No, the
accounting process typically starts with Accrual. The rates that you capture to revalue your
financial instruments (interest rates, bond and stock prices, foreign exchange spot rates, or
volatility rates) are collectively called revaluation rates. Revaluation rates are captured from
the Current System Rates window for the specified batch period.

To perform revaluations, firstly define the start and end dates for the accounting batch
period. Usually this maps to a single month but can encompass a longer period. The ‘Period
From’ cannot be changed but the ‘Period To’ can be altered. Now click on the button

Accounting in Oracle Treasury Page 21

‘Capture Rates’. These are the rates you want to use to revalue the batch from the Current
System Rates window.
Review and adjust the revaluation rates, if required and then select the option ‘Calculate
Revaluations’. This will calculate your mark-to-market and currency gain or loss revaluations
using the GL daily rate.

After this the concurrent program ‘Program - Calculate Revaluations’ (XTRCALRV) is

submitted. Check the log file of this program to ensure that the revaluations have been
completed successfully. After this click on the ‘Revaluation Details’ option and you can see
the revaluation Details. If any deal has the option ‘Incomplete’ checked it has failed
revaluation and the log will show the reason for the same. You can recalculate revaluations
as often as you want. Once all deals are successfully revalued, authorize the revaluations by
clicking on the option ‘Authorize’. You cannot change revaluations once they are authorized.

Refer to the following screenshots for the steps to perform revaluation.

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Accounting in Oracle Treasury Page 23
Financial instruments are revalued using either mark-to-market or currency gain or loss
revaluation. Mark to market revaluation calculates the fair value or current replacement cost, for
the financial instrument. Currency gain or loss revaluation calculates the value of foreign currency
holdings. For example, if you have a foreign currency bank account and the exchange rate
fluctuates, you will experience a currency gain or loss. The method of revaluation used
depends on the type of financial instrument being revalued. Bond Option (BDO), Bonds
(BOND), Equities (STOCK), Foreign Exchange Options (FXO), Foreign Exchange Spot or
Forward Deals (FX), Forward Rate Agreements (FRA), Interest Rate Option (IRO), Interest
Rate Swap (IRS), Interest Rate Swaption (SWPTN), Negotiable Securities (NI) and
Wholesale Term Money (TMM) are revalued using both mark-to-market and the currency
gain or loss revaluation. Current Account Balances (CA), Intercompany Transfers (IG) and
Short Term Money (ONC) are revalued by calculating only the currency gain or loss.

Deal pricing models are predefined for each deal type. You can define new pricing models
for any deal type that has a Fair Value pricing model. If the pricing model is fair value, you
will need to specify the override value and override type in the revaluation window. Here is
the list of the revaluation methods used for each financial instrument in Oracle Treasury.

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Deal Type Deal Pricing Model

Bond Option Fair Value: User entered fair value.

(BDO) No Revaluation
Bond (BOND) Fair Value: User entered fair value.
Market: Calculates the value of the bond using the revaluation rate.
(Revaluation Rate/100) * Face value of deal.
No Revaluation
Current Account Face Value: Balance.
Balance (CA) No Revaluation
Deal Orders (DO) No Revaluation
Equities (STOCK) Fair Value: User entered fair value.
Market: Calculates the value of the bond using the revaluation rate.
No Revaluation
Exposures (EXP) No Revaluation
Forward Rate Fair Value: User entered fair value.
Agreements (FRA) FRA Discount: Present value of the deal using the contract and
implied forward/settlement rate. Note that this pricing model is used
for FRA deals priced in Australia or New Zealand dollars.
FRA Yield: Present value of the deal using the contract and the
implied forward/settlement rate.
No Revaluation
Foreign Exchange Fair Value: User entered fair value.
Contracts (FX) Market-Deal: Compares the current market rate to the transaction
rate.
GL-Deal: Compares the GL daily exchange rate to the transaction
rate.
No Revaluation
Foreign Exchange Fair Value: User entered value.
Options (FXO) Garman Kohlhagen (Modified Black-Scholes) (Hull, John C.
Options, Futures, and Other Derivatives. 3rd ed. Prentice Hall, 1997):
No Revaluation
Interaccount No Revaluation
Transfers (IAC)
Intercompany Face Value: Balance of deal.
Transfers (IG) No Revaluation
Interest Rate Fair Value: User entered fair value.
Options (IRO) Black (Black-76) (Hull, John C. Options, Futures, and Other Derivatives.
3rd ed. Prentice Hall, 1997)
No Revaluation
Interest Rate Swaps Fair Value: User entered fair value.

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(IRS) Discounted: Calculates the net present value of the deal using the
discount rates from the yield curve.
No Revaluation
Negotiable Fair Value: User entered fair value.
Securities (NI) Discount: Calculates the value of the deal using the current market
discount rates from the yield curve. Note that effective interest is
deducted from calculated gain or loss.
No Revaluation
Short Term Money Face Value: Balance of the deal.
(ONC) No Revaluation
Retail Term Money No Revaluation
(RTMM)
Interest Rate Fair Value: User entered fair value.
Swaption (SWPTN) No Revaluation
Wholesale Term Discounted Cashflow: Calculates the net present value of all future
Money (TMM) cash flows including principal changes and coupon payments adjusted
by the current accrual balance.
Fair Value: User entered fair value.
No Revaluation

Accruals

Use the Accruals window to authorize the accruals for your batch. You can generate
amortizations and accruals adjustments, split by revenue and expense, for all money market
products. These adjustments include amounts for settling derivatives, such as FRAs and
options. Amortization and accruals adjustments are calculated for each batch period, rather
than as an accumulating amount for multiple periods. Reversal entries are not required.

There are two types of accruals supported by Treasury.

Straight Line Accruals

This type relies on a constant accrual amount and is used to calculate accruals for all deals
except discounted security deals.
Effective Interest Accruals
This type relies on a constant accrual rate and is used to calculate accruals for discounted
security deals only. Effective interest amortizes the discount on a discounted security deal
over the life of the deal so that a constant rate of interest is used. Effective interest accruals
are necessary to properly account for discounted securities, especially when a deal is resold.
If the discounted security deal is not held until maturity, the proper accounting entries are
generated unless the effective interest accruals method is used.

The accrual methods calculate the accounting period discount by multiplying the Yield to the
Maturity rate at the time of purchase, and by multiplying that to the beginning accounting
period cost basis. Accruals is the first mandatory step in the accounting process. If your
company set the Accounting - Perform Deal Revaluations company parameter to ‘Yes’, then

Accounting in Oracle Treasury Page 26

you must perform revaluations before you can perform accruals. You cannot perform
accruals on individual deals. Instead, you must perform accruals in batches. For each batch
that you accrue, you must:

1. Define the start and end dates for the batch, unless the batch is already defined.
2. Create the period adjustments for the accrual.
3. Authorize the accrual for the batch.
4. You can adjust the accruals for a batch up until the point when you transfer your
daily journals to General Ledger.

The accrual process involves:

1. Open the accruals form (Accounting->Accruals)
2. Select the Batch ID from the LOV, this is the same as the revaluation Batch ID if
you are using revaluations.
3. The ‘Period From’ and ‘Period To’ options default automatically here.
4. Select the option ‘Calculate’.
5. This triggers a concurrent program, ‘Program - Generate Accruals’ (XTRCALAC).
6. Once this is successfully completed, you can query the accruals from the form and
check the amounts generated.
7. To complete the process click on the button ‘Authorize’. You must authorize your
accruals before you can proceed to generating daily journals. You can delete period
adjustments for a batch until you transfer the daily journals for the batch to General
Ledger.

Refer to the following screenshots for the steps to perform accruals.

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Daily Journals

Use the Daily Journals window to generate the daily journals for an accounting batch, view
the generated journal entries, change the dates or GL accounts for your journal entries and
reallocate suspense journal entries to a GL account. Daily journals are generated based on
the deals in the accounting batch and the journal entry actions that you set up in the Journal
Entry Actions window. Daily journals are generated using the transaction foreign currency
and set of books currency equivalent.

In the "Submit Process to Generate Journals" form, which you see after clicking on the
"Generate Journals" button in the "Daily Journals" form, there are two types of journal
batches that you can generate. (Note: all accounting in Treasury is done in "batches" that
span over a user-defined period of time and cover all eligible deals). The default value is
"Generate Non-Revaluation/Non-Accrual Related Journals".

To generate Daily Journals:

1. Open the Daily Journals Form (Accounting-Daily Journals)
2. Click on the Button ‘Generate Journals’.
3. Select the option ‘Generate Non-Revaluation/Non-Accrual Related Journals’ or
‘Generate Revaluation/Accrual Related Journals’.
4. Choose the cutoff date or Batch Id as per the selection above.
5. Click on Submit.
6. You will now see a prompt: “Do you want to submit the process to generate journals
Yes/No?” Select Yes.

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 7. This triggers the concurrent program ‘Program - Revaluation/Accrual Related
Journal Processing’ (XTRJRNAL) if you have chosen ‘Generate
Revaluation/Accrual Related Journals’. If you chose the option ‘Generate Non-
Revaluation/Non-Accrual Related Journals’, the concurrent program ‘Program –
Non-Revaluation/Non-Accrual Related Journal Processing’ (XTRJNLCA) will run.
8. After you generate journal entries, you can use the Maintain/Review Journal Details
window to review and update your generated journal entries.

Refer to the following screenshots for the steps to generate daily journals.

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Accounting in Oracle Treasury Page 30
Viewing and Correcting Journals

Use the Maintain/Review Journal Details window to view daily journals or change generated
journal entries. You can only change generated journal entries for daily journals that have not
been transferred to General Ledger. Please note that if you set the ‘Validation Required for
Accounting’ system parameter to ‘Yes’, then the accounting batch process only creates
journals for validated transactions. The accounting batch log file records the
revalued/accrued and non-revalued/non-accrued transactions that are not validated and
therefore did not have journal entries created. If the batch creates journal entries for
revalued and accrued transactions but related cash transactions are not validated, the log file
indicates the creation of unbalanced journal entries. To correct unbalanced journal entries
you must rollback the journal entries created, validate the relevant transactions, and run a
new accounting batch. Updating the Journal Date is subject to these restrictions:
1. You cannot enter a date on which there is no daily exchange rate available in your
company's exchange rate type between the transaction currency and the SOB
currency.
2. You cannot enter a date that falls within a closed GL period.

If you want to reallocate entries from a company suspense journal to a General Ledger
account, use the Suspense Journals window.

Transfer to General Ledger

After successfully completing all of the steps in the accounting process, transfer your daily
journal batches to General Ledger. Before you perform this step, you must ensure that you
have entered and verified all accounting changes. Once a batch has been transferred to
General Ledger, you cannot unauthorize, make changes, or delete the batch. If a deal
changes after you transfer to GL, you must create a reversal and a replacement journal.

If your journal batch contains entries with journal dates that fall into a closed GL period,
you can optionally post these entries to the next open GL period. If you choose this option,
Treasury maintains a record of both the actual journal date and the new posting date. You
can choose to allow the transfer of unbalanced journals to GL by setting the company
parameter ‘Accounting - Allow Unbalanced Journal Transfer (Yes/No)’ in the Company
Profiles window.

Daily journals are transferred to General Ledger in both the transaction currency and the set
of books currency equivalent. The rate used to calculate the set of books currency equivalent
is drawn from the GLRATES table. This calculation takes place when you generate daily
journals.

To transfer a journal batch to General Ledger:

1. Open the Daily Journals form (Accounting->Daily Journals)
2. Query or enter the company and journal batch that you want.
1. If you use the Find Journals window to query journals, you can check the Include
Transfer box to view batches previously transferred to GL.
2. Review the journals to ensure that they are correct and that you are ready to transfer
them to GL.

Accounting in Oracle Treasury Page 31

 3. If your journal batch contains entries with journal dates that fall into a closed GL
period, use the Journals in Closed Period poplist to control the posting of these
entries. Choose Next Open to post these entries to the next open GL period, or No
Change to post these entries with the closed period date.
4. Choose the Transfer Journals button. If you are transferring an unbalanced journal,
Treasury displays a warning message. If you set the company parameter Accounting -
Allow Unbalanced Journal Transfer to Yes, you can allow the transfer of the
unbalanced journal.
5. A concurrent process ‘Program - Revaluation/Accrual Related Journal Processing’
(XTRJRNAL) transfers the accounting batch to General Ledger.

Transferring Options

There are two places in the system where XTR journals can be summarized.

First, there is a company level parameter "Accounting - Journal Transfer Method" (Detail or
Summary). It should be noted that it only takes effect during journal transfer. Even if the
value of the parameter is set to "Summary", the journals that are going to be generated in
XTR and be visible in the Daily Journals form will always represent individual deals. In other
words, if there are 2 deals in the system that on the same date should each generate a debit
to the same GL account, you will see these deals as two separate debit lines in the Daily
Journals form.

Once you go to the Transfer Journals form and pull up the journal batch, this is when the
system will look at the company level parameter and either shows you two separate debits

Accounting in Oracle Treasury Page 32

(parameter value = Detail) or one single debit for cumulative amount (parameter value =
Summary). Whatever you see in the Transfer Journals form will be then transferred to the
GL journal interface table.

Since you can view XTR journals in Daily Journals form even after the transfer to GL, the
transferred journal lines will always be displayed as individual - not summarized - journal
entries (even if you transferred them as summary journals). It is important to note that XTR
summarizes debit and credit journals separately during transfer using the following
parameters:

• Same journal date

• Same GL account

So, if the following journals exist in the batch:

Dr 100.00 GL# 10 date = Feb 1

Dr 200.00 GL# 10 date = Feb 1
Dr 300.00 GL# 10 date = Feb 1
Cr 22.00 GL# 10 date = Feb 1
Cr 33.00 GL# 10 date = Feb 1
Cr 44.00 GL# 10 date = Feb 2
Total Debits: 600
Total Credits: 99

And this is transferred using the Summary method, in the GL interface table the following is
seen after the transfer:

Dr 600 GL#10 date = Feb 1

Cr 55 GL#10 date = Feb 1
Cr 44 GL#10 date = Feb 2
Total Debits: 600
Total Credits: 99

Now, when the XTR journals are transferred to GL, they are placed in the GL interface
table. Before you can post them, you have to import them from the GL interface table into
the main GL table. This is the second place where the journals can be summarized.

In the GL journal import form (GL: Journals->Import->Run), there is an option called

"Create Summary Journals". If this option is chosen while importing the above mentioned
batch, the GL journals will look as follows:

Dr 545 GL#10 date = Feb 1

Cr 44 GL#10 date = Feb 2
Total Debits: 545
Total Credits: 44

Accounting in Oracle Treasury Page 33

This is because GL "Summary", unlike XTR "Summary", means that debits and credits for
the same GL account are also netted This example shows how you can have different totals
in XTR and GL after the journal transfer.

To ensure that the XTR journal is available in GL do the following:

• For this particular XTR journals batch, take note of all journal entries in the batch on
the XTR side (Daily Journals form), their amounts, GL accounts, dates and dr/cr
side
• Group all entries by GL account and for each GL account calculate total debits, total
credits and the net of debits and credits.
• Verify that netting debits and credits for the same GL account results in the
calculation of the same total debit and credit amounts that the client sees in GL after
import.

If you have already run revaluation and accruals for a month and later enter transactions for
a month you will see the following messages that are intended.

Accounting in Oracle Treasury Page 34

Example Accounting
In this example let us take an ONC or short-term money deal and see how the accounting is
getting created using the Process of generating Revaluation/Accrual related processing.

1. Setup the Journal Entry Actions (Setup-> System -> Journal Entry Actions)

2. Create an ONC deal Money Market Transactions -> Short Term Money)

Accounting in Oracle Treasury Page 35

3. Validate (Settlements -> Transaction Validation)

4. Settle the transaction (Settlements -> Settlements)

Accounting in Oracle Treasury Page 36

5. Run Revaluations (Accounting->Revaluations) and ensure it completes Normal.

6. Run Accruals (Accounting-> Accruals) and ensure it completes Normal.

Accounting in Oracle Treasury Page 37

7. Submit the process to generate Accrual/Revaluation related journals and ensure it
completes Normal.

Accounting in Oracle Treasury Page 38

8. Once the concurrent program completes, query the Daily Journal screen to see the
accounting entries generated for the batch ID (13323) and del (8279).

Accounting in Oracle Treasury Page 39

9. You can also generate the Non-Revaluation/Non-Accrual related journal entries at
any time. Take for example another ONC deal that is created and the same process
run for the accounting choosing Non Revaluation/Non-Accrual processing.

Accounting in Oracle Treasury Page 40

10. Seen here is the snapshot of the accounting entries generated for the transaction as
seen in the Daily Journals window.

Accounting in Oracle Treasury Page 41

Automating Accounting Process

A concurrent program Streamline Accounting Process is also available to provide clients

with the option of processing Revaluation, Accruals, and Journals for a specific or all
companies accessible to the user based on a certain date through to Journal Generation or
Journal Transfer. This program allows users to link any or all of the steps together in a
sequence and run in a concurrent program, which executes each individual accounting
process for the specified company or companies. The Streamline Accounting Process can be
run for either a single company or for all the companies available based on the user access
level. A separate concurrent request is submitted for each company and a separate
concurrent request log gets generated for each company.

Report Parameters
Company this lists all the treasury companies you have access to as defined by the User
Access Level. If the field is left blank, the system processes all treasury companies that you
have access to.

Batch End Date is the batch ending date and the default is the current system date.
Start Process From is the starting point for the accounting process. The choices are:

• Revaluations: Start process from revaluation rates capture.

• Accruals: Start process from accrual generation.
• Daily Journals - Generation: Start process from journal generation.
• Daily Journals - Transfer to GL: Start process from journal process.

Accounting in Oracle Treasury Page 42

Note: The company parameter Accounting - Perform Deal Revaluation affects the results of
the Streamline Accounting Process. If you set the parameter to No, the program would
perform no revaluations.

End Process After is the ending point for the accounting process. The choices are:

• Revaluations: End process after revaluation details are authorized. This value can be
selected if the Start Process From is Revaluations.
• Accruals: End process after accrual details are authorized. This value can be selected
if the Start Process From is Accruals or Revaluations.
• Daily Journals - Generation: End process after journals are generated. This value can
be selected if the Start Process From is Daily Journals - Generation, Accruals, or
Revaluations.
• Daily Journals - Transfer to GL: End process after journals are transferred. This
value can be selected for any of the Start Process From options.

Journals in Closed Periods: Sets the method to handle journal entries that fall into a closed
period. This field is enabled only if the End Process After parameter is set to Daily Journals -
Transfer to GL. The choices are:

• No change: The transaction details are left as is and are transferred to General
Ledger.
• Next open: The journal entries are placed in the next open period and then
transferred to General Ledger.

In Treasury, there is no specific closing process. As there are no pre-defined accounting

periods to open and close, whenever the user selects to initiate the accounting processes
would be considered day/month-end close. One practice may be to generate journals for the
transactions daily or weekly by running Non-Revaluation/Non-Accrual Related Journals and
to perform revaluation and accrual calculations and generate journals for them monthly.
Another practice may be not to have any daily or weekly process but perform revaluation,
accruals, and journals only at month-ends. This could be considered a monthly closing
process. However, there is no mechanism in place to enforce this and it is at client
discretion.

A feature referred to as "Flexible Journals" has been introduced in 11.5.9 (patch 2428924)
due to the customer demand to process cash-related journals more frequently than accrual or
revaluation related journals. This feature provides the ability to create journal (for Cash-
related amounts only) at any time without the link to the revaluation and accrual batches. In
the Flexible Journals feature, you may be able to generate multiple Cash related (Non-accrual
/ Non-revaluation) batches within the same date (cut off date) provided cash flow
transactions are created after the generation and transfer of the earlier batch. System shall
pick up any unprocessed transaction since the last run and create a new NR/ NA batch with
the same end date. This way multiple transfers could be done within a same day.

Accounting in Oracle Treasury Page 43

Hedge Effectiveness Testing

The crux of the FAS 133 (and its European counterpart IAS 39) is a special accounting
treatment of gains and losses of qualifying derivatives. Oracle Treasury from the very
beginning was providing support for derivatives, fair value gain/loss calculations (through
Revaluation) and flexible accounting setup. Someone who is very well familiar with the
requirements of the standards and Oracle Treasury functionality can create a FAS/IAS
compliant accounting setup given the three above-mentioned components of the system.
However, some of the steps would still have to be performed manually (effectiveness testing
and reclassification). Oracle Treasury allows you to view your Oracle AP and AR
outstanding exposures real-time and set up relationships to hedge those exposures with FX
forwards. Functionality as of release Financials Family Pack E (XTR.L) allows using only FX
forwards as hedging instruments. If an FX forward deal is designated as an instrument in a
current hedge relationship, cancellation, rollover or predelivery of the deal will result in
cancellation of the hedge relationship.

Oracle Treasury supports the most important building blocks of IAS39 compliance: mark-
to-market revaluation and breakdown of revaluation results into components such as fair
value gain/loss (due to the change in the market price of the instrument) and currency
gain/loss (due to the change in the exchange rate between your SOB currency and the
currency of the instrument). Oracle Treasury uses internationally accepted pricing models to
calculate fair value gains/losses of all the financial instruments supported, derivative and
physical alike. Also, Oracle Treasury allows immense flexibility in setting up journal entry
structures based on a variety of user-defined groupings such as portfolios (company/LE
specific) and product types (system-wide). To differentiate the accounts that the gain/losses
of hedge instruments will be booked to, user can set up a portfolio called HEDGE and set
up the journal entry actions such that the gain/losses are booked to a set of GL accounts
other than the normal/non-hedge accounts. Thus, when hedge deals are saved in this
portfolio, the accounting entries will be booked to the desired GL accounts. With the aid of
descriptive fields, it is possible to store any user-defined information on individual deals.
Also, with the attachment functionality, user can attach any soft-copy document or file to
deals or hedge relationships. With the aid of Oracle Discoverer, it is possible to create
reports displaying data recorded at the hedge level.

Foreign Exchange Hedge Effectiveness and Accounting Under IAS 39 and FAS 133

This feature helps to support foreign exchange forward hedging of Payables and Receivables
as defined by IAS 39 and FAS 133. This new feature expands existing functionality that
already allows users to view real-time Payables and Receivables exposures, as well as
designate and track related Foreign Exchange forward hedges. Oracle Treasury now also
automatically calculates the retrospective effectiveness of these hedges, comparing historical
gains or losses of the Foreign Exchange forward contracts to the offsetting losses or gains
associated with the underlying exposures being hedged. Oracle Treasury allocates the
effective and ineffective portions of these revaluation amounts and can automatically
generate proper accounting entries under IAS 39 and FAS 133. This feature also delivers the
ability to audit prospective effectiveness testing results, as well as reclassify the effective
portion, or deferred, gains and losses back into current period earnings when the underlying
exposure is realized.

Accounting in Oracle Treasury Page 44

Setup

Hedging is a strategy designed to reduce financial risk using derivative instruments. A hedge
can help lock in profits or limit losses by reducing the volatility of an asset or liability by
mitigating the risk of loss. To use this feature:

1. Setup hedge policies that define the exposure sources (known as hedge items) that
you want to hedge and the financial instruments (known as hedge instruments) that
you want to use to hedge those items using foreign exchange spot/forward deals.
This can be done by opening the form Setup->Policies->Hedge Policies.

Accounting in Oracle Treasury Page 45

2. Setup the hedge strategies that define the reasons that you are hedging your
exposures. You can use hedge strategies to define all of the accounting-related
reporting information that you require as well as to set up any default information
that you want when you create a hedge. . This can be done by opening the form
Setup->Policies->Hedge Strategies.

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3. Setup the Hedge Item Accounts in Journal Entry Actions. Access the form through
Setup->System->Journal Entry Actions.

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Hedge Eligibility Revaluation

To be eligible for revaluation, the following conditions should be met:

1. Hedge status = other than “Cancelled” or “Designate” AND hedge start date <=
revaluation batch end date AND revaluation start date <= hedge end/discontinue
date
2. Risk type = foreign exchange or fair value
3. Hedge source type = other than XTR
4. Hedge currency = other than the set of books currency of the company
5. Retrospective test method on the hedge is any value other than “No Testing”
6. Hedge item current amount is not equal to zero.

For Hedge Item Revaluation, if time value is excluded on the Hedge Strategy form, then GL
Rate model will be used to revalue hedge items (CCYUNRL). If time value is not excluded
on the Hedge Strategy form, then forward Rate model will be used to revalue hedge items
(UNREAL).

Hedge Item Revaluation

1. Determine the beginning value by converting the current hedge amount into set of
books currency amount using the rate on the hedge start date.
2. Determine the ending value by converting the hedge amount into set of books
currency amount using the rate for the revaluation end-date or hedge
discontinue/end date.
3. Calculate the unrealized gain/loss by subtracting (1) from (2) above. A negative
value is a loss; a positive value is a gain.

Effectiveness Testing

In 11.5.10 CU2, prospective and retrospective hedge effectiveness testing are the two new
(optional) steps in the accounting process. In order to able to test the effectiveness of the
hedge, ensure that the Company Parameter 'Accounting - Perform Hedge Effectiveness
Testing' is set to Yes. This form can be accessed by Setup->Parties->Company Profiles-
>Tab Parameters.

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There are two methods of hedge effectiveness testing available.
Prospective
This is a forward-looking statement that the hedge will remain effective (i.e. regression
analysis). In Prospective testing, user can manually enter the result of externally performed
test as PASS or FAIL, as well as add any comments related to testing and attach supporting
documents.

Retrospective
This is a retrospective looking statement that in the past the hedge was effective (historical
gain/loss offset analysis). Here, if the company parameter is set to ‘Yes’, this process
becomes a required step after revaluations in the accounting batch. This process splits
unrealized gain/loss amounts of deals designated as hedge instruments into effective and
ineffective amounts according to test results, as well as calculates any reclassification amount.
For retrospective testing, there are 5 testing methods that the user can select from at the
hedge strategies setup or hedge attributes level:

1. Shortcut/Fully Effective
2. Period Offset
3. Cumulative Offset
4. Manual Entry
5. No testing

For example if the Derivative/Hedge Instrument Gain is $2200 and the Hedge Item Loss is
$2000, the effectives is 110% (2200/2000). If the tolerance levels are between 80% and

Accounting in Oracle Treasury Page 49

120%, this will pass the test as it falls within the range. However, if the effectiveness were at
say 50%, the hedge would have failed the effectiveness test. Here the effective part of the
gain is $2000 and the ineffective part of the gain is $200. Now Preferential Accounting will
be available for effective part of the gain of $2000. The ineffective part of the gain for $200
will be part of the regular accounting (Direct to Current Period Income).

Viewing Effectiveness Testing Results

Treasury provides the feature to view the results of the effectiveness testing for both
prospective and retrospective methods. This form can be accessed by View > Hedging >
Effectiveness Test Results.

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Prospective

Retrospective

There is no major change in accounting for Treasury in release 12. Sub ledger accounting
(SLA) is not applicable to Oracle Treasury.

Accounting in Oracle Treasury Page 51

Accounting In Oracle Treasury
March 2007
Author: Bindu Gopal Rao

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