The Business Benefits of

Oracle Subledger Accounting

An Oracle White Paper
April 2008

“Centralization of the subledger
accounting rules would minimize setup
and maintenance, providing greater
financial control and enforcing a
consistent approach for true global
accounting.”
—Carolyn Carter,
Director of Global Accounting, Emerson
The Business Benefits of Oracle Subledger
Accounting
EXECUTIVE OVERVIEW
Corporations today need accounting systems that provide accurate and reliable
information, adhere to the highest standards of transparency and controls, fulfill
varied legal and management reporting requirements, and enable the books to be
closed as fast as possible.
Oracle E-Business Suite Release 12 introduces a new centralized function called
Subledger Accounting (SLA) that works together with Oracle General Ledger (GL)
to provide a world-class accounting system. The new centralized accounting
architecture addresses the concurrent needs for strong internal controls and diverse
accounting treatments. It offers unparalleled visibility into enterprise-wide
accounting information with a single, global accounting repository and user-driven
reporting. In short, SLA is a robust, centralized accounting engine and repository
that enables true global accounting.
INTRODUCTION
Running a global business means successfully addressing conflicting requirements in
all facets of the enterprise. Fiscal operations offer no reprieve. The more successful
or profitable your organization becomes the more complex and stringent the
accounting requirements become – or so it seems. From evolving global accounting
standards, to new internal control legislation, to sophisticated reporting and analysis
requirements – accounting operations have a heavy load to lift.
Oracle Subledger Accounting addresses these diverse requirements with a complete
solution that allows you to:
• Lower costs with streamlined accounting processes
• Meet diverse global accounting requirements and maintain internal controls
• Access better information and provide better reporting
In the following pages, we will offer information about specific capabilities that
support these assertions. We’ll also provide detailed examples of how these features
can be applied to real world business scenarios.
The Business Benefits of Oracle Subledger Accounting Page 2

Oracle Subledger Accounting, in
combination with Oracle Financial
Services Accounting Hub enables you to
centralize accounting data from any third
party transactional system.
LOWER COSTS WITH STREAMLINED ACCOUNTING PROCESSES
Simplify and Standardize Accounting Processes
In order to achieve a competitive advantage, companies must continue to lower the
cost of doing business. One way that many companies are making this happen is by
standardizing and centralizing administrative processes - with accounting at the top
of the list. When an organization standardizes its accounting policies, it needs to
document the policy, communicate it to those who must apply it, and ensure the
standard policy is enforced – not always an easy task. Oracle Subledger Accounting
offers support for these initiatives by formalizing the generation of global accounting
entries into centralized accounting rules. Corporate accounting policy is
documented in the form of user-defined accounting rules within Oracle Subledger
Accounting. These rules can be distributed across database instances to insure the
entire enterprise adheres to the same set of rules, even if they operate on multiple
instances. Enforcement of the rules is automatically achieved because SLA creates
the accounting entries for all subledger transactions using the accounting rules that
the company has defined. Users without access to the rules cannot modify or
override them, providing your enterprise centralized control.
Furthermore, Subledger Accounting allows you to automate steps that have
traditionally been done manually. Rather than keying in distribution accounts, let
SLA take care of it for you. Automated account generation helps to dramatically
reduce data entry errors which force costly reconciliation.
It is important to note that SLA is complementary to the account generation tools
you may have run on earlier releases of Oracle EBS Applications. So if you
currently use AutoAccounting or Workflow Account Generator for account
generation, you’ll be able to continue to do so. However, SLA offers significant
opportunities for streamlining accounting processes if its features are fully
implemented.
Centralize Accounting Data from Third Party Systems
Most companies run transactional applications from multiple vendors as few
businesses have standardized on a single applications vendor. Typical
heterogeneous environments require expensive customizations to connect
transactional systems to the general ledger for financial reporting. Adding to the
complexity is incongruous data requiring clean-up, which is often a manual process.
Oracle Subledger Accounting, in combination with Oracle Financial Services
Accounting Hub, enables you to centralize accounting data from any third party
transactional system. Together, they offer an open repository and a centralized
accounting engine for transactional data from any third party source. They lower
implementation and maintenance costs by eliminating the need for expensive
customizations; and they keep your general ledger free from ‘bad’ data while giving
you better visibility into your subsystems and the enterprise as a whole. As a
comprehensive view of all subledger accounting data, SLA behaves like a detailed
version of your general ledger and provides a rich store of information for reporting
and analysis.
The Business Benefits of Oracle Subledger Accounting Page 3

User configurable accounting rules and
descriptions within SLA are incredibly
flexible and can meet virtually any
accounting requirement. The possibilities
are limitless.
User-Configurable Accounting Rules
Every company is different: HR policies are different, T&E policies are different,
and the same goes for accounting policies. One company may record expenses
against the cost center that ordered the goods while another company may record
expenses to the cost center where the goods are shipped. One company might want
the transaction number, transaction type and customer name included in the
description of the journal entry for reporting or ease of identification, while another
company may want the transaction amount, currency exchange rate and the user
who entered the transaction recorded in the journal description. There is no end to
the variations and preferences that companies have when it comes to how accounts
should be derived and the type of information that should be captured in journal
entries for management and financial reporting purposes.
When an accounting system is not flexible enough to handle these requirements,
users frequently resort to building expensive customizations to achieve the desired
result. They may also resort to entering adjusting journal entries to ‘fix’ the
accounting that is generated by the system, which is costly in terms of manual effort,
potential for user error and lack of audit trail for such journals.
Fortunately, Oracle Subledger Accounting offers maximum flexibility for generating
accounting entries by making it possible for the user to configure accounting rules
based on virtually any attribute of a transaction. For example, the expense account
for a payables invoice could be derived based on any attribute of that invoice
including item, item type, or PO distribution. The liability account can be based on
the supplier, or even broken out into multiple liability accounts by supplier site. A
deferred revenue account on a receivables transaction can be broken out by different
lines of business based on the nature of the revenue. You can even define
conditional rules such as recording customer invoices to different receivables
accounts based on the credit risk of a customer. SLA provides the ability to define
accounting rules that derive an entire account combination from various transaction
attributes, or you can define separate rules to derive individual segment values of an
account combination, or anything in between (i.e., one rule to derive an entire
account combination and then additional rules to override one or more of the
segment values). The possibilities are limitless.
Journal and journal line descriptions are also user-configurable so that you can
include any piece of transaction information in them. Common examples include
supplier attributes, customer attributes, transaction name, transaction number,
status, descriptive flexfield information, dates, periods, currencies, exchange rates,
etc. Users like to include this type of information in the journal descriptions to help
identify the originating transaction and to minimize the need to drill down to the
subledger transactions to retrieve details. User-configurable accounting rules and
descriptions within SLA are incredibly flexible and can meet virtually any accounting
requirement.
Streamline Period-End Close and Improve Reconciliation
From an accounting operations perspective, closing the books at period end in a
timely fashion is always given high priority. But problems such as accounting entries
The Business Benefits of Oracle Subledger Accounting Page 4
 recorded to the wrong account, last-minute adjustments and reconciliation issues
tend to slow down the process. Oracle Subledger Accounting offers a wide variety
of features to help you expedite this process:
• Accurate Accounting: Journal entries recorded to the wrong account are a
common cause of reconciliation issues during the close process. Common
transactions like reversing out the liability owed to a supplier when an invoice
is paid or reversing out the receivable from a customer account when cash is
received, can easily introduce problems if the liability or receivable account
against which the invoice was originally recorded is not the same account that
SLA allows you to define, test and validate
is reversed. The same thing can happen in public sector accounting when an
accounting rules; therefore, journal entries
amount is encumbered using one account and the encumbrance is reversed to
generated by SLA have very little risk of
error.
a different account. Oracle Subledger Accounting was engineered to prevent
these kinds of problems. SLA allows you to define, test and validate
accounting rules; therefore, journal entries generated by SLA have very little
risk of error. Furthermore, SLA specifically addresses those accounting issues
that relate to a string of events or a transaction flow by ‘remembering’ the
original account that was used in the initial event (i.e., invoicing), and ensuring
that the same account is reversed during the subsequent event (i.e., payment).
Performing accounting accurately helps to reduce reconciliation issues during
the period-end close.
• Online Accounting: For last-minute transactions that need to be recorded in
the subledgers during a tight close schedule, you don’t always have time to
kick off a batch process and baby-sit the process through multiple steps until
the entry is posted to the general ledger. With Oracle Subledger Accounting,
you can launch accounting directly from the transactions window to initiate
those last minute journal entries. Straight through processing allows real-time,
single step posting to all relevant ledgers (primary, secondary and reporting
ledgers).
• Preview Accounting: For tricky last-minute adjustment transactions that
need to be recorded in the subledger, you want to be sure you don’t make a
mistake because once the accounting is created for the transaction, it cannot
be changed. If there is an error, it could mean another manual adjustment
must be made in the general ledger, which may require another round of
approvals, posting, etc. Furthermore, for businesses operating in certain
European countries, it is highly undesirable to the governing authorities if a
journal is reversed due to an error in accounting. SLA resolves these issues by
allowing you to preview the journal with the exact GL accounts that would be
impacted by the transaction before you actually post it. This feature helps to
prevent the need for manually correcting journals by allowing the testing of
setup rules with what-if type analysis.
• Controlled Accounting: Transactions erroneously posted to the wrong
account are another cause for reconciliation issues. For example, the supplier
liability account may not reconcile to the supplier invoice totals if an erroneous
manual journal was posted in general ledger that updated the liability account
balance. You can prevent this from occurring with Oracle Subledger

The Business Benefits of Oracle Subledger Accounting Page 5

 Accounting by designating any account as a ‘control account’. This flag
prevents GL manual journals from posting to them as well as SLA journals
from inappropriate subledgers. For example, it can prevent the supplier
liability account from being updated by the Receivables subledger. This
preventive measure dramatically reduces reconciliation issues during the
period-end close. Additionally, this feature supports tracking of and reporting
on control accounts for trading partners, so you can track receivables balance
by customer, or payables balance by supplier.
• Streamlined Accounting: Bottlenecks in the close process sometimes occur
Oracle Subledger Accounting informs you
when an account has been disabled, but existing transactions still use the
of outstanding transactions in any of the
subledgers for the period you are trying to disabled account and remain to be imported to the general ledger. For
close so you can close the period with example, it could be the last day of the period, and you run the Payables
confidence. accounting program and it rejects three invoice lines because the cost center
that was valid when the invoice was entered into the system has been
subsequently disabled. Or worse, it could reject a payment because a
management segment value in the supplier liability account has since been
disabled. In Release 12, Subledger Accounting in conjunction with Oracle
General Ledger has introduced the ability for users to specify a replacement
account for any account combination that has been disabled. When SLA
encounters a disabled account and a replacement account has been defined, it
automatically substitutes the new account for the old one and stores the
disabled account so that there is a full audit trail. Being able to replace
disabled accounts helps to eliminate bottlenecks during the period-end close.
• Comprehensive Accounting: When you are ready to close the accounting
period, how do you know there aren’t any lingering transactions in the
subledgers that haven’t been processed yet? Oracle Subledger Accounting
informs you of outstanding transactions in any of the subledgers for the
period you are trying to close. This feature allows you to close the period with
confidence.
Oracle Subledger Accounting includes many features that minimize reconciliation
issues and proactively helps you to close your books faster.

MEET DIVERSE ACCOUNTING REQUIREMENTS AND MAINTAIN

CONTROLS

Enable Concurrent Compliance with Multiple Accounting Standards

Earlier we discussed the trend toward standardization of accounting policies, but as
with any attempt to standardize, there always seem to be exceptions that need to be
made. With an increasingly global economy comes added complexity for accounting
operations as well as fiscal and management reporting. Mergers and acquisitions and
evolving compliance requirements in regulated industries such as Insurance and
Telecom, also add new levels of complication to the mix. Multi-national enterprises
operate in different countries, each often with its own set of accounting and
reporting requirements. This results in the local accounting office having to produce
multiple sets of financial statements to satisfy local, statutory, and parent company

The Business Benefits of Oracle Subledger Accounting Page 6


SLA enables you to satisfy different
accounting regulations by maintaining and
applying different sets of accounting rules
to different sets of transactions or by
accounting for the same transaction with
multiple methods.
reporting needs. The staff in the local accounting office also needs to have expertise
in all of these different accounting principles and regulations to get the job done.
Oracle Subledger Accounting was designed precisely to address such dynamic and
multifaceted business environments. It provides you with the ability to control and
enforce your standard accounting practices, but also gives you the flexibility to
handle the exceptions and define additional sets of accounting rules where needed.
Together with Oracle General Ledger, Subledger Accounting enables compliance
with multiple accounting requirements concurrently in a single instance or even
across database instances. Different accounting regulations are satisfied by
maintaining and applying different sets of accounting rules to different sets of
transactions; or by accounting for the same transaction with multiple methods.
Each set of accounting rules can be defined and maintained by select users who have
expertise in the accounting principles and regulations of that region. For example,
the corporate accounting department can define the SLA accounting rules according
to corporate accounting policy and deploy these rules to all local subsidiaries that
must abide by them for consolidation reporting. Every subledger transaction for
each subsidiary where these SLA rules are deployed is automatically processed using
the corporate accounting policy. Since the corporate accounting rules are
automatically applied, the local accounting offices don’t need to keep a large staff
that is knowledgeable about the foreign accounting principles of the parent
company. Local staff can focus on the local accounting practices and regulations,
and define and maintain them as a separate set of SLA rules. When any subledger
transaction is recorded, all applicable sets of accounting rules are applied to generate
multiple sets of journals entries that satisfy all applicable accounting standards.
Detailed Example of Enabling Compliance with Multiple Accounting Standards
To illustrate, let’s take the situation where a US based company has operations in the
US and France and must produce financial statements for reporting authorities in
both countries. Specifically:
1. The US operation reports in USD per the US business calendar, US COA,
and US GAAP.
2. The French operation is subject to the French accounting regulations, and
thus has to report its activities to the local authorities denominated in
Euros, according to the French business calendar, French chart of
accounts, and the French Fiscal accounting rules. But it also needs to
report its financial results to the US parent company for consolidation
purposes.
The Business Benefits of Oracle Subledger Accounting Page 7
Figure 1. Subledger Accounting supports global business.

To address all of these reporting requirements, the US would define a ledger to

record its operations using the US chart of accounts, US business calendar, USD
currency, and US GAAP accounting rules. France would define two ledgers – one
for local reporting and one for corporate reporting to the parent company. The
ledger for corporate reporting would have the same characteristics as US ledger - US
chart of accounts, US calendar, USD currency, and US GAAP accounting rules.
The local ledger would have local characteristics - French chart of accounts, French
business calendar, EUR currency, and French Fiscal accounting rules. The US
corporate accounting office would define one set of US GAAP SLA accounting
rules and apply them both to the US ledger and the French corporate ledger. The
French accounting office would define a separate set of French Fiscal SLA
accounting rules for the local French ledger. To illustrate how these two sets of
accounting rules could differ and how a single transaction can be accounted for in
multiple ways, consider that French Fiscal rules sometimes mandate certain
purchases of raw materials to be reported as expenses, whereas the same raw
materials would be treated as inventory under US GAAP. So when SLA creates the
accounting for such a transaction, the local French ledger would have the raw
materials recorded to an expense account while the French corporate ledger would
have the raw materials recorded to an inventory account.
With the above example, it is clear that Oracle Subledger Accounting allows you to:
• Define multiple accounting rules (US GAAP and French Fiscal rules) for a
single legal entity and apply them in different ledgers.
• Create multiple journal entries from a single business transaction event (i.e.,
transaction being accounted for on the primary ledger per French Fiscal
accounting rules, and on the secondary ledger per US GAAP).
• Segregate accounting rule maintenance as desired. So the corporate
accounting office controls and maintains the US GAAP accounting rules,

The Business Benefits of Oracle Subledger Accounting Page 8


SLA rules are defined and stored within
the system and can be queried and
reviewed at any time…subledger journals,
combined with the accounting rules offer
full disclosure of how the accounting was
created for every subledger transaction
and provide assurance that it was done
correctly.
while French accounting office controls and maintains the French Fiscal
accounting rules. Giving you control where you need it and flexibility
where you need it.
Increase Transparency and Enable Complete Auditability
Continuously evolving and expanding compliance requirements keep internal
control and auditability concerns at the forefront. Business and accounting
processes must be clearly documented and material deviations from them are
scrutinized by the auditors and must be explained.
The transparency of Oracle Subledger Accounting rules and journal entries helps
you stand up to the rigors of a visit from your auditors. SLA rules are defined and
stored within the system and can be queried and reviewed at any time by interested
parties. These rules are even date-effective, so changes to them over time can be
recorded as historical backup. The journal entries that are created when the rules are
applied are stored with references to the accounting rules that generated them and
linked to the transactions from which they originated. These links allow you to drill
down from journal entries to the underlying transactions so you can access the
details quickly. The subledger journals combined with the accounting rules offer
full disclosure of how the accounting was created for every subledger transaction
and provide assurance that it was done correctly.
Many non-configurable accounting systems are only capable of generating
accounting by one set of hard-coded rules. If your reporting requirements demand
accounting that is different from the hard-coded rule, you must enter manual journal
entries to adjust the results. Auditors tend to question manual journal entries
because they are a common source of accounting errors and omissions; they
override existing standard accounting policies, and they generally provide no audit
trail. SLA’s configurable accounting rules minimize the need for manual
adjustments because you can configure the SLA accounting rules to create the
accounting in exactly the way that you need it. Users cannot touch the defined
accounting rules unless you give them access. Thus, integrity of the accounting data
is protected by the security of SLA accounting rules and decreased need for manual
adjustments.
GET BETTER INFORMATION AND PROVIDE BETTER REPORTING
Build Relevant End-User Reports
Similar to hard-coded accounting rules, hard-coded reports that are not user-
configurable seldom meet the needs of most audiences who usually have differing
reporting requirements. To address the gap, users often resort to creating expensive
custom reports to extract the information that they need from their accounting
systems. Not only are custom reports resource-intensive to create, but they also
make upgrades and maintenance more expensive and arduous. In order to eliminate
the need for customized reports, Oracle Subledger Accounting has fully embraced
Oracle BI Publisher. The combination of BI Publisher and SLA allows end-users to
easily create reports that are relevant to the business requirements at hand with no
expensive customizations required.
The Business Benefits of Oracle Subledger Accounting Page 9

Oracle BI Publisher lets you create and
maintain your own report formats with
familiar desktop tools. It lets you mix and
match transaction and accounting details,
including information captured in
descriptive flexfields, to tailor the SLA
reports to meet your specific needs.
As a comprehensive view of all subledger
accounting data, SLA behaves like a
detailed version of your general ledger and
provides a rich store of information for
reporting and analysis.
BI Publisher lets you create and maintain your own report formats with familiar
desktop tools. These reports are based on XML data extracts directly from Oracle
Subledger Accounting. At runtime, BI Publisher merges the custom report template
with the SLA data extract to generate the output in the desired format (PDF,
HTML, RTF, and EXCEL). The flexibility of BI Publisher is a result of the
separation of the presentation of the report from its data structure.
Delivered out-of-the-box in SLA are XML extracts that have been designed with the
features of BI Publisher in mind. For example, the Subledger Accounting Account
Analysis XML extract contains all of the fields that could be of interest to a
subledger accounting report, including the transaction details. This extract offers a
wide range of parameters and up to 100 fields to choose from so that you can get
the information you need in the format that you need it. You can mix and match
transaction and accounting details, including information captured in descriptive
flexfields, to tailor the SLA reports to your specific needs.
Build a Better Foundation for Reporting and Analysis
The general ledger is the foundation of any accounting system because it represents
the convergence of accounting data from different sources and applications to
provide a complete financial picture of a company or organization. In order to keep
the general ledger streamlined, most enterprises typically store only summary level
data. A streamlined general ledger helps to ensure good performance for system
processes. The downside of maintaining only summary level data in the general
ledger becomes apparent when you need to see the detail behind the accounting
data. You need to go back to each individual source system or application that
affected the general ledger account balance to get the information you want. This
can be a tedious and time-consuming task.
Just as Oracle General Ledger stores balances and journals, Subledger Accounting
stores subledger balances and subledger journals for all of your transaction systems
that require accounting. Oracle Subledger Accounting, coupled with Oracle General
Ledger, gives you the best of both worlds. It allows your general ledger to be free of
extraneous data, so that you can maintain a simple chart of accounts and store only
what is needed for general ledger reporting and analysis. But the moment you need
to access more detailed information, you can go directly to SLA to see the detail
from all transaction sources that fed the GL account balance without having to go
back to multiple source systems and applications. This is especially valuable if you
have taken the time to integrate your external third party transaction systems with
Subledger Accounting to centralize your accounting within SLA. As a
comprehensive view of all subledger accounting data, SLA behaves like a detailed
version of your general ledger and provides a rich store of information for reporting
and analysis. Even if your enterprise uses an external data warehouse for reporting
and analysis, accounting data can be fed almost exclusively from SLA and GL.
Therefore, SLA, like your general ledger, is an integral part of your accounting
infrastructure.
The Business Benefits of Oracle Subledger Accounting Page 10
Report on User-Selected Attributes
Companies frequently want to analyze account balances and financial results by
different transaction attributes. For example, they want revenue and receivables
broken down by sales rep, profitability by customer, cost of goods and payables by
vendor, and so on. However, transaction information like sales rep, customer,
vendor, etc. is typically not stored in the general ledger due to the volume of GL
data it would create, so users were not be able to analyze GL data categorized by
transaction attributes. In Release 12, Oracle Subledger Accounting enables you to
perform this type of reporting and analysis using supporting reference information
from subledger transactions. This feature allows business users to select relevant
transaction information by which to report their accounting data, so that they can
report on an account balance, like receivables for example, by transaction attributes
like sales rep, customer, credit risk category, item, or any combination thereof.
More importantly, these supporting references can be applied to accounting data
coming from multiple products or even multiple systems (if you are integrating
external systems into SLA), so if you need to know total bank charges paid for the
year and you have bank accounts in multiple applications – SLA allows you to
maintain and report on that value without manual or external processes.

IN SUMMARY
Oracle Subledger Accounting offers unparalleled visibility into enterprise-wide
accounting information with a single, global accounting repository. It addresses the
concurrent needs for centralized accounting processes with strong internal controls
and diverse accounting treatments.
In summary, Oracle Subledger Accounting enables you to:
• Lower costs with streamlined accounting processes
• Meet diverse global accounting requirements and maintain internal controls
• Access better information and provide better reporting

The Business Benefits of Oracle Subledger Accounting Page 11

The Business Benefits of Oracle Subledger Accounting
April 2008
Author: Elise Mattei, Linda Wong
Contributing Authors: Joe Gum, Rob Zweibach, Neil Ramsay

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