Multiperiod Accounting

Multiperiod accounting feature allows user to create accounting entries across more than one
accounting period for a single accounting event. The functionality is primarily used to defer recognition
of expense incurred across multiple GL periods through which the benefits will accrue. For example,
expenses incurred on annual maintenance contracts for equipment’s, rent paid in advance etc.

For creating a transaction with multiperiod accounting users need to enter the multiperiod accounting
start date, end date and accrual account.

Start Date: Date when multiperiod accounting starts

End Date: Date when multiperiod accounting ends

Accrual Account: Account where the expenses will be parked till they are recognized.

These three new columns are available under the column group multiperiod accounting and are hidden
by default. The new attributes are available on both the invoice line and invoice distributions. The values
assigned at invoice line level will be automatically defaulted on to the invoice distributions, excluding
recoverable tax distributions, which the user can override.

How it works
Multiperiod invoice will have two accounts on the lines and distributions. The existing expense account
or distribution set will continue to be used to capture the account to which the expenses have to be
booked. While another account is used to park the expenses in the interim account till the entire
expenditure in recognized. This account is called the multiperiod accrual account. When the invoice is
accounted the expenses will initially be debited to the multiperiod accrual account and later when the
multiperiod accounting program is submitted a portion of the total expenses will be recognized and
moved from accrual account to the actual expense account. The amount to be recognized will depend
on the number of accounting periods for which recognition has to be done and the recognition formula
used in the accounting rules.

Steps for multiperiod accounting

1. Create an invoice. Enter the values for multiperiod start and end date and multiperiod accrual
account.
2. Validate the invoice.
3. Account the invoice in online mode on through batch accounting program.
4. At the end of each accounting period submit the Multiperiod Accounting Program (newly
introduced) to recognize the expenditure for the relevant accounting program.
5. View the basic accounting as well as multiperiod recognition entries.

For example, an invoice for a 3 months lease is entered in Jan 10th. Total expense is $12000 and it
covers rental period Jan 1 to Mar 31. Assuming rental expenses is split evenly per month and Monthly
accounting calendar is in use, the accounting entries are:
Basic Accounting

Accounting Dr/Cr Journal Accounted Accounted

Date Debit Credit
Jan 10th Dr Prepaid Expense 12000
Cr Liability 12000

Mulitperiod Accounting Recognition Journals

Accounting Dr/Cr Journal Accounted Accounted

Date Debit Credit
Jan 31st Dr Rental Expense 4000
Cr Prepaid Expense 4000
Feb 28th Dr Rental Expense 4000
Cr Prepaid Expense 4000
Mar 31st Dr Rental Expense 4000
Cr Prepaid Expense 4000

Changes to multiperiod accounting related attributes

All the three multiperiod accounting attributes can be changed on the invoice at any time until the
expense are completely recognized. However not all changes take effect immediately. If transaction data
or accounting method has been changed after the first recognition entry is accounted in final status, the
accounting impact by the changes are reflected in future entries only and the already accounted journal
entries will not be affected.

For example, continuing the above example if the multiperiod end date has been extended from Mar 31
to Apr 30, after entry for January has been final accounted, the difference will be reflected in February
and the future accounting entries are:

Accounting Dr/Cr Journal Accounted Accounted

Date Debit Credit
Feb 28th Dr Rental Expense 2000
Cr Prepaid Expense 2000
Mar 31st Dr Rental Expense 3000
Cr Prepaid Expense 3000
Apr 30th Dr Rental Expense 3000
Cr Prepaid Expense 3000

The revised amount for the entry in February is calculated as:

$6000(Amount to be recognized up to end of Feb) minus $4000(Amount already recognized) = $2000

Important Nuggets
1. End date cannot be changed to a date which is earlier that the last recognition journal date.
2. Multiperiod accounting start date and end date will not be editable after the expense are
completely recognized.
3. Any changes to multiperiod accrual account will not be considered after the invoice is accounted.
4. Cancellation of invoice line or distribution will always be accounted on the first day of next open
period after the last multiperiod accounting recognition journal date. This is applicable irrespective
of whether the last MPA date is in open or closed period.
5. Its always advisable to run Multiperiod Accounting Program as part of period close process after all
the Payables transactions are entered, accounted and transferred to General Ledger.

Setup
No setups are required to use the multiperiod accounting feature. System automatically considers an
invoice for multiperiod accounting if the multiperiod start and end date are provided either on the
invoice lines or distributions.

The only setup which you might want to change is the proration formula used in the seeded accounting
rules to recognize the expenses. Two proration formulas are seeded by Oracle where one is to prorate
the expenses based on number of days and the other one is for proration based on number of periods.
The seeded accounting rules use proration based on number of periods.