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Overview of the New Financial Architecture in Oracle E-Business Suite Release 12
Mary Burns

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracle’s products remains at the sole discretion of Oracle.

Agenda
• What We Set Out To Address • Release Twelve: The Global Release

• Global Architecture • MultiOrg Access Control • Subledger Accounting • Ledgers and Ledger Sets • Ledger Considerations • Global Business Functions • Legal Entities • Accounting Set Up Manager • E-Business Tax • Advanced Intercompany • Banking Model

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What we set out to address

Doing Business Globally is Complex
Top Drivers of Complexity

1 2 3 4 5 6 7 8

National and International Laws & Regulations Actions by Competitors Changing Customer Requirements Industry Standards and Regulations Tax Codes Changing Workforce Attitudes International Reporting Standards Language and Cultural Differences
Direct impact on Finance

Globalization is unstoppable. Regardless of geography, industry or income, companies are globalizing to gain new customers and access new markets. Is this a good thing? Nearly two-thirds of the CEOs we surveyed are positive about the impact that globalization will have on their organizations over the next three years.
Source: 9th Annual Global CEO Survey – Globalization and Complexity; PwC 2006

Source: PWC, 9th Annual Global CEO Survey

Make it Simpler to do your job
Control Costs by Managing Complexity
Major Focus

Standardizing operating practices and controls Standardizing policies and business rules Standardizing and integrating finance systems Adopting best practices Optimizing the finance organization and its reporting structure Reducing reliance on spreadsheets

69% 66% 59% 58% 52%

50%
Senior executives say simplification is driving the Finance agenda

33%

S u e P CMn g mn B ro e r o rc : W a a e e t a mte

Make it Easier to do Your Job
How Finance Spends its Time % Yet To… 50 Improve processes or rationalize % technologies

26%

47%

60 %
Tran ion Act it sact al iv ies Conrol Act it t iv ies D ecisionSu p , Perform ceM m p ort an g t

27%

Standardize policies, rules, and processes across the entire enterprise Implement a shared services model * Adopt best practices or simplify processes across the entire enterprise

73 % 80 %

The Agile CFO, IBM Business Consulting Services, 2005 * Deloitte Consulting, 2006

Customers:
Centralize, Simplify, Standardize
Work Globally, to be more competitive Think Globally, to make the right decisions Manage Globally, to lower cost and increase performance
A$+$
Easy Reporting Transparent Audit, Reconciliation & Drilldown Corp. Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Joint Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Parent Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar National Compliance Local Regulation National COA Local Calendar

$

Financial Financial Data for Data for Management Management - and - and Compliant Compliant

Analytics

€+$

+

Comprehensive and compliant processing

Controlled Transaction Entry

How Financials Release 12 Can Help
The Global Business Release WORK GLOBALLY
Financial Control & Reporting Credit-to-Cash Procure-to-Pay Treasury & Tax Travel & Expense Asset Management Governance, Risk & Compliance

THINK GLOBALLY
To Make the Right Decisions
Performance Management Profitability Management Business Intelligence

MANAGE GLOBALLY
To Lower Cost & Increase Performance Integration
Data Management Reporting

To Be More Competitive

Global:
1.

2.

Of, relating to, or involving the entire earth; worldwide: global peace; global monetary policies, etc. Comprehensive; total: a... global, generalized sense of well-being

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Release Twelve The Global Business Release: A New Financial Architecture

Global Financial Architecture
6 Major Initiatives
1. 2. Ledger and Ledger Sets Multi-Org Access Control Subledger Accounting Tax Engine Intercompany Bank Model
MultiOrg Access Control Work in Process Inventor y Receivables Projects
Dr Cr

General Ledger Ledger & Ledger Sets

Subledger Accounting (SLA)

3. 4. 5. 6.

Tax Engine

Inter Company

Bank Mod el

Purchasing

Payables

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Multi-Org Access Control
Work Think Manage

MOAC: Multi-Org Access Control
Role based access to Operating Units Perform multiple tasks across operating units without changing responsibilities
Belgium
Legal Entity

Holland
Legal Entity

Denmark
Legal Entity

Functional Tasks
 Order Management  Dunning, Collections, Billing  Requisition, Demand & Purchase Orders  Receiving & Drop Ship  Invoice Receipt, Disbursement  Customer Data Management  Accounting Setup

Belgium
Operating Unit

Holland
Operating Unit

Denmark
Operating Unit

Responsibility Responsibility Responsibility Single Responsibility

Purpose Built Cross OU “Desks” Shared Services
Shared Service
Order Management Dunning, Collections, Billing Requisition, Demand & Purchase Orders Receiving & Drop Ship Invoice Receipt, Disbursement Customer Data Management Accounting Setup

Product Reference
Order Management Receivables Procurement Supply Chain Management Payables Trading Community Architecture Accounting Setup Manager

Multiple Organization Access Control
Summary of Changes
• Security Profiles for data security • MO: Security Profile • List of operating units for a responsibility • Defined in HR • OU field on UI • all transactions • setup data specific to OU, like transaction type • Enhanced Multi-Org Reporting and Processing • Ledger/Ledger Set parameter on accounting reports and processes • OU parameter on other standard reports and processes • For example: submit the Payables Open Interface Import w/OU param null to import all records across all OUs

Multi-Org Access Control
In practice
Select Operating Units In daily use

Select Operating Unit Classify Organization classification
as operating unit

Run Reports Across Operating Units

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Subledger Accounting

Work Think Manage

Centralized Accounting Policies
Greater Control, Transparency and Auditability
• Internal control and compliance with multiple accounting policies through user-defined accounting rules
3rd Party System s

General Ledger General Ledger

Dr

Cr

Centralized Accounting Model, Rules, Engine and Repository

• Single source of truth for all subsystem accounting activity with a common data model and repository • Accounting, reconciliation and reporting facilitated by centralized data model

3rd Party System s

Invento ry

Receivable s

Project s

• Streamline closing process with common posting engine • Auditable and transparent entries accessible with full drilldown

Work in Process

Purchasin g

Payable s

Subledger Accounting
Centralized Rules, Common Repository: Global Control
Ledger French Rules Plan Comptable French Calendar

What it is

Some Benefits

EUR
Dr Cr

• Accounting Rules • SarBox & 8th Dir. • User Editable • Subledger Daybooks • • • • •

• Faster, Easier • • • • •

Subledge r Accounti ng

(Journals) Subledger Balancing Reports, inquiries, open items, et cetera Multiple Representations Common Posting to GL Ledgers Real time or Periodic

Reconciliation Corporate Rules = Accounting Standardization Local Rules = Improved Local Compliance Automate “Apples to Apples” Adjustments Improved Auditability Improved Internal Control

Payables Invoice

Subledger Accounting
Transaction Level Compliance
• National Daily Journal Requirements • Internal Control: Central Definitions, Eliminate overrides

• Policy Enforcement in Volume Processing
• Transparent Accounting Rules • Debits & Credit at the point of the event • Automate Foreign Operation adjustments • Reconciliation
Event Class: Invoices Event: Invoice Approved Ledger: France (EUR) GL Date: 20-Sep-2005 Description: Office supplies Type Account Description

Platform • “In accordance with the Underlying Records”

Debit

Credit

Asset purchase 01.9100010.100 Paris: furniture 10,000 Misc expense 01.9100020.100 Paris: supplies 400 Misc expense 01.9100020.200 Nantes: supplies 100 Misc expense 01.9100020.300 Nice: supplies 300 VAT 01.3100060.000 VAT@17% 1,836 Accounts Payable 01.7000010.000 ABC Supplies 12,636 12,636 12,636

Ticked & Tied
SLA Controls that GL Balances and SLA Balances tie, and that both tie to the document (invoice, payment, etc.) sources
GENERAL LEDGER Cash Receivables Inventory Assets Prepayments Payables Accruals Shares Previous Results Balance Sheet Sales COGS R&D S&M G&A-Fin G&A-IT G&A-HR Period Income Income Statement Closing Balance

Opening Balance

Debit

Credit

Closing Balance

100 1,000,000 500,000 100,000 1,000 (750,000) (250,000) (100,000) (501,100) -

3,500,000 3,000,000 1,200,000

2,750,000 3,500,000 1,500,000

2,800,000

2,700,000 50,000

10,500,000 1,500,000 300,000 300,000 300,000 150,000 150,000 300,000 24,000,000

10,500,000 3,000,000

-

24,000,000

750,100 500,000 200,000 100,000 1,000 (650,000) (300,000) (100,000) (501,100) (3,000,000) 1,500,000 300,000 300,000 300,000 150,000 150,000 300,000 -

Opening Balance SUBLEDGER ACCOUNTING Receivables Customer Customer Customer Customer Customer Total One Two Three Four Five 250,000 350,000 100,000 100,000 200,000 1,000,000

Debit

Credit

150,000 250,000 1,500,000 800,000 300,000 3,000,000

400,000 450,000 1,400,000 750,000 500,000 3,500,000

150,000 200,000 150,000 500,000

General Ledger SLA Detail

Payables Vendor Vendor Vendor Vendor Total I II III IX (250,000) (100,000) (150,000) (250,000) (750,000) 1,000,000 75,000 725,000 1,000,000 2,800,000 900,000 50,000 775,000 975,000 2,700,000 (150,000) (75,000) (200,000) (225,000) (650,000)

Multiple Accounting Representations
Global Compliance – Statutory and Stock Market
Ledger A French Rules Plan Comptable French Calendar Ledger B US GAAP US COA US Calendar

Multiple Ledgers

EUR

EUR

or
Dr Cr

Single subledger transaction can create multiple accounting representations Payables Invoice and in multiple currencies

Subledge r Accounti ng

Chose to use an alternative Ledger or just an Adjustment Ledger or segment

SLA keeps the Subledgers & GL tied out
Keep the auditors happy!

Subledger Applications

Accounting Configurations

Journal Entry Setup Subledger Journal Entries

General Ledger

Accounting Events

Accounting Program

Subledger Accounting Service
Reconciled: Transactions (& adjustments) Docs, SLA, GL in synch Subledger Balances

GL Journal Entries and Balances

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Ledgers and Ledger Sets

Work Think Manage

Ledger
One Repository of Financial Truth

Implements the 4 C’s: Accounting Method Chart of EUR Accounts The balanceCalendar on Creditors (COA) Currency is 4.2M Eur (Currency)
US GAAP US COA US Calendar

Ledger B

on March 31, 2006 (Calendar) according to IAS/IFRS definitions (Accounting Method)
Reporting Currency

Ledger Sets
Global Information At A Glance

Ledger A French Rules Plan Comptable French Calendar

Ledger B US GAAP US COA US Calendar

EUR

EUR

Reporting Currency

Ledger Sets
Global Information At A Glance
Ledger Set Share: Chart of Accounts Calendar
Ledger C US GAAP US COA US Calendar

Ledger A French Rules Plan Comptable French Calendar

Ledger B US GAAP US COA US Calendar

USD
Ledger D US GAAP US COA US Calendar

EUR

EUR

Key benefits to many Ledgers in one set
•Decision-driving business information always available •Simpler processing and General Ledger management •Data and definitions that can be shared

AUD

Reporting Currency

Currency in Release 12
• Transaction Currencies • Accounting Currency in Primary Ledger • Reporting Currency in Primary Ledger • More Accounting Currencies in Secondary Ledgers • For every transaction OR • For SLA Posting level / GL activity level • Balance level Translation or Remeasurement in

Ledgers – within Ledger sets, run at one click • Balance & Activity level Translation or Remeasurement in Financial Consolidation Hub • Enhanced Revaluation

• [Functional Currency term dropped: conflicts with IAS 21 / FAS 52]

Data Access, Definition Access
• Data Access Sets • Grant and tailor access to Ledgers and Balancing Segment Values (i.e. Companies, Stores, Branches, etc.)
Privileges View GL Manager France Ledger Canada Ledger US Ledger Write Accountant

• Definition Access Sets – separate from data security
• Share, restrict definitions; privileges to view, modify, etc.

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Ledger Considerations

Ledger Sets – Work them your way
Management

Ledger Set

US Ledger Set Legal Ledger US1 Legal Ledger US2 Legal Ledger US3 Adjustment Ledger US

Corporate Ledger Set

adjustments eliminations

UK Ledger Set Legal Ledger UK1 Legal Ledger UK2 Adjustment Ledger UK Adj Ledger Corporate

• Automate GAAP / IAS adjustments in an adjusting ledger • Eliminate within a Set with GCS • Consolidate Formally in FCH • Map from a non-conforming COA with a GCS Ledger

• Set of 26 Ledgers in one country • Euro Zone in One Ledger Set • My Corporate Set in US GAAP • Statutory Set for Country Y Subs • Division X Worldwide Ledger Set

When to use a Secondary Ledger, an Adjusting Segment or an Adjusting Ledger?
Adjusting Segment
Corp. wants GL balances per Parent GAAP

Adjusting Ledger
Corp. wants “Just the adjustments, thank you”

Secondary Ledger
Corp. wants a complete Parent GAAP & Currency edition of the Sub’s books

Subsidiary books are pretty Mapping gets us most of the Subsidiary books are quite similar to parents way to Parent alien to parents No inventory National chart of accounts is clearly related to IAS IFRS or GAAP balances National Controllership - Corp GAAP known Balances are enough (Full drill down available) Inventory is the big difference Manageable series of reclassifications Regional Controllership - Corp GAAP administered See they’ve been properly adjusted to our rules Inventory is one of the big differences National chart of accounts is radically different from corporate Parent Controllership Mexico plant, US parent Every petty cash slip

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Global Business Functions
Work Think Manage

Legal Entity: Your Registered Companies
Legal Authorities
Countries, States, Local, Agencies, Taxation, Registrars, Regulators... Public Company (ultimate parent) Subsidiary Public Company Company (regional parent) Subsidiary Company Subsidiary Company (business parent) Subsidiary Company

Regulates

Complies

Registered Companies, Funds, Partnerships… Inc. LLC. Ltd. SA. GmBH. Etc. “exist in the outside world”

Legal Entities

Subsidiary Company

Managed & analyzed by

Subsidiary Company

Subsidiary Company

Management Orgs
Divisions, LOBS, Plants, Cost Centers, Whatever = “Decision Making Tags”

• Parent companies (LEs) “own or control” subsidiaries (LEs) • No outside ring - must pick an LE • LEs create commercial transactions

LEs: Why and What?
Why We Care • LEs pay the taxes - need tax registrations • Trade between LEs needs intercompany • LEs own the money and bank accounts • LEs file the accounts, take care of accounting • LEs comply with whatever needs compliance: “legal” in LE What we’ve done • Addresses, Officers, etc. • Enabled First Party stamp • Added Establishments: map Registrations to Authorities • GRE/LE not touched • Authorities as TCA parties • LE Configurator

Tabulate your Registered Companies and other forms of LE

Setup and maintain: Legal Entities, Establishments, Jurisdictions, Legal Authorities, Legal Addresses

Where LE fits in…
Transaction Taxes -Complies & Files, Pays
Registrations Files with Authorities
Exists Locally

Actual Registered Companies, etc.
Maintains its Subledger Documents in many OUs Default Legal Context (DLC)

Business Group GRE/LE

Legal Entity
Accounts for itself in a Ledger or BSVs

Et Cetera, 11i

Operating Units

Establishments
Files Registrations with Authorities

Legal Entity:
Vehicle for compliance

Ledger

Get the LE Right
Compliance Falls Into Place Transaction Actual Registered Let’s put LEs to work Business Taxes• Companies, etc. Isolate legal compliance from management needs Group -Complies Track your registered companies • & GRE/LE Files, Pays • Make your compliance flow more easily

Maintains Et Cetera, 11i its Subledger Accounting Setup Manager Registrations Documents Operating Files Assign books, bookkeeping rules and currency management with Authorities in many OUs Units to your registered companies Default Legal Exists EBusiness Tax Context (DLC) Locally Have your registered companies calculate, file, and pay the Accounts transaction taxesfor itself they owe

Legal Entity
or BSVs

in a Ledger Establishments business between and across your registered companies Do Files
with full legal documentation

Intercompany Bank Model

Legal Entity:

Ledger Registrations Have your registered companies use their money to pay Vehicle for compliance with Authoritiestheir bills, et cetera

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Accounting Setup Manager (ASM)
Work Think Manage

Centralized Set-up
Accounting Setup Manager

Define Legal Entities & Associated Rules Ensure Complete & Accurate Setup via Online Checklist Define Multiple Ledgers for Rules & Currencies One Place to manage Your Global Accounting Rules, Currencies, Ledgers, And Ledger Sets

Set Accounting Rules for All EBS Apps

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E-Business Tax

Work Think Manage

Centralized Global Tax
Less Complex Global Tax Compliance
Business Needs Solution • Tax content for certain countries Automation • Vertex and Taxware integration for U.S. • Integrity checks during setup process Constant Changes in Tax Laws and Regulations • Date effective setup • Tax rules flow for change or creating rules • Tax simulator for setup, rules, and transactions • Tax registrations and tax reporting codes Local Compliance • Tax lines determine applicable taxes • Configurable tax reporting templates • Single set up for all Oracle applications Information Visibility • Use of E-Business Suite components such as trading partner geography, trading partner classification, legal entity, inventory item categorization, and accounting event.

Oracle E-Business Tax
Transactions

Processing taxes for transactions and reporting

Purchasing Parties Payables Places Products Sales Orders Processes
Determine Applicable Regimes Taxes Tax Status Taxable Basis & Rate Calculate Tax Amount

Compliance, Assurance

Efficiency, Global Visibility

Single Interface for Transactions

Transparent Integration with Tax Partner Services

Extensible

Service Oriented Architecture

Receivables

- PDF, HTML, RTF - Security enabled

Tax Reports

Tax Transactions

Taxes, Rules

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Advanced Intercompany (AGIS)
Work Think Manage

Advanced Global Intercompany System
Address the Top Barrier to a Fast Close
Advanced Global Intercompany System

Web UI

Subledger Invoices & Documents

Open Interfaces / API Excel (Web ADI)  Generate subledger invoices  Control transaction entry with Intercompany Calendar  Fully Configurable Approval Rules  Flexible Security Model  Centrally defined Intercompany Accounts Online Reconciliation Reporting

XML Publisher Reports

Dr

Cr

General Ledger

Subledger Accounting

Receivable s

Payable s

AGIS at Work
Rebilling a Corporate Cost from an USA HQ
• GL Entries created for US subsidiaries • AP and AR Invoices created for France and Italy

Inter Company

California Company

Illinois Company

General Ledger Entries New

Subledger Invoices & Documents

York Company

France Company

Italy Company

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Banking Model

Work Think Manage

Centralized Banking
Shared Services Disbursements
• Bank account is now associated with LE entity rather than Operating Unit
OU C

LE
OU A OU B

• Single bank account serves multiple Operating Units • Any and all Operating Units associated with a ledger can be permitted to use the bank Plu account

Inventory

Receivable Receivabl es s Payables Payables

Project Projects s Assets

Work in Process Purchasin g

 Centralized Credit Card Model s  Credit Card Encryption  Supplier & Customer Banks in
TCA

Bank Model: Example of What You Can Do
Pay invoices from different OUs with 1 instruction
OU A

• New Payments Module • New Bank Model • New Bank & Credit Card Features

OU B

OU C

Single Payment Instruction

Bank

Payments

Invoices

Sub Ledger Accounting

Banks

Legal Entity

Operating Units

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Sharing Services

Work Think Manage

All Together: Easier To Share Services
Central processing, Distributed impact
Formal SSCs At home or overseas Call Centers, Outsourcing Offshoring, SAS 70, On Demand Ledger and Ledger Sets Subledger Accounting Intercompany, Tax Engine MOAC across LEs, Bank Internal Controls Manager

SSCs (Formal) SLAs & Tax Inter-LE

Informal Service Sharing Ledgers & Ledger Sets Process Efficiency Ledgers with Shared Service Infrastructure Decentralized Depts. Balancing Segments (Serves Informal and Formal) Centralized Depts.. MOAC across OUs Organizational Access Normal Business Intercompany Cross Org Processes Practice Bank Model Banking Model Tax
Inter Unit Accounting

What the Architecture Gets You
• Work Globally
• • • • Global Global Global Global Order Desk Procurement Billing Dunning
Release 12 Subsidiary LEs….

Company

Company

Company

…account for themselves in Ledgers, and…

• Think Globally

Ledger Set

• Manage Globally
• Global Accounting Rules • Global Set-up • Global Integration

• Global Ledger Sets – worldwide insight manage their subledger data in Operating • Global Reporting Units
MultiOrg Access Control Work in Process

Inventor y

Receivables

Projects

Purchasing

Payables

Share Services, maintain privacy
Exploit Cross-OU Processes
Yesterday: An LE Group in 1 SoB with 1 OU - no partitioning

R12: Introduce partitioning without sacrificing processes

Ledgers in Ledger Sets, New OUs
Inventory Inventory Work in Process Work in Process Receivable s Purchasing Projects Inventory Work in Process Receivable s Purchasing Projects

MOAC

Payables

Assets

Payables

Assets

Release 12: The Global Business Release
Work Globally, to be more competitive Think Globally, to make the right decisions Manage Globally, to lower cost and increase performance
XML Publisher Reporting Corp. Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Joint Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Parent Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar National Compliance Local Regulation National COA Local Calendar

$

A$+$

OICM Ledger Sets, Ledgers SLA, Tax

DBI, FCH Profitability Mgr, EPB

€+$

General General Ledger Ledger

+

Subledger Transactions

Intercompany, Bank, Payments

TCA, LE

MOAC, +300 Features

Q & A

QUESTIONS

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