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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
National and International Laws & Regulations
2
Actions by Competitors
3
Changing Customer Requirements
4
Industry Standards and Regulations
5
Tax Codes
6
Changing Workforce Attitudes
7
International Reporting Standards
8
Language and Cultural Differences
Direct impact on Finance
Source: PWC, 9th Annual Global CEO Survey
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
Make it Simpler to do your job
Control Costs by Managing Complexity
Major Focus
Standardizing operating practices and
controls
69%
50%
Standardizing policies and business
rules
66%
Standardizing and integrating finance
systems
59%
Adopting best practices
58%
Optimizing the finance organization and
its reporting structure
52%
Senior
executives say
simplification
is driving the
Finance
agenda
Reducing reliance on spreadsheets
33%
Source: PWC Management Barometer
Make it Easier to do Your Job
How Finance Spends its Time
26%
47%
27%
Transactional Activities
Control Activities
Decision Support, Performance Mgmt
% Yet To…
50%
Improve processes or
rationalize technologies
60%
Standardize policies, rules,
and processes across the
entire enterprise
73%
Implement a shared services
model *
80%
Adopt best practices or
simplify processes across the
entire enterprise
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
Comprehensive
and compliant
processing
Financial
Data for
Management
- and
Compliant
Analytics
€+$
+
€
Controlled
Transaction
Entry
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
How Financials Release 12 Can Help
The Global Business Release
WORK GLOBALLY
THINK GLOBALLY
MANAGE GLOBALLY
To Be More Competitive
To Make the Right Decisions
To Lower Cost & Increase
Performance
Financial Control &
Reporting
Performance Management
Integration
Credit-to-Cash
Profitability Management
Data Management
Procure-to-Pay
Business Intelligence
Reporting
Treasury & Tax
Travel & Expense
Asset Management
Governance, Risk &
Compliance
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.
Ledger and
Ledger Sets
2.
Multi-Org
Access
Control
3.
Subledger
Accounting
4.
Tax Engine
5.
Intercompany
6.
Bank Model
General
Ledger Sets
Ledger
& Ledger
Dr
Cr
Subledger Accounting (SLA)
Tax
Engine
Multi-Org
Access
Control
Inter
Company
Inventory
Work in Process
Bank
Model
Receivables
Purchasing
Payables
Projects
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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
Holland
Denmark
Legal Entity
Legal Entity
Legal Entity
Belgium
Holland
Denmark
Operating Unit
Operating Unit
Operating Unit
Responsibility
SingleResponsibility
Responsibility
Responsibility
Functional Tasks
 Order Management
 Dunning, Collections,
Billing
 Requisition, Demand &
Purchase Orders
 Receiving & Drop Ship
 Invoice Receipt,
Disbursement
 Customer Data
Management
 Accounting Setup
Purpose Built Cross OU “Desks”
Shared Services
Shared Service
Product Reference
Order Management
Order Management
Dunning, Collections, Billing
Receivables
Requisition, Demand &
Purchase Orders
Procurement
Receiving & Drop Ship
Supply Chain Management
Invoice Receipt, Disbursement
Customer Data Management
Accounting Setup
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
Classify Unit
Operating
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
General
GeneralLedger
Ledger
3rd Party
Systems
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
Inventory
Receivables
Projects
3rd Party
Systems
Work in Process
Purchasing
Payables
• Streamline closing process
with common posting engine
• Auditable and transparent
entries accessible with full
drilldown
Subledger Accounting
Centralized Rules, Common Repository: Global Control
Ledger
What it is
French Rules
Plan Comptable
French Calendar
EUR
Dr
Cr
Subledger
Accounting
• Accounting Rules
• SarBox & 8th Dir.
• User Editable
• Subledger Daybooks
•
•
•
•
•
Payables Invoice
(Journals)
Subledger Balancing
Reports, inquiries, open
items, et cetera
Multiple
Representations
Common Posting to GL
Ledgers
Real time or Periodic
Some Benefits
• Faster, Easier
•
•
•
•
•
Reconciliation
Corporate Rules =
Accounting
Standardization
Local Rules =
Improved Local
Compliance
Automate “Apples to
Apples” Adjustments
Improved Auditability
Improved Internal
Control
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
Event Class: Invoices
Reconciliation
Event:
Invoice Approved
Ledger:
France (EUR)
Platform
GL Date:
20-Sep-2005
Description:
Office supplies
• “In accordance
Type
Account
with the
Asset purchase 01.9100010.100
Underlying
Misc expense
01.9100020.100
Misc expense
01.9100020.200
Records”
Misc expense
01.9100020.300
VAT
01.3100060.000
Accounts Payable 01.7000010.000
Description
Debit
Paris: furniture 10,000
Paris: supplies
400
Nantes: supplies
100
Nice: supplies
300
VAT@17%
1,836
ABC Supplies
12,636
Credit
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
Opening
Balance
Debit
Credit
Opening
Balance
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
100
1,000,000
500,000
100,000
1,000
(750,000)
(250,000)
(100,000)
(501,100)
-
-
Debit
Credit
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
10,500,000
3,000,000
1,500,000
300,000
300,000
300,000
150,000
150,000
300,000
24,000,000
24,000,000
Closing
Balance
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
-
Closing
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
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
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)
Payables
Vendor
Vendor
Vendor
Vendor
Total
I
II
III
IX
(250,000)
(100,000)
(150,000)
(250,000)
(750,000)
General Ledger
SLA Detail
Multiple Accounting Representations
Global Compliance – Statutory and Stock Market
Ledger A
Ledger B
French Rules
Plan Comptable
French Calendar
US GAAP
US COA
US Calendar
EUR
Multiple Ledgers
EUR
or
Dr
Cr
Subledger
Accounting
Payables Invoice
Single subledger
transaction
can create multiple
accounting
representations
and in multiple
currencies
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
Events
Accounting
Configurations
Accounting
Program
Journal Entry
Setup
Subledger
Journal
Entries
Subledger Accounting
Service
Reconciled:
Transactions
(& adjustments) Docs, SLA, GL in synch
General
Ledger
Subledger
Balances
GL
Journal
Entries
and
Balances
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Ledgers and Ledger Sets
Work Think Manage
Ledger
One Repository of Financial Truth
Ledger B
US GAAP
US COA
US Calendar
EUR
Implements the 4 C’s:
Accounting Method
Chart of Accounts
Calendar
Currency
The balance on Creditors (COA)
is 4.2M Eur (Currency)
on March 31, 2006 (Calendar)
according to IAS/IFRS definitions (Accounting Method)
Reporting Currency
Ledger Sets
Global Information At A Glance
Ledger A
Ledger B
French Rules
Plan Comptable
French Calendar
US GAAP
US COA
US Calendar
EUR
EUR
Reporting Currency
Ledger Sets
Global Information At A Glance
Share:
Chart of Accounts
Calendar
Ledger Set
Ledger C
Ledger A
Ledger B
French Rules
Plan Comptable
French Calendar
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 and secured
US GAAP
US COA
US Calendar
USD
Ledger D
US GAAP
US COA
US Calendar
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
Write
Accountant
France Ledger
Canada Ledger
US Ledger
• 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
• 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
Adjustment
Ledger UK
Adj Ledger
Corporate
• 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
Adjusting
Ledger
Secondary
Ledger
Corp. wants GL balances
per Parent GAAP
Corp. wants “Just the
adjustments, thank you”
Corp. wants a complete
Parent GAAP & Currency
edition of the Sub’s books
Subsidiary books are
pretty similar to parents
Mapping gets us most of
the way to Parent
Subsidiary books are quite
alien to parents
No inventory
Inventory is the big
difference
Inventory is one of the big
differences
National chart of accounts
is clearly related to IAS
IFRS or GAAP balances
Manageable series of
reclassifications
National chart of accounts
is radically different from
corporate
National Controllership
- Corp GAAP known
Regional Controllership
- Corp GAAP administered
Parent Controllership
Mexico plant, US parent
Balances are enough
(Full drill down available)
See they’ve been properly
adjusted to our rules
Every petty cash slip
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Global Business
Functions
Work Think Manage
Legal Entity: Your Registered Companies
Public
Company
(ultimate parent)
Legal Authorities
Countries, States, Local,
Agencies, Taxation,
Registrars, Regulators...
Regulates
Complies
Legal Entities
Registered Companies,
Funds, Partnerships…
Inc. LLC. Ltd. SA. GmBH. Etc.
“exist in the outside world”
Managed & analyzed by
Management Orgs
Divisions, LOBS, Plants,
Cost Centers, Whatever =
“Decision Making Tags”
Subsidiary
Public
Company
Company
(regional parent)
Subsidiary
Company
Subsidiary
Company
(business parent)
Subsidiary
Company
Subsidiary
Company
Subsidiary
Company
Subsidiary
Company
• 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
What we’ve done
• Addresses, Officers, etc.
• Enabled First Party
stamp
• LEs own the money
and bank accounts
• Added Establishments:
map Registrations to
Authorities
• LEs file the accounts,
take care of accounting
• GRE/LE not touched
• LEs comply with
whatever needs
compliance: “legal” in LE
• 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
Establishments
Actual Registered
Companies, etc.
GRE/LE
Legal
Entity
Accounts
for itself
in a Ledger
or BSVs
Files
Registrations
with Authorities
Business
Group
Ledger
Maintains
its Subledger
Documents
in many OUs
Default Legal
Context (DLC)
Et Cetera, 11i
Operating
Units
Legal Entity:
Vehicle for compliance
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
Operating
Filesbooks, bookkeeping rules and Documents
Assign
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
theyitself
owe
Legal
Entity
Intercompany
in a Ledger
Establishments
Do business between and across your registered companies
or BSVs
with full legal documentation
Files
Bank Model
Legal Entity:
Ledger
companies use their money to pay
Registrations Have your registered
Vehicle for compliance
with Authorities their 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
Set Accounting Rules
for All EBS Apps
One Place to manage
Your Global Accounting
Rules, Currencies,
Ledgers,
And Ledger Sets
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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
Processing taxes for transactions and reporting
Transactions
Purchasing

Parties
Compliance, Assurance

Efficiency, Global Visibility
Single Interface for Transactions
Payables
Places
Products
Sales Orders
Processes
Determine Applicable
Regimes
Taxes
Tax Status
& Rate
Taxable
Basis
Transparent Integration with Tax Partner Services

Extensible

Service Oriented Architecture
Receivables
…
Calculate
Tax
Amount
Tax Reports
- PDF, HTML, RTF
- Security enabled
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
 Generate subledger invoices
 Control transaction entry with
Intercompany Calendar
Excel
(Web ADI)
Online
Reconciliation
Reporting
 Fully Configurable Approval Rules
 Flexible Security Model
 Centrally defined Intercompany
Accounts
Dr
General
Ledger
XML
Publisher
Reports
Cr
Subledger
Accounting
Receivables
Payables
AGIS at Work
Rebilling a Corporate Cost from an USA HQ
Inter
Company
• AP and AR Invoices
created for France
and Italy
California
Company
General
Ledger Entries
Illinois
Company
• GL Entries created for
US subsidiaries
New York
Company
Subledger
Invoices &
Documents
France
Company
Italy
Company
<Insert Picture Here>
Banking Model
Work Think Manage
Centralized Banking
Shared Services Disbursements
• Bank account is now
associated with LE entity
rather than Operating Unit
LE
OU A
Inventory
Work in
Process
OU B
OU C
Receivables
Purchasing
Payables
Projects
Assets
• Single bank account
serves multiple Operating
Units
• Any and all Operating
Units associated with a
ledger can be permitted to
use the bank account
Plus
 Centralized Credit Card Model
 Credit Card Encryption
 Supplier & Customer Banks in TCA
Bank Model: Example of What You Can Do
Pay invoices from different OUs with 1 instruction
• New Payments Module
• New Bank Model
OU A
• New Bank & Credit Card
Features
OU B
Single
Payment
Instruction
OU C
Bank
Sub Ledger
Accounting
Invoices
Payments
Banks
Legal Entity
Operating Units
<Insert Picture Here>
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
SSCs
(Formal)
SLAs & Tax
Inter-LE
Ledger and Ledger Sets
Subledger Accounting
Intercompany, Tax Engine
MOAC across LEs, Bank
Internal Controls Manager
Informal Service Sharing
Ledgers & Ledger Sets
Process Efficiency
Ledgers with
Decentralized Depts.
Balancing Segments
Shared Service
Centralized Depts..
MOAC across OUs
Infrastructure
Normal Business
Intercompany
(Serves Informal and Formal)
Organizational Access
Practice
Bank Model
Cross Org Processes
Tax
Banking Model
Inter Unit Accounting
What the Architecture Gets You
• Work Globally
•
•
•
•
Global Order Desk
Global Procurement
Global Billing
Global Dunning
• Think Globally
• Global Ledger Sets –
worldwide insight
• Global Reporting
• Manage Globally
• Global Accounting
Rules
• Global Set-up
• Global Integration
Release 12 Subsidiary LEs….
Company
Company
Company
…account for themselves in Ledgers,
and…
Ledger Set
manage their subledger data in Operating Units
Multi-Org
Access
Control
Inventory
Work in Process
Receivables
Purchasing
Payables
Projects
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
MOAC
Inventory
Inventory
Work in
Process
Work in
Process
Receivables
Purchasing
Projects
Payables
Assets
Inventory
Work in
Process
Receivables
Purchasing
Projects
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
OICM
XML Publisher
Reporting
DBI, FCH
Ledger Sets,
Ledgers
Profitability Mgr,
EPB
General
Ledger
Subledger
SLA,
Tax
A$+$
MOAC,
+300 Features
TCA, LE
+
€
Transactions
Intercompany,
Bank, Payments
€+$
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
QUESTIONS