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Joint Venture AccountingIntroduction
SAP AG 2003
In the capital-intensive Upstream Oil and Gas Industry, operators need the tools which enable them to make informed decisions in the
effective management of their operations.
SAP for Oil & Gas offers a comprehensive solution to meet these demanding challenges, providing a premier enterprise solution that
has been enhanced and refined for upstream businesses.
The SAP for Oil & Gas Upstream solution components are specifically designed to meet the
demanding needs of upstream businesses,
providing integrated processes and tools so you
can manage your business better.
SAP for Oil & Gas Upstream
SAP AG 2003
SAP for Oil & Gas - Upstream Solution Components
SAP Upstream includes the following industry-specific solutioncomponents:
Production & Revenue AccountingSAP PRA
Supply Chain Processing
Goods Receipt Processing
Shipping & Container
Management
MaterialTracking
Material Holding
TransportRequest
TransportOrder
PurchaseRequest
PurchaseOrder
GoodsReceipt
OutboundDelivery
OutboundShipment
MaterialRequest
Container
MaterialReservation
Material Receipt
Material Issue
ReturnsHandling
Offshore Logistics ManagementSAP OLM
CutbackCutback
Venture A
EG2
Company Code50 % Partner B
25 %
Partner D25 %
AR / AP
Partner D25
ET1
AR / AP
Partner B25
AR / AP
Partner B25
Cost ObjectCost Object
Venture AVenture A
Cost ObjectCost Object
Venture AVenture A
Gross
Net OperatingOperatingExp Exp / Rev/ Rev
5050
OperatingOperatingExp Exp / Rev/ Rev
5050
OperatingOperatingExp Exp / Rev/ Rev
100100
Joint Venture AccountingSAP JVA
Production SharingProduction SharingAgreementAgreement
Definitions
Production Sharing AccountingSAP PSA
SAP AG 2003
Oil & Gas Solution Map
Enterprise Management Strategic Enterprise Management Business AnalyticsBusiness
Intelligence & Decision Support
Accounting
Employee Relationship
Management & Workforce Analytics
Joint Venture Management
Upstream Exploration & Appraisal Development Production Marketing Disposal
SupplySupply Chain
Planning & Optimization
Acquire, Trade & Sell
Exchange & Throughput
HandlingScheduling Inventory Management
Primary Distribution &
Transport
Secondary Distribution & Transportation
Manufacturing Manufacturing Planning & Optimization Manufacturing Process Batch Manufacturing Blending & PackagingProduct Quality
Management
Sales, Service & Marketing Marketing Contracts, Sales & Pricing Service Analytics
Service Station & Convenience Retailing Convenience Retailing Fuels Management
Site & Headquarter Accounting
Business Analysis & Reporting
Enterprise Asset Management Specify & Design Procure & Build Operate & Maintain Decommission & Dispose
Business Support Employee Life-Cycle & Transaction Management ProcurementFinancial Supply Chain
ManagementEnvironment, Health and
Safety
Edition 2003
SAP AG 2003
Exploration & Appraisal
Portfolio Risk AnalysisIdentificationJoint Venture Development(S81)Undeveloped Leasehold AcquisitionSurveying, Positioning & EvaluationAppraisal Drilling & Boundary Determination
Development
Field Development ConceptFunding & Budgeting (Partner Determination) (S12)Project Planning (S8)Development DrillingFacility Construction (S8)Development Logistics (S79, S8)
Production
Reservoir ModelingDepletion PlanningWell ServicingSurface Facilities Maintenance (S8)Production Management & Reporting(S79)Secondary/Tertiary Recovery Planning and ManagementRemote Logistics (S83)Production/Revenue Accounting (S79)Production Sharing Agreement Handling(S81)Lease/License Administration (S79)Reserves Accounting & ReportingPortfolio Business Performance Analysis(S79)Production Sharing Government Contracts(S82, S81)Production Sharing Cost Recovery (S82, S81)Production Sharing Reporting (S82, S81)Upstream Graphics (S79)Gas Plant Accounting (S79)Lease Fuel Valuation Process (S79)Material Supply Capabilities (S83)Remote Logistics Goods Receipt Processes(S83)Container Management Capabilities (S83)Remote Logistics Temporary Holding Processes (S83)Goods returns Facilities (S83)Goods Tracking Capabilities (S83)Interfaces to Data Capture System (S79)
Marketing
First Purchaser (S79)Crude, Gas & NGL Marketing (S79)
Disposal
Asset Transfer (S12)Environmental ComplianceSite Remediation (S8)Property Marketing & Due Diligence Preparation (S12)Plug & Abandon Wells & Reporting to State
Oil & Gas Solution Map 2003 (Upstream) - 1
SAP AG 2003
Oil & Gas Solution Map 2003 (Upstream) - 2
Strategic Enterprise Management
Stakeholder Relationship Management (S11)Strategy Management(S11)Performance Measurement (S11)Strategic Planning & Simulation (S11)Business Consolidation(S11)
Business Analytics
Customer Relationship Analytics (S1, S13)E-Analytics (S13)Supply Chain Analytics(S3, S13)Financial Analytics(S12, S13)Human Resource Analytics (S10, S13)Product Lifecycle Analytics (S7, S13)
Business Intelligence & Decision Support
Flexible Reporting(S13)Decision Automation & Tracking (S13, S1, S3, S7, S11, S9, S5)Information Dissemination & Sharing (S13, S99)Performance Monitoring(S13, S11)Planning & Simulation(S11, S13)Ad hoc Analysis (S13)Collaborative Decision Support (S13, S99)Data Collection & Integration (S13)Content Management & Collaboration (S13, S99)
Accounting
Financial Statements(S12, S11)General Ledger & Subledgers (S12, S11)Revenue & Cost Accounting (S12, S11)Order & Project Accounting (S12, S11)Product & Service Cost Calculation (S12, S11)
Employee Relationship Management &
Workforce AnalyticsInformation Collaboration (S9)Manager Self-Service(S9)Employee Self-Service(S10)Employee Collaboration(S9)Strategic Alignment(S10)Reporting & Benchmarking (S10)
Joint Venture Management
Assessment & Distributions (S81)Overhead Splitting(S81)Suspense Processing(S81)Equity Change Processing (S81)Cut Back Processing(S81)Cash Call Reclassification (S81)Partner Netting (S81)Joint Asset/Inventory Management (S81)JV Partner Auditing(S81)Non-operating Properties (S81)Equity Adjustment(S81)
SAP AG 2003
SAP JVA is the only SAP solution that allows you to track venture expenditures on a venture by venture and partner by partner basis.
SAP JVA is fully integrated with: Financial Accounting (SAP FI) Controlling (SAP CO) Asset Management (SAP AM) Materials Management (SAP MM) Production Planning (SAP PP) Plant Maintenance (SAP PM) Project System (SAP PS)allowing you to capture all joint venture transactions by using
standard SAP functions.
The result is a streamlined workflow and reductions in errors.
Why SAP JVA?
SAP AG 2003
Using proven SAP FI-Special Ledger functionality as its basis, SAP JVA ensures accurate calculations and reporting of venture activities
on a venture-by-venture basis.
SAP JVA supports joint audit data exchange (JADE) reports, online and in real time, reducing audit headcount, time, and expense.
SAP JVA ensures full compliance with all standard overhead methods and calculations (US and international).
SAP JVA provides complete drill down capabilities for reporting all ventures, all authorization for expenditures (AFEs) tied to JOA's,
overhead analysis, cutback, and billing.
Why SAP JVA?
SAP AG 2003
Detailed joint venture data capture in real time
Cash calls from partners
Partner billing for venture expenses and revenues
Overhead calculation, based on the Joint Operating Agreement
Allocations of billable and non-billable costs
Multi-currency processing
Farm-in/Farm-out and Equity Changes
SAP JVA Features and Benefits
SAP AG 2003
JVA Business Objects: Venture
EG3
C75 % 25%
Venture A
EG4
EG1
33 1/3
EQTYPE 1Engineering
Design
EG6
B25%
A25 %
C25 %
D
EG2
25%BA
50 %D
25 %
EG5
EQTYPE 2
Construction
EQTYPE 3
Production
B
A33 1/3
C33 1/3
33 1/3
B
A33 1/3
C33 1/3
33 1/3
25%BA
50 %D
25 %
25 %
A
2002
2003
2004
Ventures associate Equity Types and EquityGroups to define a specificjoint operation or purpose
SAP AG 2003
.
A
EG3
C75 % 25%
Venture A
EG1
33 1/3
EQTYPE 1
EG2
25%BA
50 %D
25 %
Valid
EQTYPE 2
ConstructionEQTYPE 3
Production
B
A33 1/3
C33 1/3
33 1/3
33 1/3
3
EG4
EG5
B
A
C33 1/3
33 1/
25%BA
50 %D
25 %
EG6
B25%
A25 %
C25 %
D25 %
A
EG3
C75 % 25%
Venture A
EG1
33 1/3
EQTYPE 1Engineering
Design
EG2
25%BA
50 %D
25 %
Valid
EQTYPE 2
ConstructionEQTYPE 3
Production
B
A33 1/3
C33 1/3
33 1/3
3
EG5
B
A33 1/3
C33 1/3
33 1/
EG4
25%BA
50 %D
25 %
EG6
B25%
A25 %
C25 %
D25 %
New Processing Plant
Design
JVA Ventures and Cost Objects
A
A
Cost centre
Project
Construction Project
SAP AG 2003
Cost Center
PM Order
Internal Order
Project Prod Order
VentureAsset Plant
1 2
JVA Ventures and Cost Objects
Joint venture coding is derived from Cost Objects in Controlling (CO). Examples include Cost Centersand Orders.
Each Cost Object includes the following joint venture fields in the master data:y Joint Venturey Equity Typey Recovery Indicatory Joint Venture Object Typey JIB/JIBE Classy JIB/JIBE Sub-Class A
SAP AG 2003
Cost ObjectCost Object
Joint Venture Coding for Cost Object
Production Order
Network Order
Plant Maintenance
Order
Project Cost centre Internal Order
Joint Venture
Equity Type
Recovery Indicator
JV Object Type
JIB/JIBE Class
JIB/JIBE Subclass A
Recovery indicators include the following:y Billable (BI)y Corporate (CP)y Non-billable (NB)y Cutback (CB)
SAP AG 2003
Recovery Indicator
Identifies category of a joint venture transaction
Indicates whether a particular revenue or expense is shared by venture partners
Used to select data for reporting to venture partners Used to distinguish between joint and own revenues and
expenditures
Recovery indicator assignment & determination:
Default (Corporate)
Cost Object
G/L Account & Cost Element
Document Type
User Entry
MMCOFI
SAP AG 2003
Joint Venture Interface
Accounting Interface
Special Ledger
Interface
AM
MMFI
PS
COSD
HR
PM
Accounting Document
Itm Account Cost Obj. Amount1 Vendor -117.502 Cost 1 CC-1 60.003 Cost 2 CC-2 40.004 Tax 17.50
JV Interface
Joint Venture DocumentJoint Venture DocumentItm Account Cost Obj. AmountVenture EqG RI1 Vendor CC-1 - 70.50JVI001 A01 BI 1 Vendor CC-2 - 47.00JVI002 A01 BI 2 Cost 1 CC-1 60.00JVI001 A01 BI 3 Cost 2 CC-2 40.00JVI002 A01 BI 4 Tax CC-1 10.50JVI001 A01 BI 4 Tax CC-2 7.00JVI002 A01 BI
JV DATAJVT01
BILLINGJVT02
CUSTOMDATABASE
FI DATAGLT0
PP
In this example, an invoice is posted for the direct acquisition of a joint venture asset. The asset is assigned to the cost centre JV00-B in the time-dependent parameters, and this cost centre is
assigned to venture JV1001, so the asset transaction is coded against venture JV1001.
The venture coding is copied from the asset entry to the vendor entry.
SAP AG 2003
Joint Venture Asset Posting - Example
JV Document
Vendor Invoice
Asset Document
JV Document
Asset MasterJVA derives venture coding for an asset using the cost
centre entered on the asset master record
In this example, a goods receipt document is posted to receive stock worth GBP 500 into plant JA01. Plant JA01 is assigned to cost centre JV00-S01. Cost centre JV00-S01 has the following joint venture coding:y Venture JV1001y Equity Type Cy Recovery Ind. BI
The resulting joint venture document is coded with cost centre JV00-S01 and all the joint venture coding on that cost centre.
SAP AG 2003
Joint Venture Material Posting - Example
JV Document
Goods Receipt
Material Document
Accounting Doc
JV Document
MM Assignments
JVA derives venture coding for material movements from a special stock cost object that is assigned to a plant and a valuation type (which is optional) associated with the plant.
In this example, a goods receipt document is posted to receive stock worth GBP 500 into plant JA01. Plant JA01 is assigned to cost centre JV00-S01. Cost centre JV00-S01 has the following joint venture coding:y Venture JV1001y Equity Type Cy Recovery Ind. BI
The resulting joint venture document is coded with cost centre JV00-S01 and all the joint venture coding on that cost centre.
SAP AG 2003
Joint Venture Vendor Invoice Posting - Example
Post Vendor Invoice
Accounting Doc
JV Document
Cost Centre Assignment
The expenses are assigned to the JV partners via the cost centre assigned to the expense line items
You use cutback to recover costs from joint venture partners. Cutback posts credits against joint venture costs and charges these costs to venture partners.
SAP AG 2003
Cutback
Venture A
EG2
Company Code50 % Partner B
25 %
Partner D25 %
AR / AP
Partner D25
ET1
AR / AP
Partner B25
Gross
Net
The cutback process allocates JV partners'expenses or revenuesaccording to theirworking interest ownership.
OperatingExp / Rev
50
OperatingExp / Rev
100
Cutback Processing
RI = BillCost Object
Venture A
SAP AG 2003
JV Billing Ledger
Billing
JV Integration Mgr.
StatementExp. Suppl
Expenditure Detail
Inv. SupplDetail
Invoice
Joint Venture Billing
Internal Allocations
Costs
Orders
PayrollVendor
Invoices
Accounts Receivable
JV Summary Ledger
Cutback
JV Integration Mgr.Cash Calls
Paid Cash Calls
Partner Payments
Cutback Invoice
Partner Adjustments
JV Billing creates various customized billing documents to send to your JV partners
JV Integration Mgr.
SAP AG 2003
Cash Call Processing
Equivalent to down payments or pre payments Can be issued for future months (Reclassification) Request and cash receipts carried forward to billing process Integrated with Accounts Receivable and Accounts Payable
Venture JV0001 EqG A01 FCurr NOK
Partner FCurr Amt Lcurr Amt
JVGBU1 600.00 46.74
JV5001 300.00 23.37
JV5101 100.00 7.79
Partner Shares
Cash Call Request:
FIDocument
Cash Call
Gross to venture/projectNet to venture/project/partner
AccountsRec.- Cash
CallsPartner A
600Accounts
Rec.- Cash Calls
Partner B300
AccountsRec.- Cash
CallsPartner C
100
Inter-company functions allow you to book inter-company entries on the books of the operating partner and any of its affiliated businesses. By identifying these relationships, through inter-company mappings of accounts and other relevant objects, SAP JVA automates processing of inter-company joint venture transactions.
SAP AG 2003
COTo Affiliate:
INVOICE
FI
A/P
FIDocument
Cash Call
Affiliated Inter-Company Setup
Cutback creates A/P entries to operator on the books of the affiliated partner as configured in SAP JVA and SAP FI
Gross cash calls create A/P entries on the books of the affiliated partner, as defined in configuring SAP JVA and SAP FI
Inter-Company Ventures
Cutback
IntercompanyProcessing
Cash Calls
SAP AG 2003
Assessments & Distributions
Cost allocations with SAP Controlling and JVA allow you to: Configure allocation rules Substitute the recovery indicator (recovery indicator manipulation) Allocate secondary costs Re-run settlement Transfer costs to operating units
Cost Object B
Materials
Mail & CarriageTelecomsEntertaining
12Hotels8Travelling
Repairs & ServicingVehiclesLight & HeatingRent & Rates
Staff Salaries
80External Labour40Internal Labour
140Total
Distribution (through original cost element)Internal CO only
Cost Object B
140Assessment A
Materials
Mail & CarriageTelecomsEntertainingHotelsTravellingRepairs & ServicingVehiclesLight & HeatingRent & RatesStaff SalariesExternal LabourInternal Labour
140Total
Allocation (via secondary cost element)Internal CO only
Cost Object A
- 350Assessment A
Materials
Mail & CarriageTelecomsEntertaining
30Hotels20Travelling
Repairs & ServicingVehiclesLight & HeatingRent & RatesStaff Salaries
200External Labour100Internal Labour
0Total
40%
Unallocated Costs
40%
JVA supports two types of postings to account for changes in venture ownership. An ownership change may occur (i.e., a new equity group is assigned as owner of the JV) in the current
period after postings have already been assigned to the old equity group but before Cutback has been run to assign JV/equity group expenses to partners. JVA provides a process that automatically posts a reversal of the debit to the original equity group and reposts the expense to the new equity group. Running this process ensures that all postings to the JV for the period will be assigned to the equity group that owns the venture as of the end of the period. This posting is executed in JVA because the JVA process Cutback will access this new expense posting and post appropriate portions to the partners in the new equity group in FI A/R.
An ownership change may be recorded after the close of a previous accounting period. JVA also offers a process to handle the accounting impact of this change in ownership. In this case, the posting is made in FI to the affected partners because processing for the period has already been completed.
SAP AG 2003
Suspense Processing
Suspense functionality supported for: Partner Suspense Equity Group Suspense Project/WBS Element Suspense
Specific costs are not charged to a venture but instead posted to suspense accounts for the duration (year & period) a project remains in suspense
Selection
GBU1Company Code
Venture JV0001 JV9999to
Project Suspense
Posting
2002Fiscal Year
12Period
31.12.2002Posting Date
Options
Test run
Set project in suspense Post Costs
Accounting DocumentAccounting Document
Itm Account Cost Obj. Amount1 O'head Admin - 50.002 O'head CC-1 50.00
Joint Venture DocumentJoint Venture Document
Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB2 O'Head CC-1 50.00JVI001 A01 BI
Joint Venture DocumentJoint Venture Document
Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB2 O'Head CC-1 50.00JVI001 A01 BI 3 O'Head CC-1 0JVI001 A01 BS
JVA Project Suspense
PCO calculates overhead charges for a venture. These charges are uncalculated benefits received from the operator and the operator's group of companies (the parent company).
PCO rules are defined for a joint venture company in JVA configuration. They are defined as uplift percentages to be applied to joint costs, based on thresholds. They are called stepped rate rules.
Stepped rate rules are defined in JVA configuration with a name, timeframe, description, and steps. Each step has a threshold amount and a rate. The rules are assigned to a JOA on the Overhead tab in the JOA master.
SAP AG 2003
Overheads
International Parent company overhead US/Canada Well related allocations
OverheadCost
Stepped Rate Rule
1%
2%
5%GBP 10 000
GBP 0
GBP 250 000
GBP 10 000 GBP 500
GBP 140 000 GBP 2 800
Partner netting is optional. You use partner netting to clear open items from partner accounts, leaving a single net open item to carry forward to the next accounting period or fiscal year. Partner netting selects open items by venture, equity group, partner, and (if active) operations month. These are cleared and replaced by a single net open item.
Rule, for which open items are netted and how the net item is posted, are defined in posting rules in JVA configuration.
Partner netting selects open items by venture, equity group, partner, and (if active) operations month. These are cleared and replaced by a single net open item.
Posting rules define which open items are netted and how the net item is posted.
SAP AG 2003
Partner Netting
Venture V1
Part
ner A
64,4004006
4,4005
J - Cutback
34,000
4,0001
K Cash Due
4,0006
14,000
L Cash Called
411,000
4,0003
Bank
11,0004
211,000
A/P
54,400
11,0002
Joint Costs
1. Cash Call2. Invoice3. Cash Call Payment4. Invoice Payment5. Joint Venture Cutback6. Partner Netting
Venture V1
6,60000
400- 7,000
Joint CostsAccounts PayableJV Cash Calls Out (K)JV Rec. under CC (J,L)JV BankPartner Netting
Itm SEI Account. Amount1 J Partner A 4002 J Partner A -4,4003 L Partner A 4,000
Partner netting allows you to clear open items from partner accounts, leaving a single net open item to carry forward to the next accounting period or fiscal year.
Partner netting postings are fully customizable
Changes in equity occur for the following two main reasons:y Farm-In / Farm-Outy A partner joins or leaves a venturey Redeterminationy Partner shares are adjusted to reflect changes in business conditions, such as reserves
In each of these cases a new equity group is added to the venture to reflect the changes. The old equity group is retained, so that adjustments to the old shares can be made and history of postings is always available.
For similar reasons, a change in funding currency is affected by creating a new equity group, with the funding currency added or removed.
When you create a new equity group, documents, which should have been posted to the new equity group, may already have been posted to the old equity group. You could reverse all the incorrect postings and post to the new equity group. However, SAP JVA provides the following two programs to handle these changes:
y The current period program handles changes before cutback has been run for the old equity groupy The prior period program handles changes after cutback has been run for the old equity group
SAP AG 2003
Farm-In / Farm-Out A partner joins or leaves a venture
Redetermination Partner shares are adjusted to reflect changes in business conditions, such as reserves
Funding Currency Change A funding currency is added or removed from a venture
Current and prior period equity adjustments handled
Equity Changes & Adjustments
Audit support allows you to give non-operating partners detailed accounting transaction records in anelectronic format to assist transaction audits. These records are based on operator-defined selection criteria and can be restricted at multiple levels. JADE requirements are also supported.
SAP AG 2003
JV Partner Auditing
Gross billable/all by venture/account
Gross billable/all by cost object
Gross billable/partner net by cost object
Gross billable/all by cost object foreign currency
Gross billable/partner net for JIB
Remaining cutback by cost object
Posted suspense overview
Gross non-operated by cost object
Venture/equity group/billing indicator
Partner/billing indicator
Standard JVA Reports:
Billing Reconciliation Extract:Reconciliation
Ledger 4B and 4DJVA BillingBalances
Ledger 4A and 4CJVA Balances
StatementExp. Suppl
Expenditure Detail
Inv. SupplDetail
Invoice
Non-operated venture processing facilitates integrated handling of incoming, non-operated invoices with SAP accounts payable functions. You can record these invoices online. In addition, cash call
features are available for non-operated ventures at the venture and project level.
SAP AG 2003
Online transaction for incoming invoices for non-operated ventures Input forms, defined in JVA configuration, control the layout of the input screens Input form includes the SAP coding block information (account, cost object,
asset)
Incoming cash calls are handled with the cash call functions Non-operated venture processing is fully integrated with SAP
accounts payable functions
Non-Operating Ventures
InvoiceInvoiceData Entry
Transaction
Cash CallCash CallCas
h Call
Transact
ion
R/3
Accounts Payable
Non-operating net share
Balanced Books By Venture Balanced books by venture allows you to produce balanced financial statements on a venture by venture
basis. If a document without balancing-entries-by-venture is posted to the joint venture ledger, the data capture process creates an inter-venture booking, to balance the document by venture.
Bank Account Switching Bank account switching is common practice outside North America. Large ventures are funded from one
or more dedicated venture bank accounts. Depending on the venture, SAP JVA determines the bank account from which an invoice is paid. SAP JVA also produces correspondence, notifying the bank to make all required transactions for the movement of cash between accounts. In addition, bank account switching produces all required settlement documents, and can calculate all applicable interest.
Other Functions: (mention if time permits): Asset and Material Transfer Asset and material transfer capabilities allow you transfer assets and materials to joint venture properties at
the current replacement price, rather than at historical cost.
Net Profit and Carried Interest Profit Partners Net profit and carried interest profit partners allow you to allocate payments and a net profit interest to a
non-operating partner, and to set up a carried interest arrangement, if necessary.
SAP AG 2003
Main Features Balanced books by venture
Venture specific bank accounts v. central disbursement account
Funding currency defined for each venture
Bank reconciliation and switching
Exchange differences for each venture
Cash and Banking
SAP AG 2003
mySAP JVA Key Benefits
Integration with financials, materials management and asset management streamlines workflow and greatly reduces errors . . .traditional packages have multiple charts of accounts, interface files that are passed between modules via batch processing (weekly, monthly, annually).
Supports industry-standard JADE (Joint Audit Data Exchange) reports, on-line and in real time . . . reduces audit headcount, time and expense.
Full compliance with all standard overhead methods and calculations (US and international)
Complete drill down capability for reporting: all ventures, all AFEs tied to JOA, overhead analysis, cutback and billing.
Business Drivers: Maximize Assets, Minimize Overhead
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