Sub Ledger Accounting

Outcomes-Driven Value-Centric.

Sub Ledger Accounting: In line with R12 upgrade from 11i


In R12, Oracle has introduced new functionality named Sub ledger accounting. Oracle Sub ledger accounting is a rule based engine, for generating accounting entries based on source transactions from all the modules of Oracle application. This paper covers brief introduction to Sub ledger accounting with its key features. This paper also attempts to cover the technical upgrade process for 11i customer, who wishes to upgrade from Oracle E Biz 11i to Oracle Release 12. Briefly this paper touches the set up process and bottom up account building

process required to make Sub Ledger accounting functional in Implementation or upgrade process.

Release 12 of Oracle has significantly improved the accounting capabilities of

E Business suite. Sub ledger accounting is a rule based accounting engine that centralizes accounting for Oracle E Business suite products. Sub Ledger accounting is not a separate product in itself, but is Oracles engine catering to the accounting needs of Oracle Applications.

Earlier accounting events were stored within individual sub ledgers. In Oracle R12, a new schema (XLA) is defined and the accounting events were stored

within centralized data model. Within the same engine, Oracle released a new functionality named as Accounting method builder. With this functionality users will be able to define and maintain custom accounting rules. Previously, this was

handled by Work flow Account Generators. However accounting method builder is not replacing workflow account generator, and can be used in conjunction.

Introduction


Accounting method builder is more robust and user friendly and together with new ledger support, sub ledger accounting enables support of multiple accounting requirements, concurrently in a single instance. Different accounting regulations can be satisfied by maintaining and applying different sets of

transactions; or accounting for the same transaction with multiple methods.

There are no sub ledger accountings responsibilities and sub ledger accounting forms are embedded within standard Oracle application responsibilities (e.g. Costing Manager, Payable Manager, etc). Sub ledger accounting provides

following services to Oracle applications

Generation and storage of detailed accounting entries

Flexible Journal Entry Set Ups

Storage of Subledger balances

Subledger accounting entries along with

bi-directional drilldown to transactions

Subledger reporting

Multiple Accounting Representations

Key Features of Sub Ledger Accounting

In 11i, the account used during transaction flows to the GL, and there is no

option of configuring the accounts once the distribution is created. While in

R12, account re configuration is possible event after transaction is recorded in

Subledger.

The difference between 11i and R12


To further understand this, we will take example of one application (Cost

Management) and explore it. And we will consider following three scenarios for

better understanding, 1. No customization in SLA2. Customization in SLA for changing GL Code of combinations

3. Creation of shadow journals for reporting purpose

If a company chooses to pass the accounting as it is, there is no customization required. This application came as hand in and completely integrated with other modules of Oracle e-business suite. The customization or transformation terms used in SLA refer to GL code combination or additional entries required only.

SLA is required in R12; its not option but mandatory requirement. The data first

pass to Subledger accounting engine before moving to General Ledger.


Let say, Inventory application creates an accounting entry for X.Y.Z Account and would like to see this code as it is in General Ledger,

Let say, Inventory application creates an accounting entry for X.Y.Z Account and would like to see this code as X.Y1.Z1 in General Ledger

Oracle provides seeded rules and set up, by using that, this can be achieved, without any customization. This is standard functionality.

No customization in SLA (Seeded Set up)

Customization in SLA for changing GL Code of combinations

This can be achieved by attaching custom rules to Event types, however as per Oracle suggestion if implementer has to change the seeded rule, he/she has to copy the custom definition (or seeded set up) and then make the changes. This

would affect the entire chain in SLA set up.


Creation of shadow journals for reporting purpose

This is the most important and significant change, which oracle has introduced

through Sub Ledger accounting. Let us take an example, of Smart Inc

organization; it might have operations in France, which is Smart Inc France and

with UK being the parent company, the French company has to do accounting

journals in formats that can be reported as per French legislation and also as

per UK legislation. For example, in France an inventory item is accounted as

expense, whereas in UK the inventory item is accounted as an asset. In the

example below, X.Y.Z is never passed to the GL. Instead to GL X.Y1.Z1 is

passed to the Primary Ledger FRANCE and X.Y2.Z2 is passed to the Secondary

Ledger UK. The picture below shows the role that SLA plays in such scenario.

*Cost Management used above is just for an example, similar results can be

achieved with all other Sub ledger applications as shown in following diagram,


Account Generators to SLA (11i to R12)

On upgrade from Release 11i to Release 12, all Account Generators are

retained. It is Oracles recommendation that post upgrade users transition account generation from the Workflow Account Generators to the Subledger

Accounting Engine. The Subledger Accounting Engine will be the technology moving forward and Workflow will not be technology available in Fusion.

In Fixed Assets, the FA Account Generator (FAFLEXWF) is retained. A new

profile option, FA: Use Workflow Account Generation is set to Yes by default.

Once rules are defined in the Accounting Methods Builder and the custom

account generation is accomplished by the Subledger Accounting Engine, set the Profile Option to No. Picture 6 shows the account derivation rule in SLA.

Note that two different accounts are generated based on the conditions that are set. The first rule which is selected uses the Account generated by the Workflow

Account Generator.


Notice that the condition is Generated Code Combination Identifier IS NOT

NULL. So, if the account is generated by the Workflow Account Generator, use

the generated account. Otherwise, use the default account. So even if using the Workflow Account Generator, SLA still has rules to manage for that scenario.

The Fixed Assets Account Generator has three journal type account levels: Book,

Category, and Asset. Journal types are divided up into the different account

levels. SLA now provides greater flexibility because it does not utilize journal

type account levels. Every journal type can be modified individually to book

according to requirements, so users are not required to have only one account generation methodology for a journal type account level. On a side note, in SLA

each Fixed Assets book can now feed a ledger directly. Users can have multiple

representations for both corporate and tax books.


Even with the SLA account derivation, AutoAccounting setup in Receivables and Projects is still required. AutoAccounting creates the default accounts for

transactions. The SLA accounting rules are configured to accept these default

accounts without change. Optionally, additional user-defined accounting rules

can be defined in SLA. These SLA rules will override default accounts or

individual segments of accounts. One of the reasons AutoAccounting setup is still required is because the default accounts are used for processing before being transferred to SLA. For example, Oracle Projects cost distribution, revenue

generation, and accounting event generation processes require AutoAccounting to create default accounts during processing. SLA allows multiple Receivables distributions. However, they are not definable in AutoAccounting, only in SLA. By

utilizing configurable account derivation in SLA, users could reduce the number

of Transaction Types needed in Receivables to support AutoAccounting. It is recommended that users setup basic default accounting in AutoAccounting and then let SLA override this accounting using rules based on user requirements.

It is important to realize that accounting rules can only be applied to transactions coming from the subledgers. Manual Journal Entries and/or entries uploaded

through Web/ADI are not processed by the subledger accounting engine and therefore cannot leverage user-defined accounting rules. The following

subledgers (see Figure 2) use the Subledger Accounting Engine when

accounting entries are generated. Following applications are integrated with SLA,

Purchasing Asset Receivables

Payables Cash Management IntercompanyCost Management Process Manufacturing ProjectsPayroll Loans Lease ManagementProperty Manager Public Sector/Federal Globalizations


Implementation considerations

R12 SLA (Subledger Accounting) Pre-Upgrade program

SLA Pre Upgrade program

Historic data conversion

SLA Post Upgrade program & Hot patch

SLA Set up

During the upgrade, existing accounting data from the subledgers (i.e., AR, AP)

is upgraded into the new Oracle Subledger Accounting (SLA) data model. By default, the upgrade updates the data for the current fiscal year, as well as the

necessary periods of the previous fiscal year, to ensure that there are at least six

periods included in the upgrade (occurs when the upgrade is performed in the first half of the fiscal year). This is the minimum downtime upgrade.

You may need to run the SLA Pre-Upgrade program if you are using Oracle

General Ledger and at least one of the following subledgers: Assets, Cost

Management, Payables, Receivables, Purchasing, or Project Accounting. This

optional program allows changing the default number of periods of historic data to be upgraded.

The R12 SLA Pre-Upgrade program is run on your 11i instance. In order to run

the R12 SLA Pre-Upgrade program to change the default number of periods

of historic data to upgrade, you must apply Patch 5233248 to your Release

11iAPPL_TOP and submit the SLA Pre-Upgrade Program.


Historical Data

As per Oracle, Evaluate your business requirements carefully with regards

to historical data before deciding how far back you wish to keep detailed accounting information. The R12 SLA Upgrade will upgrade the transactions in

the accounting periods you specify. Your decision can have an impact on the increased data volume and your system resources. We recommend that you upgrade the data that you need.

Some Key notes

1. The records considered by pre-upgrade program are for AP, AR, Project

Accounting, FA, Inventory /Costing and PO products only.

2. The accounting period under consideration must be a NON-Adjustment

period. 3. The period has a status of closed, open, future, and never opened. 4. The GL_PERIOD_STATUSES table is updated by pre-upgrade program.

5. The R12 SLA Pre-Upgrade Program does not perform the actual upgrade.

This program writes out to the GL_PERIOD_STATUSES table. It is the subledger

(i.e., AP, AR, FA, Costing etc.,) upgrade programs that actually perform the

upgrade by reading the accounting information in the subledger (FA, AP, AR

etc.,) tables and writing the corresponding records to the SLA tables for future reference. 6. The R12 upgrade works differently for AP transactions. For AP only, all

records in the ap_accounting_events_all, ap_ae_headers_all, and ap_ae_lines_

all tables are upgraded into the respective SLA tables. Only the xla_distribution_

links records for AP are migrated based on the xla_upgrade_dates and the

accounting period in the gl_period_statuses tables


For example, upgrade data for periods that have open transactions--i.e., invoices

that have not been paid and invoices you plan to cancel. You will also need historical data to clear payments, cancel payments, and reconcile payments.

The SLA pre-upgrade program selects the first date of the current fiscal year as

its START DATE. If there are not enough periods to make up 6 months, then the

system will look at the periods in the prior fiscal year.

Current Accounting Period in Fiscal

R12 downtime upgrade Default

R12 downtime upgrade Default R12 SLA Pre-Upgrade Program

Sep-11 Jan-2011 to Sep-2011 Allow you to specify the number of periods

Feb-11 Sep-2010 to Feb-2011 Allow you to specify the number of periods

R12 SLA Post-upgrade program and Hot Patch

If you do not perform a complete upgrade of the accounting data, Oracle Subledger Accounting allows you to perform an additional upgrade of the data by running the SLA post-upgrade process whenever the missing data is required.

SLA hot patch can be run during uptime to upgrade historical data, if user chose to only a partial or minimal upgrade during downtime. Before running any SLA post-upgrade process (i.e., SLA Hot Patch), user must enter the initial date to be

used to determine the initial period to be upgraded. This date is entered in the SLA: Initial Date for Historical Upgrade profile option. This profile option must be

populated in order to run the process. Run the process as follows: 1. Run AutoPatch with options=hotpatch.


Technical flow of the R12 SLA Upgrade

2. Specify $XLA_TOP/patch/115/driver/xla5584908.drv when prompted for the

unified driver.

Note: The SLA Hot Patch can be run multiple times, each time by specifying a date that covers a range that has not been upgraded.Caution: Running the Hot Patch could take several minutes or several hours to complete depending on the date range you specify and the amount of data to be upgraded.

This is the technical flow of the R12 SLA Upgrade, which is performed in the

main r12 udriver file.

1. Identify what accounting periods will be upgraded. The periods to be upgraded depend upon the minimum Downtime upgrade or initial period setup in the pre-upgrade or uptime upgrade. (Files Used: XLA_UPGRADE_DATES and

GL_PERIOD_STATUSES )

2. The periods to be upgraded are stamped with an intermediate status (P-pending). (The same set of periods are populated in the XLA_UPGRADE_

DATES) 3. The data in the Subledger accounting tables are upgraded into the SLA accounting tables. (The periods in the XLA_UPGRADE_DATES is checked in

this step) 4. The Subledger products call the SLA API to update the period status

column in the General Ledger. They stamp the data for the periods specified to

indicate that they have been upgraded (U-upgraded). The SLA API stamps the

GL_JE_HEADERS table for the upgraded applications. The column je_from_sla_

flag=U is also stamped.

This completes the R12 SLA Upgrade cycle.


Set up considerations

Since SLA is a new enhancement in Oracle R12, we should know few terminologies,

Accounting Method Builder:Accounting Method Builder (AMB), enable users to define accounting rules using

Standard Oracle Forms. The AMB gives users the ability to create and maintain

user-defined accounting rules. This provides the user with great flexibility while

maintaining necessary control. Users can also more easily comply with multiple

geographic, legislative, or industry requirements. By putting accounting rules in place, manual journal entries and customizations can be reduced. An added

benefit is that because these user-defined accounting rules are created and

maintained through the forms, all user-defined accounting rules will be retained

in subsequent upgrades. The AMB supports logic such as prioritization and conditional statements without using SQL

To customize an accounting method, users must create a user-defined

Subledger Accounting Method. A Subledger Accounting Method is composed of multiple Application Accounting Definitions. For example, the Standard Accrual

Subledger Accounting Method is made up of the following Application Accounting Definitions: Asset Standard Accounting, Cash Management Standard Accounting,

Load Standard Accrual, Cost Management, Accrual Basis (which is the Payables

definition), Process Standard Accounting, Projects Standard Accounting, Property

Manager Normalized Accounting, and Receivables Default Accrual. Notice these represent the different sub ledgers that will create accounting entries in the General Ledger.

Set up considerations


Subledger Accounting Method (SLAM) - This is the Subledger accounting method that is built and assigned to a Ledger. This will be created via the Accounting Methods Builder and includes all the details needed to create the appropriate journal entries.

Application Accounting Definitions (AAD) - The application accounting definitions is made up of the Journal Line Definition, Journal line types, and

Accounting Derivation Rules. These are developed using the event classes and types. A new AAD can be created or a seeded AAD can be used. The details are assigned and validated to be certain the setup at this level is correct.

Journal Line Definitions (JLD) - JLT, ADR and JED are combined to create the

JDL for an event. These can be shared across AADs and can be used to create

sets of line assignments for event classes and types.

Journal Line Types (JLT) - The types are defined for each particular class to be used. These must be assigned to the Journal Line Definition (JDL) to be used.

These determine the journal entry line options to be used. These options include

identifying the natural side used (debit, credit, gain/loss), accounting class, summarization, and other conditions that will cause the rule to create a journal

entry.

Accounting Derivation Rule (ADR) - This is used to determine the accounting combinations that will be used for the journal entries. Various rules can be

defined. These can be defined by segment, accounting combination, or value set.

The simplest way to derive an account is to establish the account as a constant value-use the account combination that is defined in the accounting chart of

accounts.


Mapping Sets -These sets are optional and user defined. If the user determines that the seeded details are insufficient, then mapping sets can be setup to allow

for more specialization in the accounts. This is not supported by development as this would require customization. Seeded details are supported as they are provided by Oracle code.

Transaction Objects/Sources- Transaction objects and sources carry transaction information into the rules defined for the accounting chart of

accounts.

Event- An event is the recording of a change of status in the transaction life cycle, i.e., invoice approved, payment received, period close, etc. These are defined for each SLAM used. Event classes and event types are used to create

the events to be used

Event Class- This classifies the types of transactions that are to be accounted for. An example of an event class is WIP Variance.

Event Type- This defines actions that are possible for an event class that has potential accounting significance. Examples for the WIP Variance Event CLASS

would have event TYPES defined for Period Close Variance, Job Close Variance,

and Final Completion Variance


Basic Steps to Build Accounts


The process is built from the bottom up as mentioned below, 1. Create Account Derivation Rule (ADR). The source information in the ADR refers to various distribution tables. 2. Define conditions required for the ADR created in step 1.

3. Create Journal Line Definitions (JLD) for an event class

a. Query the LOV of seeded event classes b. Copy the seeded event class using the Copy Definition button

c. Replace existing ADR in the Journal Line type form with the new ADR.

This is in the Line Assignments sections, using Line Type 4. Create new Applications Accounting Definition (AAD)

a. Query for the seeded AAD b. Copy from this to create a new AAD c. Associate the new JLD assignments created in Step 3

d. Validate the definition. If successful continue to next step or continue

creating the JLDs required. If unsuccessful, check the setup for all steps above

before moving to next steps.

5. Associate the new AAD with the Subledger Accounting Method (SLAM)

a. Query SLAMs to view existing methods

b. For the existing AAD enter an end date to stop this from being used

c. Attach the new AAD with the start date 6. Assign the SLAM to the Ledger

Each of these definitions except sources can be copied and modified from the

Oracle seeded definitions to meet your accounting needs. Sources are the

components of a transaction such as a supplier or distribution line. If a user needs a customized source then a developer must develop custom code and it can be plugged into the list of sources.


When replicating Account Generator logic in the Subledger Accounting Engine

using the Accounting Methods Builder the components highlighted in red will have to be copied and modified. Notice that even though the Account Derivation

rules is the component that is the focus of the account generation each of the components above this have to be copied and modified all of the way up to the

Subledger Accounting Method.

If a customer has 11i instance with very complex customization, in deriving

the accounting configuration, they can prefer to use the old customizations

in upgraded instance (R12) also. However extensive testing is required in

migrating custom code and this can be balanced out from investing in Sub ledger accounting. Some of the technical customization can be avoided by using source and mapping based accounting rules; however possibility of the technical customizations at code level cannot be ruled out in Sub ledger accounting. Most of the customers use SLA functionalities for out of box solution for account

transformations and also configure the accounts at sub ledger level for complex

requirements. This is completely situational and has to be a business decision and should be treated on individual customization level.

Business considerations


1. Oracle Subledger Accounting Implementation Guide (B13984-02)

2. R12.0 and R12.1: FAQ for the SLA Upgrade: SLA Pre-Upgrade, Post-

Upgrade, and Hot Patch [ID 604893.1]

3. R12.1 Oracle Applications Upgrade Guide: Release 11i to Release 12.1.3

E16342-03

4. R12.0 Oracle Applications Upgrade Guide: Release 11i to Release 12.0.4

E12011-02

5. Detailed instructions for the SLA Post Upgrade (aka SLA Hot Patch) can be

found in Note: 751160.1

6. Transitioning from Account Generators, White paper by Solution Beacon

Reference

The above information is compiled and written by Jitendra Gahlot

Jitendra Gahlot, an Oracle Certified E-Business Consultant from Enrich IT Inc. Jitendra has Over 10 years of ex-perience of Implementing, Supporting and Development of Oracle E-Business Suite.

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Sub Ledger Accounting