Lakshmi Sampath Oracle EBS Architect Dell, Inc. How I Wish I knew SLA

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1 Lakshmi Sampath Oracle EBS Architect Dell, Inc. How I Wish I knew SLA This article aims to provide a comprehensive knowledge and understanding of the Subledger accounting (SLA) architecture in Oracle E-Business Suite (EBS) R12. It will also uncover some of the unpublished implementation tips and tricks and also show how users can meet their financial and reporting needs on time using SLA. The article also highlights how Dell, Inc. used the SLA functionality to automate and control various accounting entries using specific business rules. Introduction With the introduction of Oracle EBS R12, accounting-related functions and structures change significantly from previous releases. Many of the original design limitations, such as the inability to journal easily across ledgers (sets of books) as well as the existence of complex setups, the use of global shared service centers, separate business tax sub-systems, and separate customer and supplier masters have been resolved. SLA is a new functionality introduced in EBS R12. SLA is a powerful and flexible rules-based accounting engine, with a centralized data model and repository that generates accounting entries based on source transactions for all Oracle Applications transactions. With the introduction of SLA, customers now have a unified view of all the Oracle Application Subledgers across all modules with accounting entries. SLA helps to do a single step posting to all ledgers and also provides real-time/online accounting information as well as an audit trail for all transactions. Here are some more facts about SLA SLA works with Oracle General Ledger (GL) to provide an accounting system tailored to your requirements. SLA supports user-defined accounting rules. SLA allows multiple accounting representations for a single transaction SLA establishes a common data model and interface for all subledgers. SLA is not a module or application or product but a service within a product. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 1

2 There is no separate responsibility available for SLA. In order to get to the Subledger accounting rules, you will have to use the module specific responsibility and then get to accounting setup to define the Subledger accounting rules. Accounting Structure Difference between 11i and R12 The Accounting Structure in EBS R12 is quite different than in EBusiness Suite 11i. In EBS 11i, when you process a transaction to GL, it posts directly to General Ledger as Journal Entries. In EBS R12, when a transaction is processed, it creates subledger journal entries before it hits the General Ledger. (See Figure 1) EBS R12 Users also now have options to determine if they want to do a draft accounting or final accounting or create a final accounting post to GL. Figure 1 SLA also keeps the Subledgers and GL tied out. SLA controls that the GL balances and SLA balances tie together and that both tie to the document sources for e.g. AR Invoices, AP payments etc. Here is how the transaction flows all the way through GL via the SLA module. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 2

3 Figure 2 Subledger Accounting Components Subledger Accounting comprises five components. (Figure 3) 1. Ledger There are two sets of Ledgers: Primary and Secondary Ledgers (Set of books in 11i). Legal Entities are associated with Primary ledgers and Primary ledger typically reflects transactional accounting. Secondary ledgers can be utilized for statutory, management, and/or consolidation reporting. Mapping from Primary to Secondary Ledger(s) is defined in General Ledger and is assigned in the Accounting Setup Manager. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 3

4 2. Subledger Accounting Method Five Subledger Accounting Methods are seeded in the Application. Accrual with Encumbrance accounting. Cash with Encumbrance Accounting. Standard Accrual. Standard Cash. US Federal Accounting. Standard Accrual is used more commonly. Federal Customers use the US Federal Accounting method. 3. Application Accounting Definition Application Accounting Definition (AAD) comprises Event Classes and Event Types. Event Classes define the transaction types for accounting rule purposes, e.g., Adjustments, Bills Receivable, Receipts, and Transactions etc. Event Types define possible actions for each transaction type with accounting significance, e.g., Receipt Created, Receipt Reversed, Receipt Unapplied, etc. 4. Journal Line Definitions Journal Line Definitions are the heart and soul of the Subledger Accounting Engine. This has Journal Line Types, Account Derivation Rules and Journal Entry Description. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 4

5 The Account Derivation Rule is where you define how you want the account to be derived at. Line type is the Journal Line type. Journal Entry descriptions are what you provide as your own descriptions for the journals. 5. Sources This constitutes the optional information that you can configure. For example, Supporting References can be configured to capture additional information. Using SLA at Dell, Inc. In our Order to Cash system, whenever an AR receipt is created, the existing process was mapping the receipt to the Default Cost center as per the system setup. There was a lot of manual effort involved to reclassify them to the correct Customer Cost center. As a part of R12 Upgrade, using Subledger accounting rules, we wanted to automate this and make the system automatically apply the receipts to the correct cost center for the Customer. Basically, our requirement was to ensure that the create accounting process derives the correct Accounting Flexfield segments based on the receipts applied to the customer based on the sales channel to Accounting Flexfield mapping. We wanted this to work for any cash application Receipt applied, Receipt unapplied, Receipt reversed etc. The Event type for this case-study is Receipt and Event Class is applied, unapplied, reversed etc. Here is the solution summary. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 5

6 Solution Steps Here are the Solution steps: 1. Create a PL/SQL code to derive the correct AFF Segments based on receipt and other input parameters. 2. Define Custom Sources Associate the PL/SQL code to Custom Source 3. Define Account Derivation Rules (ADR) 4. Define Journal Line Types (JLT) 5. Define Journal Entry Descriptions (JED) 6. Define Journal Line Definitions (JLD) Associate the ADR, JLT and JED together 7. Define/Validate Application Accounting Definition (AAD) 8. Define Subledger Accounting Method (SLAM) 9. Assign Subledger Accounting Method to Ledger 10. Run the Create Accounting Process Step 1- Create a PL/SQL Code The first step is to create a PL/SQL function with the following input parameters Receipt customer account number, Remittance bank account unapplied, Cash receipt identifier. The function should return the code combination id of the correct accounting segment combination as the output based on the customer to sales channel mapping. This function should either be created in the apps schema. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 6

7 Step 2 Define Custom Source This step associates the PL/SQL code to the custom source. The navigation to create the custom source is: Setup, Accounting, Accounting Methods Builder, Sources, Custom sources Step 3 Define Account Derivation Rule (ADR) Copy the seeded Account Derivation rule and rename to match to your coding standards (XXG_GET_CCID). When you copy and rename the ADR, the owner automatically becomes User instead of System. The value for the source will be the name of the Custom source (XXG_GET_CCID_CODE) defined in Step 2. The navigation to get to this screen is Setup, Accounting, Accounting Methods Builder, Journal Entry Setup, Account Derivation rule Step 4 Define Journal Line Types Navigate to Setup, Accounting, Accounting Methods Builder, Journal Entry Setups, Journal Line Types and Copy the seeded Journal Line Type and rename (e.g. Dell Receipt Unapplied Cash). Change the Transfer to GL to Summary. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 7

8 Step 5- Create Journal Entry Descriptions Navigate to Setup, Accounting, Accounting Methods Builder, Journal Entry Setups, Journal Entry Descriptions and click on copy to Copy the Journal Entry Description and rename (e.g. XXG Standard Receipts Header) Step 6 Define Journal Line Definitions. Here is where you associate the Journal Entry Description and Account Derivation Rules to Journal Line Definitions at the Journal Line Type. Navigate to Setup, Accounting, Accounting Methods Builder, Journal Entry Setups, Journal Line Definitions and click on copy definition to create a new Journal line definition and rename it (e.g. XXG Receipts Default Accrual). For each Journal Line type that you want to derive using your accounting rule, associate the Account Derivation rule and the line description. Note You can use both segment-based and flexfield-based rules to derive a single account. Subledger Accounting uses segment-specific rules where they are defined and takes the remaining values from a flexfield-based rule. For example, a user can select an account derivation rule which is for All Segments and also separately select a rule which is for one particular segment. Subledger Accounting derives accounts based upon segment-specific rules and then fills in the remaining segments with the rule that specifies All Segments. Segment-specific rules take precedence over the All Segments flexfield-based rule. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 8

9 Step 7 Define/Validate Application Accounting Definition Navigate to Setup, Accounting, Accounting Methods Builder, Application Accounting Definitions and click on copy definition to create an Application Accounting Definition and rename it (e.g. XXG Receivables Default Accrual). For the event Class (e.g. Receipt), Associate the Journal Lines Definition that was created in Step 6. Then Click on Validate to validate the Application Accounting Definition. For any change in any of the SLA rules, Application Accounting definition needs to be validated. If not, the Create Accounting process will result in error. Step 8 - Create/Define the Subledger Accounting Method (SLAM) Copy and rename the seeded Subledger Accounting method (XXG Standard Accrual). Associate the Application accounting definition that just got validated in Step 7. Step 9 Assign Subledger Accounting Method to the Ledger In the Ledger Setup Screen, Under Subledger Accounting, associate the new Subledger Accounting method created in Step 8 and save. Step 10 - Run the Create Accounting Process After completing the above steps, Create accounting process can be run to check the Subledger Accounting rules that will be invoked by the process. There are 3 options that can be selected while running the create accounting process a) Create Final Accounting Post to GL b) Create Final Accounting c) Create Draft Accounting. View Accounting Journal Entries from Receipts Window Once the create accounting process completes, Journal Entries can be viewed from the Receipts window to validate their subledger accounting rules. COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 9

10 Technical Architecture of SLA XLA is the schema name for SLA. Here is the data flow diagram for SLA. TRANSACTIONS ACCOUNTING Transaction ( AR ) Headers ( RA_CUSTOMER_TRX_ALL & AR_CASH_RECEIPTS_ALL & AR_ADJUSTMENTS_ALL ) Entities ( XLA_TRANSACTION_ENTITIES ) Accounting Events ( XLA_EVENTS ) Accounting Headers ( XLA_AE_HEADERS ) LEDGER TABLES GL_IMPORT_REFERENCES Accounting Lines ( XLA_AE_LINES ) Distributions ( RA_CUST_TRX_LINE_GL_DIST _ALL & AR_DISTRIBUTIONS_ALL ) Distribution Links ( XLA_DISTRIBUTION_LINKS ) COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 10

11 The important tables that store data of SLA are given below: XLA_SUBLEDGERS XLA_SOURCES_B XLA_EVENT_SOURCES XLA_CONDITIONS XLA_ACCTG_METHOD_RULES XLA_EVENTS XLA_AE_HEADERS XLA_AE_LINES XLA_ACCOUNTING_ERRORS XLA_DISTRIBUTION_LINKS Tips about SLA Subledger accounting rules and definitions of one module can t be accessed from any other module. Seeded Subledger Accounting Methods can t be modified. They need to be copied before they can be modified. Any change made to a Subledger accounting setup invalidates the accounting process. Before running the Create Accounting process, Application Accounting Definition must be validated in order to make sure that the changes are logical. Reconciliation Accounts Reconciliation has improved with the introduction of SLA. This is possible mainly because of the following: Transaction Level Journals Transaction Details Drilldown Facility Reports COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 11

12 Upgrade Considerations By default, the R12 upgrade migrates current fiscal year accounting entries from each application to the SLA data model. This can be modified if needed. For prior periods, the historical data is preserved. You can drill down from General Ledger to the historical transactions using standard GL drilldown. You can upgrade prior periods by running a request during upgrade. Issues after Go-Live Some of the issues we faced after going live included: Journals going missing between subledgers and GL (Negative Ledger id bug). Incomplete transactions preventing close. With assistance from Oracle Support, we obtained fixes to the above issues. Conclusion With the introduction of R12 s Subledger Accounting functionality (SLA), we now have a unified view of all the Oracle Application Subledgers across all modules with accounting entries. We are now able to get real-time/online accounting information as well as an audit trail for all transactions. SLA certainly offers a powerful and flexible rules-based accounting engine. Although we had a few issues with SLA after going live, we have certainly made advantage of this new functionality in various unique ways within Dell. About the Author Lakshmi Sampath is an Oracle ACE and is currently working as an Oracle EBS Architect in Corporate IT at Dell, Inc. Lakshmi is a techno-functional Expert/Architect in implementing Oracle EBusiness Suite 10.7, , 11i & R12 including istore, isupplier, ipayment, CRM Incentive Compensation, Resource Manager, Territory Manager, Quote to Collect, Procure to Pay, Project Accounting, Financials & HRMS/Payroll modules. Lakshmi has presented several papers and hosted several panels at the COLLABORATE, Oracle OpenWorld and Austin Oracle Users Group events. She was selected as an ENCORE Presenter at COLLABORATE 2006 and She is also the Vice-chair of the OAUG Customer Support Council and a member of the OAUG Education Committee and a director for both the Oracle Business Intelligence Big Data Special Interest Group (OBI-BD SIG) and General Ledger Special Interest Group (GLSIG) COLLABORATE14 Copyright 2014 by Lakshmi Sampath Page 12