Multiperiod Accounting: A User s Guide

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1 Multiperiod Accounting: A User s Guide Session ID #11349 Jeannine Suwalski Biztech

2 About Jeannine Suwalski Functional business consultant 4 years experience using Oracle applications Developed Training Documentation and Implementation support for various clients for Oracle User Productivity Kit (UPK) B.S. in Communications from Villanova University Specific areas of Oracle knowledge include UPK releases 3.6 and 11.1, E-Business Suite Release 12.1 in Financials

3 About Barbara Lindsey Assistant Controller, Harvard Business Publishing 20 years of accounting experience 5+ years working with Oracle EBS Specific experience includes Oracle E-Business Suite release R GL, Purchasing, AP, Order Management, AR, Cash Management, Projects, FA, and Inventory Prior ERP experience B.S. in Accounting from University of Las Vegas

4 About Biztech Leading Mid-Atlantic Oracle Platinum Partner and IT services firm focused on Oracle Applications and Technology Solutions Over 400 successful Oracle implementations over the past 15 years Based in King of Prussia, PA with offices in New Jersey, New York City, and Washington DC Service Fortune 500 companies, organizations and government agencies Oracle certified and experienced consultants

5 Client-Centric Practice Areas Oracle Applications - Full Portfolio of Oracle Applications Solutions - Implementation, Upgrade, Migration - Since 1990 MPL6 to R12 Experience - Over 400 successful implementations to date Oracle Applications Oracle Technology BI/EPM Oracle Technology and Business Intelligence - End to end service offering in BI and EPM - Fully staffed team of Data Architects and DBAs - Solid experience in RAC, HA and HS designs - Understand full Oracle technology stack Managed Services and IT Outsource - Remote or Onsite services - Full portfolio of Oracle Applications and Technologies - World-Class Data Center with 24x7 Support - Instant capacity, operational focused business model Managed Services ITO Clients Oracle Software Provider Oracle Software Provider - Full Portfolio of Oracle License Resell - Help Clients Optimize License models - RapidApp BI Software for the agile enterprise - RapidApp Auditor to manage change and GRC

6 About Harvard Business Publishing The Harvard Business Publishing is a separately incorporated, but related unit of Harvard University and commenced operations in July The Corporation s mission is to improve the practice of management and to become the trusted source for management ideas with practical impact around the World. As a trusted provider of content and services, the HBP helps professionals at all levels to lead and transform their organizations. It publishes (in some form) virtually all of the pioneering thinkers of modern management, translating breakthrough insights into practical approaches and solutions for customers in its three major markets: Corporate Learning, Higher Education, and Individual Managers. The primary publishing lines include its flagship publication, Harvard Business Review, books from Harvard Business School Press, case studies from Harvard Business School and other elite academic institutions, e-learning programs, simulations, and performance support tools for corporate learning, conferences, and online commentary and articles from HBR.org website. Through its publishing platforms, the HBP extends the reach of Harvard Business School, serving as a bridge between academia and organizations and enabling the School to scale beyond campus-based programs into the daily work of professionals worldwide.

7 Objectives Subledger Accounting Components Multiperiod Accounting vs. Fixed Assets Solution Subledger and Multiperiod Configuration Business Scenario Multiperiod Solution at Harvard Business Publishing

8 Subledger Accounting Allows users to record different currencies, calendars, charts of accounts, and different accounting methods at Journal entry level Address a diverse and Global business Better visibility and control of your accounting Leaves less room for error with better reporting

9 Subledger Accounting Accounting Methods Builder (AMB)- help you define and customize components of Subledger Accounting Journal Line Types Journal Line Description Mapping Sets Account Derivation Rules Journal Line Definition Multiperiod Accounting Application Accounting Definition Subledger Accounting Method

10 Multiperiod Accounting

11 Multiperiod Accounting Tool within the Accounting Methods Builder (AMB) Enables users to create accounting for a single accounting event, across multiple accounting periods Most commonly used for prepaid expenses or revenue

12 Accounting for Prepaids Oracle handles through: General Ledger through Manual Spreadsheet Journal Entries Fixed Assets (FA) Mutiperiod Accounting through Subledger Accounting using AP invoice transaction as a source

13 GL through Manual Spreadsheet Journal Entries Spreadsheet tracking of expense distribution for every new Accounts Payables (AP) invoice each month Time consuming and room for spreadsheet errors Limitations Need for Internal Controls Journal entries do not report comprehensive invoice details Can t drill down to invoice details

14 Fixed Assets PO: Balance Sheet Distribution Match AP Multiperiod PO: Expense Distribution Category Match Buyer knows Expense Distribution AP: Interface AP: Invoice Workbench Prepare Mass Additions FA: Asset Assignment Accountant Needs to know Expense Distribution GL GL Create Accounting Will require maintenance if FA assignment is wrong

15 Fixed Assets Solution Reporting is improved because of the integration between AP, FA, and GL Limitations: Fixed Asset Accountant needs to know Expense Distribution which has to be manually derived Additional drilldown from GL into FA to report details such as Invoice number, Supplier name, PO number and any other criteria interfaced from Payables Report will include prepaid balances as well as fixed asset balances - can t directly tie to the balance sheet

16 Multiperiod Solution Can be applied at the AP invoice line level PO can contain the P&L COA expense account desired PO creator only needs to code to the more familiar expense account used by the business AP invoice matched to the PO and the AP invoice will have the correct expense distribution Allows the user to drill down for reporting needs in more real time as they happen and can drill down to invoice criteria, removes the need to go back and forth between interfaces like Fixed Assets

17 Business Scenario- Magazine Subscription Challenge Distribution and printing typically takes place one month before the magazine issue Costs should be recognized in the same period as the magazine revenue Can t use Fixed Assets for this prepaid example and cannot track FA does not have depreciable lives capability for less than 12 months and therefore cannot use FA to amortize invoices for amortization periods shorter than 1 year

18 Business Scenario- Magazine Subscription Proposed Multiperiod Solution Accurately amortize expenses entered in Accounts Payable to a single period or over any length of time desired Functionality will be used for the Magazine business unit and will replace the current lack of process. Additionally will be used to process remaining prepaid expenses that were in Fixed Assets for 12,24, or 36 months

19 Subledger and Multiperiod Configuration Create a secondary ledger in Accounting Setup Manager (General Ledger Super User: Setup -> Financials -> Accounting Setup -> Accounting Setups)

20 Subledger and Multiperiod Configuration Create a new accounting convention Payables ->SLA->Accounting Setup ->Accounting Methods Builder Query Method Code

21 Subledger and Multiperiod Configuration Copy Application(s) to be modified: Payables (Invoices, and Credit Memos)

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23 Subledger and Multiperiod Configuration Associate the new Applications Accounting Method with the new accounting convention

24 Subledger and Multiperiod Configuration For each Application Accounting Definition select the event class or classes to modify Application Payables Event Class Invoices Credit Memo

25 Subledger and Multiperiod Configuration Select journal line definition for each event class and copy

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27 Subledger and Multiperiod Configuration Modify the journal line types: Item Expense for Payables

28 Subledger and Multiperiod Configuration Copy the existing line type, create the new line type with a name of accrual and set the Multiperiod flag

29 Subledger and Multiperiod Configuration Accrual and Recognition Line Type

30 Subledger and Multiperiod Configuration Assign the new accrual line type and deactivate the default line type Create an Account Derivation Rule such that the initial accrual entry goes to an accrual account

31 Subledger and Multiperiod Configuration

32 Subledger and Multiperiod Configuration Assign the new derivation rule to the journal line definition

33 Subledger and Multiperiod Configuration Remove the default journal line definition and validate

34 Subledger and Multiperiod Configuration Assign the accrual and recognition lines to the journal line type

35 Subledger and Multiperiod Configuration

36 Subledger and Multiperiod Configuration Assign the New Subledger Accounting Method to the General Ledger through the Accounting Setups

37 Multiperiod Solution for HBP A requirement for the company was the ability to flag an invoice line for deferment and enter the period(s) to which the expense will be amortized. Most of these transactions will originate as 2-Way matched Purchase Orders that when matched to an invoice in Accounts Payable, will generate a distribution line to an expense account.

38 Multiperiod Solution for HBP The expense distribution will be the account to which the expense will be amortized based on the date range and number of periods entered on the invoice line The amortized amounts will be spread evenly over the amortization periods entered on the invoice line The original invoice will be debited to the prepaid account and credited to the AP liability account. The subsequent amortized entries will debit the original invoice distribution on the invoice and credit the prepaid account originally debited.

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45 Reporting in OBI

46 Conclusion- Multiperiod Accounting is a more customized and efficient way of performing accounting for your business Allows users to recognize expenses revenue across multiple periods, not available in Fixed Assets Designed to address diverse business by being able to customize by assigning more than one application to a Subledger accounting method per ledger Gives you control and visibility through the components of Account Methods Builder Reporting at the journal line level within application leaves less room for error

47 Questions?

48 Thank You Barbara Lindsey Harvard Business Publishing Jeannine Suwalski Business Analyst Booth # 1249 in Cloud Section