Oracle gl consolidations

Consolidations
Prepared by: Don Driggs, BOSS Corporatio. Don.Driggs@Bosscorporation.com
Formatted by: Eng. Baker Khader Abdallah, PMP, MBA
ERP Consultant
Introduction
Perhaps your company has shifted operations to another country or acquired a new
subsidiary. Perhaps you want to bring your foreign operations into the same database. No
business is immune to changes in the global marketplace. If you have operations or at least
significant financial transactions in foreign currencies it is most likely that you operate with
multiple sets of books.
It is even possible that you operate multiple sets of books within the same functional
currency. If this is the case, you should take advantage of the consolidation features of
Oracle’s General Ledger. If you’re haven’t done so yet, this article may help you. It will
explain the why’s and how’s of consolidations.
The purpose of using Oracle consolidations is to move financial results from one set of books
to another. The most common reason for setting up additional sets of books is to transact
business in a different currency. Other reasons for setting up additional sets of books
include using a different chart of accounts, operating with a different calendar, or using
different document sequences for the same transaction source.
From a business standpoint, consolidations occur with multiple businesses or legal entities
that operate under the same corporate umbrella. Many corporations prepare consolidations
and don’t have any foreign operations. In such cases all the transactions occur in the same
currency, nevertheless, a consolidation of financial results is important. The best tool to
prepare consolidations in this case is the Financial Statement Generator. It can prepare
financial statements that display the individual businesses and then sum them up to show a
consolidated result.
The elimination of intercompany sales or other transactions can be recorded by setting aside
a unique value in the balancing segment. In this way, the individual business can view their
results and corporate can consolidate accounts that eliminate intercompany transactions. In
this case, there is no need to use the consolidation functionality.

The critical factor in deciding to use Oracle’s consolidation feature is – do you need to report
consolidated financial results of transactions that originate in multiple sets of books? If the
answer is yes, then Oracle’s consolidation feature can significantly improve your ability to
produce such results. The complexity of your consolidation structure is not a factor because
you can set up parent accounts and organize the values of your balancing segment that
represent your businesses to mirror the legal and management structure of your
corporation.
Consolidations in Oracle
The remainder of this article will describe how to use Oracle’s consolidation features. If you
haven’t already done so, diagram the structure of your consolidation including your
elimination points. Do you have multiple consolidation levels? Are all consolidated results
reported in the same currency? Some organizations may need a consolidation of financial
results in Euros and in USD. Other important issues to discuss before setting up any
consolidations are:
 How frequently will you consolidate financial results? Some businesses may require a
flash report for sales or other critical operating barometers.
 Will you consolidate budget amounts in addition to actual results?
 What level of detail do you need in the consolidated set of books – balances or
transactions from the subsidiary sets of books? Most organizations consolidate balances
and use account drilldowns to view source transactions.
 When is the first period you want to consolidate financial results? The first period you
consolidate; you should use LTD numbers to establish beginning balances.
 Do all of the subsidiaries set of books use the same chart of accounts? If not, then you
will have to prepare a mapping of the account values.
 Do you use Multiple Reporting Currency (MRC) or Currency Translations to translate
transactions from a foreign currency to your reporting currency?
Oracle Consolidation Setup Steps
The steps to set up and use the consolidation features in Oracle are:
1. Define the parent or consolidated set of books.

2. Map the values from the subsidiary set of books to the parent set of books.
3. Define the eliminations.
Case Study: American Bureau of Shipping
The American Bureau of Shipping (ABS) is a not-for-profit organization with world-wide
operations and offers a good illustration of how the consolidation process works. ABS is one
of the world's leading ship classification societies. Their primary purpose is to determine the
structural and mechanical fitness of ships and other marine structures for their intended
purpose.
ABS Americas, ABS Europe, and ABS Pacific are three divisions operated by ABS. All of
these divisions manage operations in multiple countries and currencies within their region.
The financial results are reported with a set of books defined for each unique currency in the
same database. All operations use the same calendar and chart of accounts with Business
Unit being the balancing segment. Consolidations are done in US Dollars only.
The reasons ABS has for consolidating financial results are to obtain those results more
quickly, more reliably and with more uniformity than before. As ABS was preparing to use
consolidations, Mike Deo, the controller at ABS indicated that his staff was being pressed
more and more by management to provide more timely and accurate results so that
management could be more responsive to situations in any part of the world.
Though they maintain over a hundred sets of books for these divisions and for affiliated
companies, we’ll illustrate just a small portion in order to simplify the discussion. For our
example we’ll say that ABS uses 12 sets of books in two divisions in the organization
structure shown in the following illustration. (The actual values shown have been changed
and those encased with double lines represent parent values).
[Chart: ABS Company Consolidation Structure]

Now let’s discuss the steps to set up the consolidation
1. Define the Parent or Consolidated Set of Books
ABS uses multiple balancing segment values in the same set of books. Though they have a
set of books for their US operations, they elected to create a separate set of books for their
consolidations. Consolidations don’t require a separate set of books but security, reporting
or other requirements may suggest a separate set of books. Obviously if ABS had elected
not to create a separate set of books they would choose an existing set of books where the
currency was the one in which they wanted to report consolidated results.
ABS created parent values in their balancing segment to represent each of their regional
centers as well as one for their total consolidation. See the accompanying illustration:
Parent Value Description
010 ABS Consolidated
100 Americas Consolidated

200 EMEA Consolidated
300 Asia/Pacific Consolidated
The consolidation process will create individual account balances in the US set of books (in
USD) for all their operations. ABS will use security rules to restrict improper access of the
data by the various regional managers and by those who should only have access to the
regular US operations.
2. Map the values from the subsidiary set of books to the parent set of books.
ABS had several options in mapping the account values from the subsidiary set of books to
the parent’s. They could map segments or they could map accounts. The mapping actions
that they could perform when mapping segments are:
 Copy Value From: Copy all values in the subsidiary set of books to the same values in
consolidated set of books. It is not necessary for the segments to use the same value
set, but they must use the same segment values.
 Assign Single Value: One specific value that will be used for the parent segment has
to be assigned. You must enter the value that the parent chart of accounts will use.
 Use Rollup Rules From: Map values from the subsidiary segments to the parent
segments using the rule specified in the Rollup Rules region.
ABS decided that they wanted to keep the account values of the consolidated results the
same as their subsidiary account values. This decision was made easier by the fact that all
operations at ABS use the same chart of accounts.
[Figure: Mapping Subsidiary to Parent Set of Books]

An option they considered was to create one segment value for the consolidated business
unit (this is the balancing segment) and to make each subsidiary a unique cost center.
They would keep the accounts intact but assign a zero value to their product line. The
mapping to do that would be as follows:
Parent Flexfield Segment Action Subsidiary Segment Value
Business Unit Assign Value 110
Cost Center Copy Value From Business Unit
Account Copy Value From Account
Product Assign Value 0000
Future Assign Value 0000
ABS elected not to do this because in numerous cases a subsidiary set of books had more
than one business unit and that would have meant using Rollup Rules making the process
more complicated than they wanted. If your various sets of books use different accounting
flexfields, you may need a more complicated mapping. The best rule to keep in mind here

is to keep it simple. You will need to create a mapping for each subsidiary set of books you
are going to consolidate.
When it comes to executing the consolidation, you submit one consolidation for each
mapping. However, Oracle allows you to define mapping sets which help tremendously if
you consolidate many sets of books. ABS defined three mapping sets, one for each region,
that way one region wouldn’t have to wait on another to begin their consolidation.
3. Define the Eliminations
This step is optional but it is useful. ABS created Elimination Sets that enabled Oracle to
automatically calculate and prepare elimination journal entries. They identified the
account(s) to be eliminated (the Source) and the account in the elimination ledger to which
the balance should be posted. They used parent accounts in the Source field to reduce the
number of changes that would be required by the addition of future business units.
[Figure: Sample Elimination Account]
Though not evident in the accompanying organization chart, ABS has different levels of
consolidation and so they have to process their eliminations in stages, which means that
they had to create multiple elimination sets – one for each stage. They process and post
the lowest levels first and then proceed to the next stage and so on until all the eliminations
are posted.
Executing the Consolidation Process
The first step in consolidation process begins with translating the accounts to the conversion
currency (in our case it is US Dollars). Depending on the methodology to translate your

account balances, you may need to revalue some or all of the balances. Oracle has a
process that follows accepted accounting principles to do that too. Once accounts are
translated and properly valued, then you begin the consolidation process and that is to:
1. Transfer the Consolidation Mappings
2. Post the Consolidation Journals
3. Generate and Post the Elimination Journals
The first step is to transfer the account balances from the subsidiary set of books to the
consolidated set of books. The Transfer Data form allows you to do this by clicking on the
Transfer button. A few comments about the fields in this form will highlight the versatility
of consolidations.
 Balance Type: Use this field to transfer actual or budget amounts.
 Currency: The amounts to be transferred from the subsidiary to the parent set of
books must be in the same currency.
 Method: Choose balances or transactions.
The values of these three fields are determined by the setups in the consolidation mapping.
In the Subsidiary region, enter an Amount Type of PTD. Use PJTD the first time you
transfer amounts to establish the correct beginning balance but after that you will only want
to use PTD. Enter the period that is the source of the balances to be transferred. The
screen shot shown below illustrates the Transfer of Consolidation Data Sets. Oracle
provides a similar form to transfer a single consolidation mapping.

Use the Apply Defaults button to apply the values in the Default Parameters region to all the
consolidation mappings in this mapping data set. The Options button allows you to select
values for three different run options. They are:
1. Run Journal Import. The consolidation transfer process creates transactions that will
populate the gl_interface table. Checking this option submits the Journal Import process
that will create a journal in the consolidated set of books. T he format of the journal
batch name is <Date> <Consolidation Name> Consolidation <Request ID>: <Balance
Type> <Group ID>
2. Audit Mode. Select this option to have the system keep a record of how accounts from
the subsidiary set of books are mapped to the parent set of books. You can then run the
Consolidation Audit Report and the Unmapped Subsidiary Accounts Report to see the
audit information. (Only use this as needed to verify your consolidation mappings. You
can improve the system’s performance by not using this option).
3. Create Summary Journals. If your mapping options point different subsidiary
accounts to the same parent account then you might want to use this option so that only
one entry for that account is created in the parent set of books.
When the transfer process is complete, the general ledger will have journals that are eligible
for posting. Posting the journals is the second step. It is important to note that if for
whatever reason you find that you need to execute the transfer consolidation for the same
period again, you will have to reverse the journal. There is no mechanism to do an
incremental transfer of consolidation data.
The third and final step is to generate and post the elimination journals. The first time you
do this you will want to verify that the eliminations calculate the correct amounts.
Consolidation Workbench
In addition to providing mapping sets, Oracle has a Consolidation Workbench to help you
manage the consolidation process. This is especially useful if you have to manage many
consolidation mappings because it gives you in one view, the status of all your consolidation
mappings and it provides a launch point to execute the next step in the consolidation. An
example of this workbench or state controller as Oracle calls it is shown below:

Reporting
Aside from the obvious advantages of having all the financial results in one set of books,
one very nice advantage about reporting is that all the existing financial statements will
work for consolidation reporting. Nevertheless, with the financial results in one set of
books, you may want to prepare additional financial statements such as those that show
results of the subsidiaries in columns across the page.
All the standard reports such as trial balances and account analysis are also available.
Account Inquiry
You can use the account inquiry function in the consolidated set of books and trace the
transaction source clear back to its original entry in the subsidiary set of books without
having to sign in to the subsidiary set of books. You can do inquiries in the reporting
currency or in the functional currency. Further, you can drill down to the source in that set
of books whether it be an invoice, receipt, payment, etc.
Conclusion
Having consolidated data in one set of books offers advantages to financial reporting,
analysis, and management. It helps ensure consistency in financial reporting and helps
assure that financial controls are consistently applied. These advantages are significant and
provide every reason to use the consolidation features in the Oracle General Ledger.

If you have the need to produce consolidated financial results and if you have more than
one set of books, the Oracle Consolidation Process is an efficient method to accomplish that
objective.
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Oracle gl consolidations

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