Oracle subledger accounting method and secondary ledgers for consolidation
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The document outlines the setup of primary and secondary ledgers in Oracle Financials under the SLAM (Sub-Ledger Accounting Method) framework, particularly in various global business scenarios. It presents different scenarios involving multinational operations and their unique requirements for handling multi-currency and reporting according to IFRS and GAAP standards. Key decisions needed for configuring SLAM include functional currencies, chart of accounts, and consolidation methods across subsidiary entities.
Oracle subledger accounting method and secondary ledgers for consolidation
- 1. Michele Bryant + 44 7810 553794 ORACLE SLAM: Primary and secondary ledger set up Updated January 2018 When there is a re-implementing or new implementation of R12 Oracle Financials SLAM (Sub-Ledger Accounting Method) will be one of the new concepts to understand. Before configuring SLAM understand how the high-level design of the ledgers, chart of accounts and data sets relate to the setup of SLAM using primary and secondary ledgers. Different Business Scenarios may exist: Scenario 1 – A global business operation with more than one subsidiary and consolidating in IFRS and GAAP. One UK parent reports following IFRS and the US parent reports in US GAAP. This organisation has separate foreign subsidiaries in many countries, each with their own functional currencies. Scenario 2 – A global business operation with one UK parent. This organisation reports following IFRS. This business has separate accounting in each country each with their own functional currencies. Scenario 3 – A business operation with one parent company reporting in US GAAP.
- 2. This organisation has one subsidiary. The accounting local currency is Euros and the functional currency is US dollars. Scenario 4 – A UK operation with many subsidiary companies. The company follows IFRS and the functional currency is UK pounds. The subsidiary companies operate in local currency. ASSUME the following requirements have been satisfied: - > the decision is made about functional currency are based on operations and adherence to IAS21. > the decisions are made about multicurrency reporting based on business requirements. > the decision is made to share a corporate chart of accounts with all legal entities. > the decision is made about primary and secondary ledger use in Oracle and which chart of accounts in used in the primary and which chart of accounts is used in the secondary ledger. >The transaction and accounting chart of accounts is created. Multi-org and data access requirements have been met, calendar requirements and accounting method and currency requirements have all been met. The SLAM set up will vary according to the scenario for example: Scenario 1
- 3. This is a typical global business example where more than one consolidations are needed from more than one subsidiary into more than one parent. There are many subsidiary companies and there is more than one consolidation both in the primary ledger and the secondary ledger. The functional currency for each entity is likely to be a local currency. In that event reporting needs to be produced in more than one currency as it is a multi-currency organisation. Solution a In this scenario the consolidations will need to be performed using secondary ledgers which consolidate into the parent entity. Each subsidiary entity will have its’ own ledger with its’ own currency, calendar and accounting method. The ledgers will all use the corporate chart of accounts it will be shared across the group. This chart of accounts will be the transaction chart of accounts. This corporate chart of accounts must be able to support the transaction accounting in all entities. Separate currency reports can be created for both primary and secondary ledgers.
- 4. SLAM will need additional configuration for the secondary statutory reporting ledgers to support the required level of data conversion e.g. journal. Solution b In this scenario the corporate chart of accounts cannot support the business requirements of some of the entities. In this case these subsidiaries may need to use a chart of account to support local accounting requirements. In this case a secondary ledger is needed to support the local chart of accounts. SLAM can then use additional set-ups. The local entities can post the sub-ledger transactions or post at journal level to the secondary ledger for internal reporting. Scenario 2 The solution is as per scenario one but only one consolidation is required. Scenario 3 In this scenario, the functional currency of the subsidiary and the parent is USD. The subsidiary can use the primary ledger with the corporate or statutory chart of accounts and use the multi-currency feature of Oracle Financials to report in USD.
- 5. The local subsidiary can also use the secondary ledger with their local chart of accounts, local currency of euros for local statutory reporting. The consolidation of the subsidiary must happen in the primary ledger of the parent. SLAM will need additional configuration to support the secondary ledger. Scenario 4 A UK business with one functional currency and one corporate chart of accounts. The Primary ledger of the entities will use the transaction corporate chart of accounts and functional currency for both primary and secondary ledgers will be GBP (British Pounds). No requirement exists to report in any other currency. There may be a requirement to consolidate to a secondary ledger with a different chart of accounts. If this is so, then the parent entity may set up a secondary ledger to consolidate the results. SLAM will need additional configuration to support the secondary ledger.
- 6. Additional SLAM set ups for use with secondary ledgers The accounting set up below is an example of the set up in Oracle Financials suitable for scenario 1 solution (a) in this example a French subsidiary is using the corporate chart of accounts for its’ transactions and mapping into the US Parent consolidation ledger, so they report in US GAAP. Example scenario 1 solution a: Navigate to accounting set up in Oracle> Ledger information Primary Ledger French Operations Secondary ledger US Statutory Chart of accounts Corporate Chart of accounts US GAAP Accounting calendar Monthly Accounting calendar Fiscal Currency Euro Currency USD Sub-ledger accounting method Standard accrual Sub-ledger accounting method USGAAP Chart of accounts mapping Corporate to Statutory mapping Currency conversion rules Source representation French operations Default rate types Corporate Data conversion level Journal Disable conversion date 01-Feb-2013
- 7. Retain transaction rate type Yes Error Handling If missing conversion rate o report error * Use last rate Number of days to find last rate 15 Journal conversion Rules Post journal automatically from source ledger o Retain journal creator from source ledger no FURTHER INFORMATION ABOUT SUB-LEDGER ACCOUNTING IN ORACLE The sub-ledger accounting to secondary ledgers is set at any of the following levels: Sub-ledger Level Secondary Ledgers Journal Level Secondary Ledgers Balance Level Secondary Ledgers Adjustments Only Secondary Ledger It is a prerequisite to create a chart of account mapping if the secondary ledger uses a different chart of accounts.