Transitioning from Account Generators to the R12 Subledger Accounting Engine

Alyssa Johnson Solution Beacon, LLC

The new Subledger Accounting Engine represents a major shift in architecture for the accounting component of the Financials product family. In prior releases, the accounting events were stored within individual subledgers. Now a new schema (XLA) exists and the accounting events for each subledger are retained within one data model. One of the new functionalities of the Subledger Accounting Engine is the Accounting Methods Builder which enables users to define accounting rules using standard Oracle forms. With this functionality, users will be able to define and maintain custom accounting rules which before were defined in Workflow Account Generators. Users will find several advantages to transitioning custom accounting rules from Account Generators to the Accounting Methods Builder. Lets first explore the functionality available in Release 11i Account Generators and then compare that with the functionality found in Subledger Accounting Engine, specifically the Accounting Methods Builder. Next, a test case highlighting the transition from a FA Account Generator to SLA Accounting Rules will be explored. Finally, the benefits of transitioning from Account Generators to SLA will be discussed.

Release 11i Account Generators

Account Generators are special Workflows which automatically construct Accounting Flexfield combinations using Oracle or user-defined business rules. Seeded Account Generators can be utilized to generate accounts. If special business needs exists, users can modify the Account Generators based on Oracle rules that must be followed when customizing the Account Generator. Account Generators give users needed flexibility in generating accounting and the Workflow application is well-established and well-supported. On the downside, some Account Generators require customization leaving users no choice but to customize them. Patching can often overwrite customized Account Generators making it necessary for users to redo the customizations. Customizations are also not protected during upgrades. Finally, if changes are made to an Account Generator, the database has to be bounced for changes to take affect. User-defined rules in the Subledger Accounting Engine can alleviate the issues listed above. Following are the Account Generators in Release 11i that can be replaced with user-defined rules in SLA: FA Account Generator (FAFLEXWF) Used by Assets to generate the Accounting Combinations for each Asset Transaction OM: Generate Cost of Goods Sold Account (OECOGS) Generates the cost of goods sold account for each inventory transaction line when invoices are imported into AR These lines are inserted into Oracle Inventory via the Inventory Interface Program Inventory Cost of Goods Sold Account (INVFLXWF) Called while processing Intercompany Transactions. AR: Substitute Balancing Segment (ARSBALSG) Updates the balancing segment during various accounting activities against transactions and receipts PO Account Generator (POWFPOAG) Used by Purchasing to derive the charge, budget, variance, and accrual accounting distributions for each PO line MUST be customized if using Oracle Projects If not using Projects, it is still invoked but customization is not mandatory PO Requisition Account Generator (POWFRQAG) Used by Purchasing to derive the charge, budget, variance, and accrual accounting distributions for each requisition line
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MUST be customized if using Oracle Projects If not using Projects it is still invoked but customization is not mandatory Project Supplier Invoice Account Generation (PAAPINVW) Used by Payables to derive the Invoice Distribution Accounting Combination if the distribution is Project related MUST be customized if using Projects If not using Projects, it is not invoked Project Web Employees Account Generator (PAAPWEBX) Used by iExpense to derive Accounting Combinations for expense report lines that reference a project MUST be customized if using Projects If not using Projects, it is not invoked. Project Budget Account Generation (PABDACWF) Used by Projects to generate Accounting Combinations for all budget items in an integrated project budget Public Sector IAC Account Generator (IGIIACWF) Used in Public Sector Assets for Inflation Accounting MHCA Account Generator (IGIAMAWF) Used in Public Sector Assets IGC Charge Account Generator (IGCACGNC) Used to generate a charge account for contract commitment for Public Sector Contracts IGC Budget Account Generator (IGCACGNB) Used in Public Sector Contracts, to generate a budget account for contract commitment

Release 12 Subledger Accounting Engine

This new rules-based accounting model with a new schema (XLA) provides several benefits, including the standardization and consolidation of the accounting. Previously, the Create Accounting process was not standardized throughout the subledgers. Now, in Release 12, because the accounting is generated in a central location, there is consistency across the subledgers. This will help make the transfer to GL and month-end close processes simpler. Because the accounting entries are all stored in one centralized repository, companies will realize improved control and transparency of their accounting. A definite shift has occurred in that the processing of the transactions is separated from the accounting associated with transactions. Also, because of this centralization, balancing can now occur at the subledger level. Finally, the bottom line is that this centralization streamlines reconciliation and results in a faster close. With the addition of the SLA repository, the flow of data is shown in Figure 1.

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Figure 1 The accounting events for each subledger are stored within one data model

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 WebADI 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. Purchasing Payables Cost Management Payroll Property Manager Assets Cash Management Process Manufacturing Loans Public Sector/Federal Receivables Intercompany Projects Lease Management Globalizations

Figure 2 These subledgers use the Subledger Accounting Engine when accounting entries are generated

This new rules-based accounting model provides several benefits, including the standardization and consolidation of the accounting. Previously, the Create Accounting process was not standardized throughout the subledgers. Now, in Release 12, because the accounting is generated in a central location, there is consistency across the subledgers. This will help make the transfer to GL and monthend close processes simpler. Because the accounting entries are all stored in one centralized repository, companies will realize improved control and transparency of their accounting. A definite shift has occurred in that the processing of the transactions is separated from the accounting associated with transactions. Also, because of this centralization, balancing can now occur at the subledger level. Finally, the bottom line is that this centralization streamlines reconciliation and results in a faster close.

Accounting Methods Builder (AMB)

When looking specifically at transitioning from Account Generators to the Subledger Accounting Engine, the Accounting Methods Builder component of SLA is utilized. 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
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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. When defining a ledger (see Figure 3), notice that one of the fields is the Subledger Accounting Method th (or convention the 4 C). Release 12.0.6 comes seeded with six Subledger Accounting Methods: Accrual with Encumbrance Accounting, Cash with Encumbrance Accounting, Standard Accrual, Standard Cash, US Federal Accounting, and China Standard Accrual. If any of these methods can meet your accounting needs, no user-defined rules are required and the user can just assign this default accounting method to the ledger. However, if special accounting rules are required, users can define them using the Accounting Methods Builder.

Accounting is defined by the Subledger Accounting Method.

Figure 3 Assigning a Subledger Accounting Method

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The Subledger Journal Entry Inquiry Form (see Figure 4) illustrates areas that can be customized using the AMB to meet a companys business needs.

Journal Header
1

Journal Lines
3 4

Figure 4 Components of the Subledger Journal Entry which can be configured using AMB

Users can create user-defined Journal Header Assignments (1) and Header Definitions (2). Account Derivation Rules can also be formulated that given a certain set of conditions derive a different account combination (3) than the account combination entered at the transaction level. Users can also define Journal Line Types (4) and the Journal Lines Description (5). 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 subledgers that will create accounting entries in the General Ledger. Figure 5 represents the structure supporting each of these Application Accounting Definitions and the components that make up a complete accounting method. Note: these correspond to the sections identified in Figure 4.

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Figure 5 The structure supporting each of the Application Accounting Definitions and the components that make up a complete accounting method

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 but 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.

Transitioning from Account Generators to SLA

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. Figure 6 shows an Assets 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.

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Figure 6 Assets Account Derivation Rule illustrating respect of Workflow Account Generator

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.

Steps to Define Rules in SLA

Following is a test case to illustrate the transition of rules defined in a Workflow Account Generator to SLA:

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A client requires that disposals (natural account 8101) be charged to cost center 210 instead of 000. The default Oracle account generator uses the default account defined in the Book Level Controls and replaces the account value with the value specified for disposals in the Book Level Controls page. As the default is defined, this generates an account for disposals with the cost center = 000 and the account = 8101. The resulting customization, first builds the combination, then checks to see if the account = 8101. If it does, then the cost center is replaced with 210. Otherwise, no changes are made.

Step 1: Determine Accounting Requirements

Because of the increased flexibility of the Accounting Methods Builder it is important to work closely with accountants to assess accounting requirements. The collaboration between a strong accountant and an experienced Oracle functional SuperUser or System Administrator will result in a true representation of the accounting requirements in SLA. Because of the greater flexibility which exists in SLA some rules could now be implemented which may not have been implemented in the past. Be sure to only assign user-defined rules where required for optimal efficiency.

Step 2: Copy Subledger Accounting Method

Remember that when configuring any component of the Subledger Accounting Method Structure, each component above the configured component must also be updated and user-defined. So the first step in setting up accounting rules in SLA is to copy the subledger Accounting Method (SLAM). It is vital that a naming convention for user-defined components is determined and strictly and consistently adhered to. This will make troubleshooting and maintenance of the user-defined rules much easier. Figure 7 illustrates how the copy functionality works in SLA.

Figure 7 Copying the Subledger Accounting Method

Step 3: Copy Application Accounting Definition

Next, copy the Oracle seeded application accounting definition for the application for which the accounting rules are being configured. If you are going to utilize user-defined mapping sets, specify at least the accounting chart of accounts. Because the subledger accounting engine can now book a single transaction to multiple subledgers, there can be a difference between the transactional chart of account and the accounting chart of accounts.
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Step 4: Copy Journal Line Definitions for Events requiring a user-defined rule
This is the point at which the analysis of the accounting requirements is important. Copy Oracle seeded Journal Line Definitions for only those events which require a user-defined rule. If a user-defined rule is not required, then utilize the Oracle-defined rule. For example, in the test case, the Addition Journal Line Definition contains no Journal Line Types that need the custom rule so that journal line definition does not need to be copied. Therefore, users can define a Journal Line Definitions and use them in conjunction with Oracle-defined Journal Line Definitions.

Step 5: Create New Mapping Set (optional)

Depending on how your accounts are going to be derived, create a mapping set to derive specific accounting. In our test case, a mapping set is created to set the department (cost center) segment of the accounting flexfield to 210 when the Account (natural account) is 8101. Notice that the Input validation can be set to either a lookup or a value set. In this case, the value set is the Operations Account. If the output type is either the entire Flexfield or a particular segment, then the accounting chart of accounts must be specified. In this case the output will replace the Department segment in the Operations Accounting Flex Chart of Accounts. When the accounting rule is evaluated, the system looks at the value of the Account segment and if it is equal to 8101 then the Department segment is set to 210. Otherwise no change is made to the accounting. This matches the requirements of the test case. See Figure 8.

Figure 8 Creating a Mapping Set

Step 6: Create New Account Derivation Rules for Every Required Journal Line Type
This is where the iterative process begins of creating a new account derivation rule for every journal line type to which the customized accounting must be applied. In the test case, an account derivation rule may need to be created for each of the Book Level journal types (14 in all). However, an accountant may determine that the customized rule only needs to be applied a portion of the Book Level journal types. The Account Derivation Rule in Figure 9 will be used to generate the department segment for Cost of Removal Clearing Journal Line Types. Notice that the Owner is now User instead of Oracle and the Accounting Chart of Accounts is specified. The rule uses the previously defined mapping set and
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supplies the Cost of Removal Clearing Account as the input source. The output type is the department segment of the accounting flexfield.

Figure 9 User-defined Account Derivation Rule for the Department segment of the Cost of Removal Clearing Journal Line Type

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Step 7: Assign ADR to associated Journal Line Type for User-Defined Journal Lines Definition
Next, assign the user-defined account derivation rules to their associated Journal Line Types in the Journal Lines Definition form. In Figure 10, for the CIP Retirements event class, the default account derivation rules have definitions for All Segments, Company, and Account segments. Now, an additional user-defined rule is added for the Department segment. It is important to have a rule that populates all the segments (All Segments) and then the subsequent records replace specific segments depending on the account derivation rules for that segment. The segment designations will be based on the Accounting Chart of Accounts. Once the rules are defined they can be used for the same journal line type in a different Event Class.

Figure 10 Assign the user-defined ADR to the department segment

Step 8: Assign User-Defined Journal Line Definitions to Event Class

Once the Journal Line Definitions have been updated, replace the Oracle defined Journal Line Definitions Assignment with the User-Defined Journal Line Definitions for the appropriate Event Class. See Figure 11. Notice that once the Journal Line Definition Assignment is updated the Validation Status changes to Not Validated.

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Figure 11 Update Journal Lines Definition Assignment with user-defined Journal Line Definition

Step 9: Validate Application Accounting Definition

With invalid event classes, the Application Accounting Definition must be validated using one of two methods. First, clicking on the Validate button (see Figure 11) will validate the specific AAD shown on the form; or users can run the Validate Application Accounting Definition Concurrent Program and specify the Aids they want to validate.

Step 10: Assign Used-Defined AAD to User-Defined SLAM

Next, the user-defined and validated Application Accounting Definition replaces the Oracle seeded AAD in the Subledger Accounting Method. See Figure 12.

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Figure 12 - Assign Used-Defined AAD to User-Defined SLAM

Step 11: Assign User-Defined SLAM to Ledger

Finally, assign the new user-defined Subledger Accounting Method to the appropriate Ledger using the Accounting Setup Manager in the General Ledger Responsibility. See Figure 13

Figure 13 Assigning a User-Defined Subledger Accounting Method COLLABORATE 09 - OAUG Forum Copyright 2009 Solution Beacon, LLC All Rights Reserved Page 13 of 15

Next: Creating Accounting

The next step to verifying new accounting rules is to run the Create Accounting concurrent process. This process has become standardized across subledgers. The Create Accounting program functions in much the same way it did in earlier releases. Figure 14 shows the parameter list for the Create Accounting concurrent program, with the addition of the Ledger (which is the Set of Books) and the Mode (which enables Draft Accounting and straight through posting to the General Ledger). The Subledger Accounting Engine uses the Subledger Accounting Method that has been assigned to the Ledger to generate the accounting entries.

Figure 14 The parameter list for the Create Accounting concurrent program

Draft accounting is especially helpful when developing new Subledger Accounting Rules. Users can determine accounting impact of journal entries with transferring the accounting entries to the General Ledger. In fact, accounting entries generated in draft mode cannot be transferred to the General Ledger. They can be deleted and recreated and the transaction or accounting definitions can be altered. They can be included on accounting reports to fully assess the impact of the accounting rules, but they do not update balances or reserve funds. When accounting rules are correct then the entries can be recreated in final mode and transferred to the General Ledger for final testing.

Finally: Test, Test, Test

Thorough and complete testing of accounting rule changes is imperative. If numerous rule changes are required, it is recommended that a subset of rules are changed (possibly even just one), in order to test and verify approach before a massive set of changes are implemented. This will make it easier to identify some initial errors that might occur. As mentioned in the previous section, Create Accounting in Draft Mode and test all Event Classes. Finally, if some unaccounted Release 11i transactions still exist, be sure to test both Release 11i and Release 12 transactions.

Exporting and Importing AADs

Once development of user-defined rules has been completed, concurrent programs are available to export and import the Application Accounting Definitions between database instances. The import/export processes can also be used for version control. The concurrent program from exporting AADs is Export
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Application Accounting Definitions. One of the parameters of this concurrent program is the Account Method Builder Context. By adding a user-defined lookup type to the SLA Lookup XLA_AMB_CONTEXT_TYPE, and then setting the Profile Option SLA: Accounting Methods Builder Context to the new lookup type value, a user can work on their own copy of components and perform changes. Utilize the concurrent program, Import Application Accounting Definitions, to import AADs from the file system into a database instance.

Conclusion
The new Subledger Accounting Engine represents a major shift in how accounting has been performed. It is now possible to support Multiple ERPs in one corporation. With the new forms-based Accounting Methods Builder, creating and maintaining accounting rules is more straightforward than utilizing Account Generators. Users can create new rules without knowledge of Workflow, without developing SQL code, and without access to the apps password. Users no longer have to account by exception. With the Accounting Methods Builder, there is much more consistency and transparency to the accounting rules. With the new functionality available with draft accounting, users can test the accounting rule changes without impacting the General Ledger. User-defined accounting rules maintained in future patching and upgrades giving more stability to the system. Because of these improvements over the Account Generator, make transitioning your Account Generators to SLA a part of your post upgrade plans.

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