Joint Venture Accounting (JVA)

Joint Venture Accounting (JVA)

SAP AG 2002

JVA Workshop
Day 1 Basics 1. 2. 3. 4. Introduction Accounting Principles Master Data Integration

Day 2

Day-to-Day Processes 1. Data Entry 2. Payments 3. Operated Accounting 4. Non-Operated Accounting Periodic Processes 1. Cutback 2. Foreign Currency Valuation 3. Month End Processing Reporting 1. Billing 2. Reporting 3. Planning 4. Year End Configuration 1. Customizing #1 Configuration 1. Customizing #2

Day 3

Day 4 (half day)

Day 4 (sec half) Day 5 (first half)

SAP AG 2002

JVA Workshop Goal

This workshop will enable you to: Understand the concepts and gain hands-on experience of mySAP.com Oil & Gas JVA Perform JVA related functions, using Finance, Controlling, Project System, and Materials Management Use sample companies to understand and apply JVA functions

SAP AG 2002

JVA Unit 1

Basics

1.
2. 3. 4.

Introduction
Accounting Principles Master Data Integration

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JVA 1.1

This section introduces the concept of JVA.

Introduction
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What are the Oil and Gas Industry processes?

EXPLORE DEVELOP

PRODUCE

REFINE

MARKET

SELL

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Why Are Joint Ventures Used?

The Upstream Oil and Gas Industry Is characterised by: High Risk Large Investment Long Term Commitment To share the risk Companies form Joint Ventures

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Who Runs a Joint Venture?

Joint Ventures Non Operator Partner A 35% JV#1 Exploration
Manage the work Plan and run venture activities Maintain accounting records for venture Report venture activity to partners Share income or product

65% 30%
JV#2 Construction

40%

30%
Non Operator Partner B 70% Operator

JV#3 Production
30%

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SAP JVA

Operating Partner
Manage the venture on a day-to-day basis Maintain venture accounting records Calculate partner shares of venture expenditure and revenue Report venture activity to partners

Non-Operating Partner
Maintain accounting records for their own share of the venture Settle accounts with the operating partner, according to the conditions of the venture

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JVA 1.2

This section describes the accounting principles behind SAP JVA.

Accounting Principles

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T Accounts
Account name Debit Entry
Partner Account
1 150
50 2

Credit Entry

JV Costs
150 1

Final Balance of Account

Notes

100

150

JV Bank
2 50

1. 2.

Partner share of venture costs Settle partner account

50

Asset account

Liability account

Capital account

Increase

Decrease

Decrease Increase

Decrease Increase

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Operator Oriented Accounting

Company A
Partner B
2 40 40 4 4

Company B
Venture Account
40 40 3

Notes
1. Company A incurs costs running the venture. Company A calculates company Bs share of costs (40%). Company B accounts for its own share of costs. Company B reimburses company A.

2. Venture Bank
100 4 40 60 1

Own Bank
40 4

3.

4. Venture Costs
3 40 2

Venture Costs
1 100 40 60

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Partner Oriented Accounting

Operating Co. Venture

Partner A 60%
2 60 60 5 5

Company A

Company B
Notes
1.
4

Venture Account
60 60 3

Venture Account
40 6 40

2.

Partner B 40%
2 40 40 6

3.

4. Venture Bank
100 5 6 60 40 60 40 1

Own Bank
60 5

Own Bank
40 6

5.

Company A incurs costs while running the venture. Company A calculates the share of costs for Partner A and Partner B. Company A accounts for its own share of costs. Company B accounts for its own share of costs. Company A reimburses the venture.

6.

Venture Costs
1 100 60 40 2 2 3

Venture Costs
60 4

Venture Costs
40

Company B reimburses the venture.

60

40

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Operator / Partner Accounting

Company A Venture
Partner A 60%
2 60 60 5 5 60

Company B
Notes
Venture Account
3 6 40 40 4

Company
Venture Account
60

1.

2.

Partner B 40%
2 40 40 6

3.

4. Venture Bank
100 5 6 60 40 60 40 1

Own Bank
60 5

Own Bank
40 6

5.

Company A incurs costs running the venture. Company A calculates the share of costs for Partner A and Partner B. Company A accounts for its own share of costs. Company B accounts for its own share of costs. Company A reimburses the venture.

6.

Venture Costs
1 100 60 40 2 2 3

Venture Costs
60 4

Venture Costs
40

Company B reimburses the venture.

60

40

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Billing Basis

Expenditure Based Invoice Based Cash Based

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Billing Basis: Expenditure Based

Venture
Billable
Expenditure
1 100

JV Billing Month 1 Expenditure 100

Notes
1. Expenditure is incurred in Month 1. An invoice is received in Month 2. An invoice is paid in Month 3.

2.
100

Total

100 3.

GRNI Accruals
100 2 100 1

JV Billing Month 2 Expenditure 0

Non-Billable

Vendor
100 3 100 2

Total

JV Billing Month 3 Venture Bank

100 3

Expenditure

100

Total

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Billing Basis: Invoice Based

Venture
Expenditure
1 100

JV Billing Month 1 Expenditure GRNI Accruals Total 100 -100

Notes
1. Expenditure is incurred in Month 1. An invoice is received in Month 2. An invoice is paid in Month 3.

2.

Billable

100

0 3.

GRNI Accruals
100 2 100 1

JV Billing Month 2 Expenditure GRNI Accruals 100 0 100

Vendor
100 2

Non-Billable

100

Total

JV Billing Month 3 Venture Bank

100 3

Expenditure GRNI Accruals

0 0 0

100

Total

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Billing Basis: Cash Based

Venture
Expenditure
1 100

JV Billing Month 1 Expenditure GRNI Accruals Vendor Total 100 -100 0 0

Notes
1. Expenditure incurred in Month 1. Invoice received in Month 2. Invoice paid in Month 3.

2.

100

Billable

GRNI Accruals
100 2 100 1

3. JV Billing Month 2 Expenditure GRNI Accruals 100 0 -100 0

Vendor
100 3 100 2

Vendor Total

JV Billing Month 3

Non-Billable

Venture Bank
100 3

Expenditure GRNI Accruals Vendor

100 0 0 100

100

Total

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JVA 1.3

This section describes the master data used in JVA.

Master Data

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Joint Operating Agreement (JOA)

JOA

Formal contractual agreement

Specifies conditions for joint activities Defines partner shares (working interests) Describes rules for sharing profit and loss Specifies penalties

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Joint Venture

Joint Venture

Definition of joint activities

Defines role of own company in venture Assigns partner shares and validity Specifies reporting requirements Defines taxation rules Defines accounting procedure

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Equity Group

Equity Group

Definition of partner shares and roles

Single operating partner and share One or more non-operating partners and shares

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Joint Venture Partner

Partner

Definition of entity participating in a joint venture

Can participate in one or more ventures simultaneously Linked to customer accounts receivable (A/R) sub-account for non-operating roles Linked to vendor accounts payable (A/P) subaccount for operating roles

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Joint Venture Partner: A/R and A/P

JV Partner Customer

Vendor

Customer record required for all partners Vendor record required for all partners Link customer and vendor using Account control fields

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Inter-Company Partners
SAP Company GBU1
Partner JV5001 JV5101 JVGBU2 Inter-Co Code Partner Name Caledonian Oil Troll Oil SAP Company GBU2

GBU2

Customers JV5001

JV5101
JVGBU2
Partner JVGBU1

SAP Company GBU2

Inter-Co Code GBU1 Partner Name SAP Company GBU1

Customers JVGBU1

Vendors JVGBU1

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Master Data Structure

JOA

Venture 1

Venture 2

Venture 3

Equity Group A Equity Group B

Equity Group A Equity Group C Equity Group D

Equity Group E

Operator Operator Partner 1 Partner 1 Partner 2 Partner 2 Partner 3

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JOA Assignments
JOA

Equity Group A Venture 1

DATE

Equity Group B

Venture 2

DATE

Equity Group C

Equity Group D

Venture 3

DATE

Equity Group E

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Equity Type

Equity Type

Definition of activity in a joint venture

Represents time-independent aspect of venture and equity group Provides link between venture activity and equity group Activity may be actual or logical

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Assignment of Equity Group to Equity Type

Venture 2

March

April

May

Equity Type 1

Equity Group A

Equity Group C

Equity Type 2

Equity Group A

Equity Type 3

Equity Group A

Equity Group D

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Assignment of Equity Group to Partners

Venture 1

Company A

Equity Group A

60% 40%

Operator Partner 1

Customer A

Equity Group B

Customer B 40% 40% 20%

Operator Partner 1 Partner 2

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Data Model
Cost Object Plant Cost centre Company Code Valuation Type

WBS Element

Order

JOA

Joint Venture

Network

Equity Group Customer Account Partner Equity Share

Date

Equity Type

Partner

Recovery Indicator

Vendor Account G/L Account

SAP AG 2002

Exercise 1.1: Review Joint Venture Master Data

1. 2. 3.

Display joint venture partners Display a JOA Display a joint venture

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JOA Class

JOA Class is used to group JOAs

Company Code
Joint Oper. Agreement JOA Class 01 02 CP JOA Class Operated Non-Operated Corporate

Operated JOAs

Corporate JOAs
Non-Operated JOAs

JOA 1 JOA 3

JOA 2
JOA 4

JOA 5
JOA 6 JOA 7

JOA 8 JOA 9

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Maintain a JOA

You cannot change the equity group if JVA documents exist.

You can assign an alternative address to each area.

The applicable venture type is determined automatically.

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Joint Venture Class

JV Class is used to group joint ventures

Company Code
Joint Venture JV Class 01 02 CP JV Class Operated Non-Operated Corporate

Operated Ventures

Corporate Ventures

JV 1 JV 3

JV 2 JV 4

Non-Operated Ventures

JV 5
JV 6 JV 7

JV 8 JV 9

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Venture Type

Operated not taxed Operated taxed Non-operated, on-billed

Non-operated
Corporate

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Maintain Joint Venture

The Posting Method is used to determine the accounting treatment of a venture. The assignment from equity type to equity group is based on the document date.

The Funding Group represents a group of ventures that are funded from the same set of bank accounts.

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Recovery Indicator

Recover y Indicato r

Identifies category of a joint venture transaction Indicates whether a particular revenue or expense is shared by venture partners Used to select data for reporting to venture partners Used to distinguish between joint and own revenues and expenditures

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Use of Recovery Indicator

1.

Basis for sharing partner costs (cutback)

Material Consumed

Billable Balances

100
20 10 33-

BI - Billable NB - Non-Billable AD - Adjustments CB - Cutback CUTBACK 30%

JV Billing Expenditure

33

110

Cutback posting
Gross Exp.

2.

Basis for operational reporting (Operator Oriented)

Material Consumed

100 20 10 33-

BI - Billable NB - Non-Billable AD - Adjustments

Venture (Gross) Reporting

130
Net Exp.

CB - Cutback

Own (Net) Reporting

97

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Exercise 1.2: Create Joint Venture Master Data

1. 2. 3.

Add a new partner Create a JOA Create a joint venture

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JVA 1.4

This section describes the integration between JVA and other SAP R/3 components.

Integration

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What is the JVA Module?

Set of Special Ledgers comprising Line Item and Balance tables fed almost entirely from standard SAP modules

JVA Coding block is based on Joint Venture structures but also contains the key structures from the standard financial and costing modules.

Coding Block

Company Venture Code

Equity Recovery Cost Account Group Indicator Object

Profit Center

JVA captures ALL financial and cost postings real time from standard modules such as FI, CO & MM and converts them to JV format It provides new processes specific to E & P and also amends standard ones to be compatible with the JV structures It provides a full Trial Balance by Venture and Equity Group Effectively a new Finance Reporting Module
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Integration

AM FI

MM

SD
CO Accounting Interface PM Coding Splitting Clearing

PS

Accounting Document HR JV Interface JV Document

JV Database

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Reporting with JVA

MM

AM

PM

PS

Open Item Mgt AP, AR etc Bank & Cash

FI Financial ledger Account

FINANCIAL DOCUMENT

CO

Cost Allocations Management Reporting Budgets & Plans

Costing Ledger Account + Cost Object

Finance Reports Cost Reports JV Processes Budgets & Plans

JVA

JV Billing ledger
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BILLING

JV ledger Acct + C/O + Venture PSA Partner Billing Cash Statements Reporting Invoices PSA ledger PSA

JVA Data Capture

FI

CO PS

PCA

JV

FI Balance Sheet FI Cost and Income CO Cost allocations

Captured

Not Captured

Partly Captured

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JVA Activation
The JVA module is activated at Company Level in SAP - specify: Region USA

Canada
International Billing Basis

Cash
Expenditure Invoice Banking arrangements Venture Bank Accounts and Switching JVA Cutback Model Standard Operator as Partner model
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Joint Venture Coding for Cost Object

Cost Object
Project Cost centre Internal Order Joint Venture Equity Type Recovery Indicator

JV Object Type
Plant Maintenance Order Production Order Network Order JIB/JIBE Class JIB/JIBE Subclass A

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Joint Venture Coding Fields

Accounting
Joint Venture

Equity Type
Joint Venture Equity Type Recovery Indicator JV Object Type JIB/JIBE Class JIB/JIBE Subclass A Recovery Indicator

Control
JV Object Type

Reporting
JIB/JIBE Class JIB/JIBE Subclass A

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Accounting Documents
FI Document

Vendor Invoice

CO Document

JV Document
JV Document

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Joint Venture Coding for Assets

Joint Venture Fixed Asset Owning Cost centre Equity Type Recovery Indicator JV Object Type JIB/JIBE Class JIB/JIBE Subclass A

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Joint Venture Asset Posting

Accounting options for capitalisation: 1) Via a WBS or Order : Accounts Receivable Accounts Payable 100 30 Invoice WBS 100 30 70 Settlement 70 Assets

Cutback

2) Direct to the Asset Accounts :

Accounts Receivable Accounts Payable 100 Invoice Assets 100

30

Cutback
70

30

SAP AG 2002

Joint Venture Asset Posting

Asset Master Vendor Invoice

JV Document
JV Document

Asset Document

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Joint Venture Coding for Material

Project

Plant

Joint Venture Cost centre Equity Type Recovery Indicator JV Object Type Valuation Type JIB/JIBE Class JIB/JIBE Subclass A

Internal Order

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Joint Venture Material Posting

Goods Receipt

MM Assignments

Material Document

Accounting Doc

JV Document
JV Document

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Default Joint Venture Coding for PM Orders

Functional Location Equipment Project

Cost centre

Plant Maintenance Order

Joint Venture Equity Type Recovery Indicator JV Object Type

JIB/JIBE Class
JIB/JIBE Subclass A

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Exercise 1.3: Create Integrated Master Data

1. 2.

Create a joint venture cost centre Create a joint venture project

SAP AG 2002

Unit 1 Summary

You are now able to: Understand the concepts and gain hands-on experience of mySAP.com Oil & Gas JVA Perform JVA related functions, using Finance, Controlling, Project System, and Materials Management Use sample companies to understand and apply JVA functions

SAP AG 2002