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Overview of the New Financial Architecture in Oracle EBusiness Suite Release 12

Mary Burns

The following is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for Oracles products remains at the sole discretion of Oracle.

Agenda
 What We Set Out To Address  Release Twelve: The Global Release

Global Architecture
MultiOrg Access Control Subledger Accounting Ledgers and Ledger Sets Ledger Considerations

Global Business Functions

Legal Entities
Accounting Set Up Manager E-Business Tax Advanced Intercompany Banking Model

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What we set out to address

Doing Business Globally is Complex

Top Drivers of Complexity
1 2 3 4 5 6 7 8 National and International Laws & Regulations Actions by Competitors Changing Customer Requirements Industry Standards and Regulations Tax Codes Changing Workforce Attitudes International Reporting Standards Language and Cultural Differences
Direct impact on Finance

Globalization is unstoppable. Regardless of geography, industry or income, companies are globalizing to gain new customers and access new markets. Is this a good thing? Nearly two-thirds of the CEOs we surveyed are positive about the impact that globalization will have on their organizations over the next three years.
Source: 9th Annual Global CEO Survey Globalization and Complexity; PwC 2006

Source: PWC, 9th Annual Global CEO Survey

Make it Simpler to do your job

Control Costs by Managing Complexity
Major Focus

Standardizing operating practices and controls Standardizing policies and business rules Standardizing and integrating finance systems Adopting best practices Optimizing the finance organization and its reporting structure Reducing reliance on spreadsheets
Source: PWC Management Barometer

69% 66% 59% 58% 52%

50%
Senior executives say simplification is driving the Finance agenda

33%

Make it Easier to do Your Job

How Finance Spends its Time
26% 47%

% Yet To

50% 60%

Improve processes or rationalize technologies Standardize policies, rules, and processes across the entire enterprise Implement a shared services model * Adopt best practices or simplify processes across the entire enterprise

27%

73%
Transactional Activities Control Activities Decision Support, Performance Mgmt

80%

The Agile CFO, IBM Business Consulting Services, 2005 * Deloitte Consulting, 2006

Customers:
Centralize, Simplify, Standardize
Work Globally, to be more competitive Think Globally, to make the right decisions Manage Globally, to lower cost and increase performance
Easy Reporting Transparent Audit, Reconciliation & Drilldown Corp. Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Joint Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Parent Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar National Compliance Local Regulation National COA Local Calendar

A$+$

Financial Data for Management - and Compliant

Analytics

+$

Comprehensive and compliant processing

Controlled Transaction Entry

How Financials Release 12 Can Help

The Global Business Release

WORK GLOBALLY
To Be More Competitive
Financial Control & Reporting Credit-to-Cash Procure-to-Pay Treasury & Tax Travel & Expense Asset Management Governance, Risk & Compliance

THINK GLOBALLY
To Make the Right Decisions

MANAGE GLOBALLY
To Lower Cost & Increase Performance
Integration Data Management Reporting

Performance Management Profitability Management Business Intelligence

Global:
1. Of, relating to, or involving the entire earth; worldwide: global peace; global monetary policies, etc. Comprehensive; total: a... global, generalized sense of well-being

2.

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Release Twelve The Global Business Release: A New Financial Architecture

Global Financial Architecture

6 Major Initiatives
1. 2. Ledger and Ledger Sets Multi-Org Access Control Subledger Accounting Tax Engine Intercompany Bank Model
MultiMulti-Org Access Control
Dr Cr

General Ledger Sets Ledger & Ledger

Subledger Accounting (SLA)

3. 4. 5. 6.

Tax Engine

Inter Company

Bank Model

Inventory

Receivables

Projects

Work in Process

Purchasing

Payables

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Multi-Org Access Control

Work Think Manage

MOAC: Multi-Org Access Control

Role based access to Operating Units

Perform multiple tasks across operating units without changing responsibilities

Belgium
Legal Entity

Holland
Legal Entity

Denmark
Legal Entity

Functional Tasks
 Order Management  Dunning, Collections, Billing  Requisition, Demand & Purchase Orders  Receiving & Drop Ship  Invoice Receipt, Disbursement  Customer Data Management  Accounting Setup

Belgium
Operating Unit

Holland
Operating Unit

Denmark
Operating Unit

Responsibility SingleResponsibility Responsibility

Responsibility

Purpose Built Cross OU Desks Shared Services

Shared Service
Order Management Dunning, Collections, Billing Requisition, Demand & Purchase Orders Receiving & Drop Ship Invoice Receipt, Disbursement Customer Data Management Accounting Setup

Product Reference
Order Management Receivables Procurement Supply Chain Management Payables Trading Community Architecture Accounting Setup Manager

Multiple Organization Access Control

Summary of Changes

 Security Profiles for data security

MO: Security Profile List of operating units for a responsibility Defined in HR all transactions setup data specific to OU, like transaction type

 OU field on UI

 Enhanced Multi-Org Reporting and Processing

Ledger/Ledger Set parameter on accounting reports and processes OU parameter on other standard reports and processes For example: submit the Payables Open Interface Import w/OU param null to import all records across all OUs

Multi-Org Access Control

In practice
Select Operating Units In daily use

Select Classify Operating Unit Organization classification

as operating unit

Run Reports Across Operating Units

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Subledger Accounting

Work

Think Manage

Centralized Accounting Policies

Greater Control, Transparency and Auditability
Internal control and compliance with multiple accounting policies through user-defined accounting rules
3rd Party Systems
Dr Cr

General Ledger General Ledger

Centralized Accounting Model, Rules, Engine and Repository

Single source of truth for all subsystem accounting activity with a common data model and repository Accounting, reconciliation and reporting facilitated by centralized data model

Inventory 3rd Party Systems

Receivables

Projects

Streamline closing process with common posting engine Auditable and transparent entries accessible with full drilldown

Work in Process Purchasing

Payables

Subledger Accounting
Centralized Rules, Common Repository: Global Control
Ledger French Rules Plan Comptable French Calendar

What it is

Some Benefits

EUR

Accounting Rules SarBox & 8th Dir. User Editable Subledger Daybooks
(Journals) Subledger Balancing Reports, inquiries, open items, et cetera Multiple Representations Common Posting to GL Ledgers Real time or Periodic

Faster, Easier
Reconciliation Corporate Rules = Accounting Standardization Local Rules = Improved Local Compliance Automate Apples to Apples Adjustments Improved Auditability Improved Internal Control

Dr

Cr

Subledger Accounting

Payables Invoice

Subledger Accounting
Transaction Level Compliance
 National Daily Journal Requirements  Internal Control: Central Definitions, Eliminate overrides
Policy Enforcement in Volume Processing

   

Transparent Accounting Rules Debits & Credit at the point of the event Automate Foreign Operation adjustments Event Class: Invoices Reconciliation Event: Invoice Approved Ledger: France (EUR) Platform GL Date: 20-Sep-2005 Description: Office supplies  In accordance Type Account Description with the Asset purchase 01.9100010.100 Paris: furniture Misc expense 01.9100020.100 Paris: supplies Underlying Misc expense 01.9100020.200 Nantes: supplies Records Misc expense 01.9100020.300 Nice: supplies
VAT 01.3100060.000 Accounts Payable 01.7000010.000 VAT@17% ABC Supplies

Debit 10,000 400 100 300 1,836 12,636

Credit

12,636 12,636

Ticked & Tied

SLA Controls that GL Balances and SLA Balances tie, and that both tie to the document (invoice, payment, etc.) sources
Opening Balance SUBLEDGER ACCOUNTING Receivables Customer Customer Customer Customer Customer Total One Two Three Four Five 250,000 350,000 100,000 100,000 200,000 1,000,000 150,000 250,000 1,500,000 800,000 300,000 3,000,000 400,000 450,000 1,400,000 750,000 500,000 3,500,000 150,000 200,000 150,000 500,000 Debit Credit GENERAL LEDGER Cash Receivables Inventory Assets Prepayments Payables Accruals Shares Previous Results Balance Sheet Sales COGS R&D S&M G&A-Fin G&A-IT G&A-HR Period Income Income Statement 100 1,000,000 500,000 100,000 1,000 (750,000) (250,000) (100,000) (501,100) -

Opening Balance

Debit

Credit

Closing Balance

3,500,000 3,000,000 1,200,000

2,750,000 3,500,000 1,500,000

2,800,000

2,700,000 50,000

10,500,000 1,500,000 300,000 300,000 300,000 150,000 150,000 300,000 24,000,000

10,500,000 3,000,000

24,000,000

750,100 500,000 200,000 100,000 1,000 (650,000) (300,000) (100,000) (501,100) (3,000,000) 1,500,000 300,000 300,000 300,000 150,000 150,000 300,000 -

Closing Balance

General Ledger SLA Detail

Payables Vendor Vendor Vendor Vendor Total I II III IX (250,000) (100,000) (150,000) (250,000) (750,000) 1,000,000 75,000 725,000 1,000,000 2,800,000 900,000 50,000 775,000 975,000 2,700,000 (150,000) (75,000) (200,000) (225,000) (650,000)

Multiple Accounting Representations

Global Compliance Statutory and Stock Market
Ledger A French Rules Plan Comptable French Calendar Ledger B US GAAP US COA US Calendar

Multiple Ledgers

EUR

EUR

or
Dr Cr

Subledger Accounting

Payables Invoice

Single subledger transaction can create multiple accounting representations and in multiple currencies

Chose to use an alternative Ledger or just an Adjustment Ledger or segment

SLA keeps the Subledgers & GL tied out

Keep the auditors happy!

Subledger Applications

Accounting Configurations

Journal Entry Setup

General Ledger

Accounting Events

Accounting Program

Subledger Journal Entries GL Journal Entries and Balances

Subledger Accounting Service

Transactions (& adjustments) Subledger Reconciled: Docs, SLA, GL in synch Balances

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Ledgers and Ledger Sets

Work

Think Manage

Ledger
One Repository of Financial Truth

Ledger B US GAAP US COA US Calendar

EUR

Implements the 4 C s: Accounting Method Chart of Accounts Calendar Currency

The balance on Creditors (COA) is 4.2M Eur (Currency) on March 31, 2006 (Calendar) according to IAS/IFRS definitions (Accounting Method)
Reporting Currency

Ledger Sets
Global Information At A Glance

Ledger A French Rules Plan Comptable French Calendar

Ledger B US GAAP US COA US Calendar

EUR

EUR

Reporting Currency

Ledger Sets
Global Information At A Glance
Ledger Set Share: Chart of Accounts Calendar
Ledger C US GAAP US COA US Calendar

Ledger A French Rules Plan Comptable French Calendar

Ledger B US GAAP US COA US Calendar

USD
Ledger D US GAAP US COA US Calendar

EUR

EUR

AUD Key benefits to many Ledgers in one set

Decision-driving business information always available Simpler processing and General Ledger management Data and definitions that can be shared and secured

Reporting Currency

Currency in Release 12
    Transaction Currencies Accounting Currency in Primary Ledger Reporting Currency in Primary Ledger More Accounting Currencies in Secondary Ledgers
For every transaction OR For SLA Posting level / GL activity level

 Balance level Translation or Remeasurement in Ledgers within Ledger sets, run at one click  Balance & Activity level Translation or Remeasurement in Financial Consolidation Hub  Enhanced Revaluation
 [Functional Currency term dropped: conflicts with IAS 21 / FAS 52]

Data Access, Definition Access

 Data Access Sets
Grant and tailor access to Ledgers and Balancing Segment Values (i.e. Companies, Privileges Stores, Branches, etc.)
View GL Manager France Ledger Canada Ledger US Ledger Write Accountant

Definition Access Sets separate from data security

Share, restrict definitions; privileges to view, modify, etc.

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Ledger Considerations

Ledger Sets Work them your way

Management

Ledger Set US Ledger Set Legal Ledger US1 Legal Ledger US2 Legal Ledger US3 Adjustment Ledger US Corporate Ledger Set

adjustments eliminations

UK Ledger Set Legal Ledger UK1 Legal Ledger UK2 Adjustment Ledger UK Adj Ledger Corporate

Automate GAAP / IAS adjustments in an adjusting ledger Eliminate within a Set with GCS Consolidate Formally in FCH Map from a non-conforming COA with a GCS Ledger

Set of 26 Ledgers in one country Euro Zone in One Ledger Set My Corporate Set in US GAAP Statutory Set for Country Y Subs Division X Worldwide Ledger Set

When to use a Secondary Ledger, an Adjusting Segment or an Adjusting Ledger?

Adjusting Segment
Corp. wants GL balances per Parent GAAP Subsidiary books are pretty similar to parents No inventory National chart of accounts is clearly related to IAS IFRS or GAAP balances National Controllership - Corp GAAP known Balances are enough (Full drill down available)

Adjusting Ledger
Corp. wants Just the adjustments, thank you Mapping gets us most of the way to Parent Inventory is the big difference Manageable series of reclassifications Regional Controllership - Corp GAAP administered See theyve been properly adjusted to our rules

Secondary Ledger
Corp. wants a complete Parent GAAP & Currency edition of the Subs books Subsidiary books are quite alien to parents Inventory is one of the big differences National chart of accounts is radically different from corporate Parent Controllership Mexico plant, US parent Every petty cash slip

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Global Business Functions

Work

Think Manage

Legal Entity: Your Registered Companies

Legal Authorities
Countries, States, Local, Agencies, Taxation, Registrars, Regulators... Public Company (ultimate parent)

Regulates

Complies

Subsidiary Public Company Company (regional parent) Subsidiary Company

Subsidiary Company (business parent) Subsidiary Company Subsidiary Company

Legal Entities
Registered Companies, Funds, Partnerships Inc. LLC. Ltd. SA. GmBH. Etc. exist in the outside world

Managed & analyzed by

Subsidiary Company

Subsidiary Company

Management Orgs
Divisions, LOBS, Plants, Cost Centers, Whatever = Decision Making Tags

Parent companies (LEs) own or control subsidiaries (LEs) No outside ring - must pick an LE LEs create commercial transactions

LEs: Why and What?

Why We Care LEs pay the taxes - need tax registrations Trade between LEs needs intercompany LEs own the money and bank accounts LEs file the accounts, take care of accounting LEs comply with whatever needs compliance: legal in LE What weve done

Addresses, Officers, etc. Enabled First Party stamp Added Establishments: map Registrations to Authorities GRE/LE not touched Authorities as TCA parties LE Configurator

Tabulate your Registered Companies and other forms of LE

Tabulate

Setup and maintain: Legal Entities, Establishments, Jurisdictions, Legal Authorities, Legal Addresses

Where LE fits in
Transaction Taxes Complies & Files, Pays
Registrations with Authorities

Actual Registered Companies, etc.

Maintains its Subledger Documents in many OUs Default Legal Context (DLC)

Business Group GRE/LE

Et Cetera, 11i

Legal Files Entity

Exists Locally

Operating Units

Establishments
Files Registrations with Authorities

Accounts for itself in a Ledger or BSVs

Legal Entity:
Vehicle for compliance

Ledger

Get the LE Right

Compliance Falls Into Place TransactionLets put LEs to work Actual Registered Business Taxes Companies, management needs Group Isolate legal compliance from etc. Complies & Track your registered companies GRE/LE Files, Pays Make your compliance flow more easily

Maintains Et Cetera, 11i its Subledger Accounting Setup Manager Legal Registrations Documents Operating Files Entity Assign books, bookkeeping rules and currency management to with Authorities in many OUs Units your registered companies Default Legal Exists EBusiness Tax Context (DLC) Locally Have your registered companies calculate, file, and pay the Accounts transaction taxes they owe for itself

Establishments

Intercompany in a Ledger Do business between and across your registered companies with or BSVs full legal documentation Files Bank Model

Legal Entity:

Have your registered companies use their money to pay their bills, Ledger Registrations Vehicle for compliance with Authorities et cetera

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Accounting Setup Manager (ASM)

Work Think Manage

Centralized Set-up
Accounting Setup Manager

Define Legal Entities & Associated Rules Ensure Complete & Accurate Setup via Online Checklist Define Multiple Ledgers for Rules & Currencies One Place to manage Your Global Accounting Rules, Currencies, Ledgers, And Ledger Sets

Set Accounting Rules for All EBS Apps

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E-Business Tax

Work

Think Manage

Centralized Global Tax

Less Complex Global Tax Compliance
Business Needs Solution Tax content for certain countries Automation Vertex and Taxware integration for U.S. Integrity checks during setup process Constant Changes in Tax Laws and Regulations Date effective setup Tax rules flow for change or creating rules Tax simulator for setup, rules, and transactions Tax registrations and tax reporting codes Local Compliance Tax lines determine applicable taxes Configurable tax reporting templates Single set up for all Oracle applications Information Visibility Use of E-Business Suite components such as trading partner geography, trading partner classification, legal entity, inventory item categorization, and accounting event.

Oracle E-Business Tax

Processing taxes for transactions and reporting
Transactions

Purchasing Parties Payables Places Products Sales Orders Processes

Determine Regimes Applicable Taxes Tax Status & Rate Taxable Basis Calculate Tax Amount


Compliance, Assurance

Efficiency, Global Visibility

Single Interface for Transactions

Transparent Integration with Tax Partner Services



Extensible

Service Oriented Architecture

Receivables

Tax Reports
- PDF, HTML, RTF - Security enabled

Tax Transactions

Taxes, Rules

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Advanced Intercompany (AGIS)

Work Think Manage

Advanced Global Intercompany System

Address the Top Barrier to a Fast Close
Advanced Global Intercompany System

Web UI

Subledger Invoices & Documents

Open Interfaces / API  Generate subledger invoices Excel (Web ADI)  Control transaction entry with Intercompany Calendar  Fully Configurable Approval Rules  Flexible Security Model  Centrally defined Intercompany Accounts XML Publisher Reports Online Reconciliation Reporting

Dr

Cr

General Ledger

Subledger Accounting

Receivables

Payables

AGIS at Work
Rebilling a Corporate Cost from an USA HQ
GL Entries created for US subsidiaries AP and AR Invoices created for France and Italy

Inter Company

California Company

General Ledger Entries

Subledger Invoices & Documents

Illinois Company

New York Company

France Company

Italy Company

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Banking Model

Work

Think Manage

Centralized Banking
Shared Services Disbursements
Bank account is now associated with LE entity rather than Operating Unit
OU C

LE
OU A OU B

Single bank account serves multiple Operating Units Any and all Operating Units associated with a ledger can be permitted to use the bank account

Inventory

Receivables

Projects

Work in Process

Purchasing

Payables

Assets

Plus
 Centralized Credit Card Model  Credit Card Encryption  Supplier & Customer Banks in TCA

Bank Model: Example of What You Can Do

Pay invoices from different OUs with 1 instruction
OU A

New Payments Module New Bank Model

New Bank & Credit Card Features

OU B

OU C

Single Payment Instruction

Bank

Payments

Sub Ledger Accounting

Invoices

Banks

Legal Entity

Operating Units

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Sharing Services

Work

Think Manage

All Together: Easier To Share Services

Central processing, Distributed impact
Formal SSCs At home or overseas Call Centers, Outsourcing Offshoring, SAS 70, On Demand Informal Service Sharing Process Efficiency Decentralized Depts. Centralized Depts.. Normal Business Practice Ledger and Ledger Sets Subledger Accounting Intercompany, Tax Engine MOAC across LEs, Bank Internal Controls Manager Ledgers & Ledger Sets Ledgers with Balancing Segments MOAC across OUs Intercompany Bank Model Tax

SSCs (Formal) SLAs & Tax Inter-LE

Shared Service Infrastructure (Serves Informal and Formal) Organizational Access Cross Org Processes Banking Model Inter Unit Accounting

What the Architecture Gets You

Work Globally
Global Order Desk Global Procurement Global Billing Global Dunning
Release 12 Subsidiary LEs.

Company

Company

Company

account for themselves in Ledgers, and

Think Globally
Global Ledger Sets worldwide insight Global Reporting

Ledger Set

manage their subledger data in Operating Units

MultiMulti-Org Access Control

Manage Globally
Global Accounting Rules Global Set-up Global Integration

Inventory

Receivables

Projects

Work in Process

Purchasing

Payables

Share Services, maintain privacy

Exploit Cross-OU Processes
Yesterday: An LE Group in 1 SoB with 1 OU - no partitioning

R12: Introduce partitioning without sacrificing processes

Ledgers in Ledger Sets, New OUs

Inventory Inventory Work in Process Work in Process Receivables Projects Inventory Receivables Projects

MOAC

Purchasing

Payables

Assets

Work in Process

Purchasing

Payables

Assets

Release 12: The Global Business Release

Work Globally, to be more competitive Think Globally, to make the right decisions Manage Globally, to lower cost and increase performance
OICM Ledger Sets, Ledgers SLA, Tax XML Publisher Reporting DBI, FCH
General Ledger

Corp. Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Joint Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar Parent Compliance US GAAP / IAS-IFRS Corp COA Corp Calendar National Compliance Local Regulation National COA Local Calendar

A$+$

+$

Profitability Mgr, EPB

Subledger Transactions

Intercompany, Bank, Payments

TCA, LE

MOAC, +300 Features

QUESTIONS