Accounting Transformation Configurations in Accounting Hub Cloud

What is Accounting Transformation?

To use Accounting Hub Cloud, accounting rules need to be established with the use of accounting transformation. Accounting transformation is a mechanism that helps you to manage the creation of accurate, detailed, auditable accounting journal entries and reference information for transactions that were recorded from a third party system.  And finally, those journal entries are pushed and posted to the General Ledger application. 

Planning and Modeling Subledgers

The first thing that needs to be done is to plan and model the custom subledger applications that will be registered in Accounting Hub. You would need exists to have separate control over accounting and other business operation decisions for a specific source system. 


If you look at the example below, we are presuming that we have a third-party application system that processes loans and billing:

For loan processing, we might be using a separate application for dealing with commercial loans and a separate application for dealing with individual loans. In that case, we need to register them as two separate subledger applications. Within that, we are going to have to determine what type of transactions are recorded in those individual subledger applications. In the example, both of them have a Transaction Type of Fixed Rate Mortgage and Adjustable Rate Mortgage.

In the same example, we have another third-party point of sale system that handles customer billing. This needs to be registered as a separate subledger application. Within that, there are two different entities that are operating in the US and UK. This can be registered together as one subledger because they can possibly share accounting methods and accounting rules.

Implementation Process for Accounting Transformation

There are six steps that are involved in the entire implementation process, but can be summarized into 3 Phases: Analyze, Build, Implement and Test. So whenever you are implementing the solution, you will have to keep these six steps always in mind, and they will give you a summarized idea of the implementation steps that you need to follow within the accounting transformation process.

The Analyze Phase is where you will analyze and identify transaction life cycle within the third-party application for transactions or activities that must be accounted and then you will analyze accounting, reporting, audit, and reconciliation requirements for each of the transaction types that you manage within those source systems.

For an in-depth explanation of the Analyze Phase, check out a separate article: Overview of the Accounting Transformation Analyze Phase in Implementing Accounting Hub Cloud.

The Build Phase is where you will actually register the source systems into the application. And then you will configure the accounting rules, and assign accounting methods to the respective ledgers. Whatever source system you have registered, you will have to build your event model underneath it. An event model basically represents the transaction types that you are managing in your source system applications which have financial impact in the Accounting Hub Cloud to make them eligible for accounting. Event Model will then have Event Classes and for each event class, you must establish the logic to generate the accounting entries by setting up the accounting rules and by establishing an accounting method.

For an in-depth explanation of the Build Phase, check out a separate article: Overview of the Build Phase in Implementing Accounting Hub Cloud.

Implement and Test Phase is the stage where you will implement and test the accounting methods by assigning them to ledgers to create a complete definition of accounting convention for the transactions and activities of each source system. Here, you will upload your transaction data from the source system as a sample data for testing purposes to ensure that all the accounting is correctly generated. Once confirmed correct, you can start moving setups into the production environment, and then start uploading your transactional data on a day-to-day basis, and start generating accounting entries for them.

Soon to follow!

• Manage the accounting transformation accounting methods
• how to create and process accounting entries,
• optional manual features of subledger accounting,
• advanced features of subledger accounting.

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Overview of Oracle Accounting Hub Cloud

What is Oracle Accounting Hub Cloud?

Oracle Accounting Hub Cloud provides the option to bring transactional data from external systems into the cloud with use of the Subledger Accounting engine. Accounting Hub is a very useful solution if you want to utilize a single, rule-based accounting engine for various external applications that records your organization's day-to-day transactions.

These external applications (called Source Systems) are typically industry-specific applications that are either purchased from third parties, or they have been homegrown within the organization. Typically, these source systems are not be capable of generating rule-based accounting entries. Examples of such source systems could be core banking application, insurance policy administration system, billing applications, loan processing applications, and a point of sale (POS) system.

Rather than having a separate accounting rule logic for each source system, you can also register these systems in Oracle Cloud and use Accounting Hub for account derivation and have a unified accounting engine repository where you can maintain and apply your accounting rules, bring the data from all the external transactional applications, then push the accounting entries into the GL application.

Advantage of using Oracle Accounting Hub

With the help of Oracle Accounting Hub Cloud, you can:

1. Get the flexibility and control that you need in the implementation, expansion, and maintenance of user-defined subledgers to adopt in a flexible business environment.
2. Configure accounting rules to meet your corporate and statutory requirements. 
3. Automate and control the processes that transform source system data to recording detailed auditable journal entries.

You can also use the modern reporting tools that are available in Oracle Cloud to reconcile the accounting journal entries. This will actually reduce the workload during the period-end processes. And you can also gain insightful information for your day-to-day business, for corporate performance, and for making business decisions.

Oracle Accounting Hub also helps you integrate and align information from virtually any source system into Oracle Financial Cloud services. It gives customers the freedom and flexibility to choose the tools they want we use to run their business as they start their transition to cloud-based computing. This capability provides a smooth transition to cloud computing for our Oracle Financials Cloud customers because they can continue their financial operations on existing systems while centralizing the critical information for management decisions, audit, and compliance to a central cloud service for easy access across the globe.

How does Oracle Accounting Hub Work?

For Example, you have an external Point-Of-Sale (POS) application where you actually manage your day-to-day transactions. We will register this POS system as a User-defined Subledger application within the Oracle ERP Cloud and import its transactions. With the use of the Accounting engine, we are going to generate the accounting entries of these transactions based on the rules that we have configured. And finally, these accounting entries are posted to the General Ledger application. From there, we can utilize the balances for complying with the management reporting requirements, audits and reconciliations, and to comply with statutory reporting requirements as well.

Accounting Hub Cloud Components

General Ledger. Oracle Accounting Hub Cloud comes along with Oracle General Ledger, where you will post all your actual balances. Oracle General Ledger provides journal entry import and creation, real-time balance storage, and accounting controls, intercompany balancing, and the period close functionality. It also comes along with a calculation manager, which helps you to define allocation rules using complex formulas. It helps you to automatically generate the allocation journals based on those allocation rules and helps you in also utilizing the in-house journal approval solution. And finally, you can also utilize the GL for your year-end process management as well. When journals are posted, the Essbase Cube, a multi-dimensional table that holds journal balances, is updated and you can generate reports of your organization's financials data.

Financial Reporting. Oracle Accounting Hub Cloud uses various Financial Reporting tools built in Oracle Cloud. Financial reporting is dependent on the data that is stored in the Essbase Cube, which will help you in faster and easier access to your balances by using various reporting tools.

Every time a transaction or journal is posted in the journal ledger, the balances cubes are updated at the same time with pre-aggregated balances at every level of summarization in your account hierarchy. This is leveraged by reports for quick processing. And you can extract the data in a much faster way because it is stored in a pre-aggregated format.

It helps you to slice and dice the data across dimensions. So you can easily move the definitions from rows and to columns, columns to rows. You can place them in terms of the page level. So it exactly works like a work table. And apart from that, you also get the flexibility to drill up and down and across on any parent level within the scope of your journal accounts.

Tools like Oracle Transactional Business Intelligence (OTBI) and the BI Publisher allows you to use seeded Financial reports across your enterprise in multiple formats. It gives you the flexibility to extract your balances in various formats including PDF, Excel, PPT, Word, etc. So that gives you a lot of flexibility because different stakeholders would like the data to be in their respective format so that they can utilize in a proper way.

Accounting Transformations. To transform the transactional data into Subledger accounting Entries, you need to use the accounting transformations. Accounting transformation is a mechanism that helps you to manage the journal entries for the transactions that would have been recorded in a third party system.

You will actually transform the transactional data that is imported from those third party applications into actual journal entries. And finally, those journal entries are pushed and posted to the journal ledger application.

For more information on Accounting Transformations, check out a separate in-depth article: Accounting Transformation Configurations in Accounting Hub Cloud.

Outbound Integration. You can also manage outbound integrations with Oracle E-Business Suite and PeopleSoft General Ledgers if you're already managing your transactional activities in any one of these two applications. You can even get the final posted balances from the GL of these applications into the Oracle Accounting Hub platform.

Configurations needed for Oracle Accounting Hub Cloud

1. You will need to Register Source Systems into Oracle Cloud using the Rapid Implementation Spreadsheets
2. Create the needed Accounting Transformations.
3. Upload the transactional data using various mechanisms such as a file-based data import or a web service

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General Ledger Accounting Configurations in Oracle Fusion Applications

Every ledger must have the "4Cs":
- Chart of Accounts  (CoA) - helps organize the data
- must be associated with A Calendar - the Calendar identifies the time frame
- the Currency provides a financial measurement
- Convention - Accounting Convention - the statutory requirements of how we conduct our accounting.

Whether or not we're talking about a primary ledger or a secondary ledger, they must have these elements.

General Ledger Accounting Cycle

1. Open Period
2. Create Journals Manually / Import Journals from SLA / Reverse Journals
3. Post Journals to Update GL Balances and the Cube
4. Review GL Balances and Reconcile Balance Sheets
5. Run Revaluation for Foreign Currencies and Translate Balances (i.e. from UK to US)
6. Perform Consolidations 
7. Review GL Balances and Reconcile Balance Sheets
8. Run Financial Reports
9. Close Period

Overview of Oracle Financials

Below is a quick diagram of the Oracle Financials Cloud Modules and how they all interact with each other. Note that most of these modules are also found in Oracle E-Business Suite.

Below summarizes some of the important modules in Oracle Financials:

General Ledger (usually abbreviated to GL)

• The Financial application that records all the finalized transactions of an organization
• Deals with Ledgers, Periods, Currencies, Accounting Convention (sometimes called SubLedger Accounting Method) and finalized financial reporting

SubLedger Accounting (usually called SLA)

• A subset application of the General Ledger that holds all the finalized transactions of the other modules (somewhat like an interface).
• Transferring data from Subledgers to the General Ledger can be done on the Balances, Journal and Subledger Level (Lowest to Highest, respectively)
• More information on a separate article: Overview of Subledger Accounting in Oracle Fusion Applications

Payables (sometimes called Accounts Payables or AP)

• The Financial application that deals with Suppliers and Payments
• Also linked to the Procurement Module via Purchase Orders and Requisitions
• Invoices can be automatically created once a Supplier has delivered the ordered goods and the organization has confirmed it.
• The Payment process can then be initiated and electronically transmitted to the Bank for Processing.
• Run Create Accounting to Transfer to SubLedger Accounting (SLA)

Expenses

• A subset application of Payables that deals with employee expense reimbursement such as Travel, Food, Accomodation, etc.
• Expenses Can be entered via Spreadsheets, Mobile Application and usually goes through an approval process
• Once approved, the expense will become a Payment Request in Payables for Reimbursement to be paid to the Employee
• Follows the same process of "Create Accounting" through Payables

Assets (sometimes called Fixed Assets in EBS)

• The Financial application that deals with Company Assets and how their value fluctuates over time.
• Can be linked to Payables when an organization orders goods that are tagged as an Asset.
• Assets can then be posted into the "Asset Book" and starts the Asset life cycle (Appreciation, Depreciation, Transfer, Adjustments, Retire, etc.).
• Run Create Accounting to Transfer to SubLedger Accounting (SLA)

Receivables (sometimes called Accounts Receivables or AR)

• The Financial application that creates and sends Invoices to Customers (can be created Manually or interfaced via AutoInvoice from Projects, third-party applications, etc.)
• Receipts are then issued once customers have paid the Invoices
• Run Create Accounting to Transfer to SubLedger Accounting (SLA)

Advanced Collections

• A subset application of receivables that deals with customer payment collection.
• Collectors can review delinquent, non-paying Customers and issue a reminder in the form of Dunning.
• Customers can then issue a Promise to Pay letter or raise a Dispute on payments.
• Every action a collector and customer is recorded in the application and can automatically raise flags/reminders when thresholds are not met.

Cash Management (usually abbreviated to CM)

• Reconcile Bank Statements to and from the Bank and link up to transactions within the application such as receipts
• Includes Miscellaneous Transactions such as Bank Interest and charges
• Cash Forecast and Positions
• Transactions such as External Transactions (Bank Charges or Interest Income) and Bank Account Transfers initiated from the Cash Management application goes into SubLedger Accounting

Tax (called E-Business Tax in EBS)

• Module responsible for the Calculation for Tax for both AR and AP
• Can be automatically linked to third-party tax providers such as Vertex
• Defines the Tax Regimes, Rates and Tax Recovery Rates, depending on the geographical area

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Overview of General Ledger in Oracle Fusion Applications

General Ledger 

Every ledger must have the "4Cs":

1. Chart of Accounts  (CoA) - helps organize accounting the data into segments
2. Calendar - the Calendar identifies the time frame of the transaction
3. Currency  - provides a financial measurement
4. Convention (or called Accounting Convention) - the statutory requirements of how we conduct our accounting (i.e. IFRS, US GAAP, etc.)

Chart of Accounts:

- Minimum of 2 Segments, Maximum of 30 Segments

Three types of Ledgers:

1. Primary Ledger
2. Secondary Ledger
3. Reporting Currency Ledger

You may have multiple Primary Ledgers for each each Legal Entity, depending on the country you're implementing for. A Secondary Ledger also shares all the data as the Primary Ledger, but may have a different accounting convention (i.e. US GAAP and IFRS).
A Reporting Currency Ledger shares all the data as the Ledger its attached to, but may have a different Currency (i.e. US to JPY). Note that one can have a separate Reporting Currency Ledger attached to a Primary and Secondary Ledger.

The Accounting Calendar defines

You may know more about Opening and Closing Accounting Periods on the Article "Overview of General Ledger Periods Cycle".

A quick checklist on the whole General Ledger process is shown in the Article: "General Ledger Accounting Cycle".

Transferring data from Subledgers to the General Ledger:

1. Balances Level - Lowest Level of Detail
2. Journal Level - Moderate Level of Detail
3. Subledger Level - Highest Level of Detail

Overview of General Ledger Periods Cycle

Accounting periods (or called GL Periods in Oracle Applications) is one of the most important aspects in a General Ledger. It defines how the transactions will be grouped together based on dates (usually their actual transaction dates) and also defines the accounting calendar. This concept applies to both Oracle Fusion and Oracle E-Business Suite. Below is a simple diagram depicting GL Period Cycles:

A quick sample is below:

Period Month	Period Status	Remarks
May 2018	Permanent Close	Can never be re-opened and Posting not allowed
June 2018	Soft Close	Can still be re-opened in case of Omission/Incorrect Data. Need to have Financial Statements re-stated.
July 2018	Open Period	Allows transactions, Receiving and Posting
August 2018	Future Enterable Period	Allows transactions and Receiving but no Posting
September 2018	Never Opened	No transactions and receiving allowed

Below is a quick checklist to follow when closing periods from a GL Perspective:

1. Import data into the Interface from other sources (Subledgers, Third-Party Applications, etc.)
2. Transfer transactions from the Interface into the General Ledger
3. Verify that all Journals are already Posted
4. Perform Allocations
5. Perform Revaluation for Trade Accounts containing foreign currency transactions
6. Reconcile Account Balances
7. Translation of Balances to the Parent Currency
8. Consolidation of Subledgers to the Corporate Ledgers
9. Run Analytics and Financial Analysis
10. Close the Period and Open the Next Period

Some companies never do a permanent close in case they need to do some corrections.

What they sometimes do is they only close out the all the periods of a certain calendar year when the external auditors are satisfied and provide a clean audit report for the said year.

It all depends on your accounting policies and strategies that fit your legislation and accounting methods.

Below is a quick demo on Opening and Closing Periods in Oracle Fusion Applications:

More details on Opening and Closing Accounting Periods posted on the Oracle Documentation.