A Grand SLAM in R12
Taking Advantage of R12 Accounting

This article highlights some of the features of accounting in Release 12, including the introduction of the new Subledger Accounting Method (SLAM). What used to be referred to as a Set of Books is now called a Ledger, and Ledgers and Ledger Sets bring along with them a completely different way of performing accounting in the E-Business Suite. From a single transaction ledger where the transaction is entered one time, you use accounting rules to populate other subledgers. Additionally, the introduction of the Secondary Ledger impacts drill down capabilities and the functionality of reporting currencies, simplifying the financial consolidation process in many cases. This article will focus on (1) the general flow of actions that occurs between the initial subledger transactions and the general ledger balances as well as (2) the impact secondary ledgers have on the flexibility of global operations and financial consolidation.

Subledger Accounting
The above diagram takes you through the journey of transactions made in each module as they make their way to the general ledger. A subledger module captures the detailed transaction data and, in R12, creates the accounting in separate subledgers that are periodically posted (in summary or detail) to the general ledger. The general ledger aggregates the same data at different levels of detail. For example, the Payables subledger module stores credits and debits by vendor invoice, but that detailed information is transfered in a summarized form to the general ledger. Subledger Accounting is not its own module in the E-Business Suite. It serves as a centralized accounting engine in the E-Business Suite, and, through its ability to apply different accounting rules to different sets of transactions, it supports multiple accounting requirements simultaneously. Subledger Accounting enables the user to set invoice actions to “create accounting” directly from the invoice lines, automatically creating journal entries at the subledger and general ledger levels.

The new Create Accounting action in Subledger Accounting comes in three flavors: “draft”, “final”, and “final post”. In draft mode, entries are not posted to the general ledger, but Subledger Accounting creates the relevant journal entries in draft mode. The user is able to validate the resulting entries, change or update the transactions, or update the accounting rules before the entries are transferred to the general ledger. In final mode, the entries are considered processed for accounting and cannot be modified, but they do not automatically post in the general ledger. Final post mode is essentially the same as final mode, but the Subledger Accounting program does in fact post the journal entries to the general ledger balances tables. In looking at the above diagram, configuring an invoice’s Create Accounting action to final post would force the transactions (or invoice lines) to traverse the entire distance to GL Balances once the Create Accounting program is run.

Secondary Ledgers
Aside from Create Accounting, secondary ledgers are another welcome addition in Release 12’s Subledger Accounting. Consider the situation in which a global company is headquartered in the United States but has major operations in both Great Britain and France. In Release 11i, the company would have different Sets of Books for each operation. Since transaction data is not shared among sets of books, it is difficult to do intercompany transactions and to consolidate without a lot of manual journal entries and logging in and out with different responsibilities. In Release 12, Subledger Accounting changes the way organizations can approach financial consolidation and reporting by allowing the creation of secondary ledgers that are (in essence) a different interpretation of the primary ledger transactions. Each R12 subledger is defined by four factors: the Chart of Accounts, the Calendar, the Currency, and the Accounting Method. As can be seen in the below image, US Operations has defined its primary ledger as comprised of the US Chart of Accounts, the US Calendar, USD as the functional currency, and Standard Accrual as the accounting method.

When Great Britain Operations defined its ledger, it decided that it would use the US Chart of Accounts, the US Calendar, GBP (Great Britain Pounds), and Standard Accrual. While the British Operations are using GBP as their currency, the remainder of the ledger is exactly the same as for the US Operations. For France, however, setting up a simple reporting currency in the primary ledger would not allow US headquarters to have global visibility of the company since the French ledger’s chart of accounts, calendar, and accounting method are different from the US ledger (the French ledger employs the France Chart of Accounts, the France Calendar, the Euro, and International Accounting Standards). There are two ways to get visibility into France’s operations: (1) either the US could set up a secondary ledger using the French Chart of Accounts, the French Calendar, the Euro, and the IAS accounting method, or (2) France can have its own transaction ledger with a secondary ledger that is mapped to the US ledger. In either case, the transaction is entered once, and then rules create the accounting entries in the secondary ledger. The second of these two options is depicted here:

The use of multiple reporting currencies and secondary ledgers allows both local and consolidated financial reporting to occur simultaneously for each operational unit of the business. One can see how the Create Accounting function of Subledger Accounting allows for a single business event (such as a French expense) to create journal entries on multiple ledgers (in this case, on both the primary and secondary French ledgers).

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