R12 Financials Overview

There are many differences not only in the way that R12 handles your business, but also in the underlying structures of the Financials. Essentially, R12 was designed to accommodate global companies with different accounting requirements who need to allow their data to be shared among different entities.

The most significant of these changes is that in R12, there is no concept of Sets of Books. Ledger and Ledger Sets together replace Sets of Books. The data of a Set of Books is contained in a ledger. The management of the set of books (open and closing, reporting, allocating, etc.) is now at the Ledger Set level A ledger and is defined by the 4 Cs: Calendar, Currency, Chart of Accounts, (these should be familiar as the definition of a set of books), and Convention. Convention refers to the Accounting Method (e.g. GAAP, IAS) used.

From a single transaction ledger, you can generate rules that will populate different subledgers. For example, if you have different tax jurisdictions, you would have a ledger that would track the accounting and reporting necessary for each of the jurisdictions. You would only enter the transaction one time, and then populate that transaction to different ledgers depending on the rules that you create. Detailed transaction information is captured in the subledgers and periodically posted (in summary or detail form) to the ledger. Within the ledgers, you define accounting rules to comply with Sarbanes Oxley, providing an audit trail and easier reconciliation. You can balance at the subledger level. Subledger Accounting allows you to define centralized rules and provides multiple accounting representations of a single transaction in multiple currencies. One of the main advantages is to be able to create a single payment transaction for different legal entities or different operating units and create a rule that allows that transaction to be credited and debited correctly without creating overrides and adjusting entries. A ledger owner might be a legal entity or a group of companies in a common legal environment, or a foreign branch. Ledgers are also used to consolidate financial transactions. Accounting entries can account for themselves in ledgers that are prepared under different conventions with different charts of accounts, and value transactions in different currencies. One of the ledgers is the ‘primary’ ledger. A ledger set is a collection of ledgers that you wish to manage as though they were one ledger. Many functions are available across ledgers:

• Open/Close Periods
• Create Journals
• Translate and Revalue Balances
• View Information
• Submit Standard Reports
• Submit Financial Statements

Another major change is the Multi-Org Access Control (MOAC). MOAC allows you to perform functions across operating units without changing responsibilities. A responsibility is no-longer tied to a single operating unit. Instead, from within HR, you can assign a list of operating units to a responsibility and assign security to that operating unit through a security profile. By setting the operating unit to null, you can import all transactions for all operating units through the open interface programs at the same time. You can also create and report on transactions that cross operating units or operate a shared services center with centralized processing.

In R12, the concept of legal entity has been enhanced. A legal entity exists in the outside world and may be regulated by different governing bodies (i.e. country, state, tax authority). A legal entity pays taxes, has bank accounts, and complies with different regulatory agencies. Transactions that occur between and across legal entities are intercompany transactions. Bank accounts are now associated with legal entities rather than with operating units, allowing for a single bank account to serve multiple operating units. Income statements and balance sheets are generated along with tax forms for every legal entity. In HR, there is the Government Reporting Legal Entity (GRLE) which represents the registered legal entity who is the employer in HR.

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