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Dealing with Foreign Currency : “Conversion”

Posted on December 18th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

This refers to foreign currency transactions that are immediately converted at the time of entry to the functional currency of the Set of Books in which the Transaction takes place.

Conversion uses a daily rate that is either supplied by the user or pulled from the Daily Rates Table at the time the transaction is entered.

The Rate Type is simply a label to identify the kind of rate used in a transaction.

In EBS suite, “User” rate Type is reserved, whereas other rate type like "Corporate" and "Spot" used for the seeded data in GL currency table.

When such a transaction is posted, a separate balance is kept in the GL_BALANCES table of all accounts entered in a foreign currency and their equivalent balance in the functional currency.

When you see the information in GL_BALANCES table, which keeps a cumulative balance for the foreign and the functional balance in an account; the rate information is missing. The rate information and the transaction-by-transaction detail is kept in the GL_JE_LINES table. GL_BALANCES only keeps the total amount entered for a particular account in a particular currency and the total functional amount for those foreign transactions. This allows for the segregation of portions of an account balance by the different currencies used in each transaction.

Finally lets compare all three

This table has compares the three Foreign Currency concepts:

JE creation

Related Posts in series for “Dealing with Foreign Currency”

Posted in EBS Suite, Functional, Oracle General Ledger | 1 Comment »

Dealing with Foreign Currency :Translation

Posted on December 16th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Similar to Revaluation, there is another term called 'Translation' , a feature that linked with Foreign Currency transactions in General Ledger.

arrow next redTranslation

Translation is used to translate an entire set of books or balances for a company from the functional currency to a foreign currency.

This feature can translate both actual and budget balances. If the system have enabled average balance processing then the system can translate average balances as well.

Translation is frequently used to prepare financial reports for consolidation into global financial statements.

Translation uses periodic rates and, optionally, historical rates in compliance with FASB52.

FASB stands for Financial Accounting Standards Board which is a group within the Accounting field that issues bulletins on how to account for various financial events.

arrow next redHow does the system translate balances?

As per Metalink Note 1061166.6, FASB52 states that when translating a Trial Balance from one currency to another, the following conventions should be used:

transaltaion

arrow next redHow does the system translate balances?

Assets and liabilities are translated by multiplying the YTD balance by the Period End Rate.

YTD (translated currency) = Rate X YTD (functional currency)

Whereas,revenue and Expense balances are translated using the PTD balance for each period and the corresponding Period Average rate for each period; therefore, translation must be performed for the first period of the fiscal year forward to the period for which translation is required. Rates must also exist in the Period Rates table back to the first period of the fiscal year in which the translation is being performed.

PTD (translated currency) = Rate X PTD (functional currency)

In the Stock and Ownership Equity accounts, historical rates are generally used. but there are certain other special cases requiring the use of Historical rates.

Point that should be noted is EBS GL allows the use of an amount to be used as the translated balance for the account specified rather than calculating the amount using the Historical Rates. This feature allows the translated balance to be calculated outside of the application in lieu of setting up and maintaining the Historical Rates. Historical Rate usage is set up by specifying a range of accounts to use Historical Rate translation. This set-up overrides the above rules for using the Period End and Period Average rates.

arrow next redCumulative Translation Adjustment Account

Since the Balance Sheet and the Profit and Loss accounts are being translated using different rates, the translated Trial Balance is no longer in balance. The amount required to bring the foreign Trial Balance back in balance is called the Cumulative Translation Adjustment or CTA. This account is specified in the Set of Books set-up screen. The accounts and the amounts in them are created and populated dynamically when the Translation process get completed successfully.

You should note that CTA is typically a Balance Sheet account, the account type is determined when the account value is defined for the account

arrow next redSome of the underline report for Translation :

  • Historical Rates Execution Report : This is used to review the historical rates, mounts or weighted-average rates you assigned to individual accounts or ranges of accounts.
  • Translated Trial Balance Report :This is for reviewing account balances and period activity after running translation.

arrow next red..What happen in Oracle when Translation Run?

Translation is very table-space intensive. When this run its roughly doubling one period of data held in the GL_BALANCES table.

arrow next redSuggested Reading at Metalink

  • How Does the Translation Process Calculate the Translated Amounts? Note 188530.1
  • DOES ORACLE APPS COMPLY WITH FASB 52? Note:1061166.6

Related Posts in series for "Dealing with Foreign Currency"

  1. Dealing with Foreign Currency :"Translation"

Posted in Finance, Functional, Oracle Application, Oracle General Ledger | 3 Comments »

Dealing with Foreign Currency : “Revaluation”

Posted on December 14th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Lets take some thoughts on Oracle GL Foreign Currency exposure.As we know three key terminology most wildly used in GL that pertain to foreign currency. They are Conversion, Revaluation, and Translation.Lets start with Revaluation:

redarrow-1

Revaluation - when ,what & why?

Revaluation is used if, and only if, you have foreign currency transactions (i.e.Conversion of foreign currency transactions). Revaluation uses the Period Rates Table. The Revaluation Rate is simply 1/Period End Rate.

redarrow-1The Revaluation Process:

1.)Finds accounts within the range of accounts specified that have all or a portion of their balance derived from foreign currency transactions;

2.)takes the foreign currency portion of the account balance and revalues it using the Revaluation Rate from the Period Rates Table;

3.)figures the difference between the current cumulative functional balance of these foreign transactions and the revalued functional currency balance calculated using the Revaluation Rate;

4.) creates an unposted journal batch to adjust the account balance to the new revalued balance calculated using the Revaluation Rate. The offsetting account is an Unrealized Gain/Loss account specified when running the Revaluation process.

Don’t be confused by the fact that the Revaluation process revalues transactions entered using Daily Rates with rates from the Period Rate table; the rate it is using is simply the "Daily Rate" on the last day of the month stored in the Period Rate Table.

The purposes of Revaluation is to "true-up" liability or asset accounts that may be materially understated or overstated at month-end using an exchange rate at month- end. This understatement or overstatement is caused by an unacceptable fluctuation in the exchange rate between the time the transaction was entered into and the period of interest for reporting, usually at a month-end. Revaluation is only necessary while the obligation remains unsettled (example ..the invoice is still unpaid or the receivable uncollected). The Realized Gain/Loss will be recorded at the time the obligation is settled.

Take a note revaluation can be done on any account, but typically,this is done for balance sheet accounts, whose balance is made up of open
transactions (ie. Accounts Payable, Accounts Receivable).

Revaluation is typically done for reporting purposes only; therefore, the journal entries produced as a result should be reversed in the following period.

Although Revaluation is intended to be used when transacting in currencies because of fluctuating Forex rate in the unstable economies, more and more company who is operating in Multi national environment , normally using this functionality by creating Journal Entries to reconcile their foreign subsidiary intercompany account.

The idea being that they are getting translated balances from their subsidiaries that do not balance to their inter company due to using different rates throughout the month to record inter company transactions.

Revaluation is used to revalue all these transaction at the same rate the foreign subsidiary used to translate their intercompany balance.

redarrow-1How to specifying PTD or YTD Revaluation

We can use the setting in the profile option 'GL: Income Statement Accounts Revaluation Rule'.

The following values are available:

PTD: Only PTD balances will be revalued for income statement accounts.

When you select PTD, the Revaluation program only revalues the PTD balances of your income statement accounts but continues to revalue YTD balances for balance sheet accounts.

YTD: Only YTD balances will be revalued for income statement accounts.
When you select YTD, then the revaluation program behaves as it did before, revaluing YTD balances for both your income statement and
balance sheet accounts.

redarrow-1Formula Used By Revaluation Calculation

YTD:

REVALUATION ACCOUNT AMOUNT= ((begin_balance_dr + period_net_dr - begin_balance_cr -period_net_cr) * revaluation_rate)
LESS
(begin_balance_dr_beq + period_net_dr_beq - begin_balance_cr_beq - period_net_cr_beq)

PTD

REVALUATION ACCOUNT AMOUNT = ((period_net_dr - period_net_cr) * revaluation_rate))
LESS
(period_net_dr_beq - period_net_cr_beq)

Will explore some more in foreign currency functionality area , keep watching...Happy weekend :)

Posted in EBS Suite, Functional, Oracle General Ledger | 6 Comments »

Oracle AIA – Why it’s hot !

Posted on December 13th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

There was lot many news for Oracle AIA this year during OOW ,as foundation pack announcment was made by Charles Phillips in his OOW's keynote during this gala event.Since then this was a huge interest in the subject.

In April this year the first announcement for the AIA was made which was industry-specific business process templates (BPMN) to provide Industry Reference Models (IRM), Oracle EBS, Siebel and Oracle Applications products between the actual move business processes (BPEL) to provide Process Integration Packs (PIP) from it.

Lets take a quick look what is all about and what's makes so hot?

What is Oracle AIA Technology?

This is a framework in which the functionality of Oracle's vast application portfolio - Oracle E-Business, PeopleSoft, Siebel, and JD Edwards - can be recombined and tailored to enterprise needs.

In simple words :A smart integration mechanism , that can support & intergrate the whole bunch of oracle products with EBS or non-EBS products(like SAP) and in this middleware is used to stitching .

The AIA has three components:

  • Industry reference models. These are best practice guides so that the final deployed processes are optimized.
  • Processes Integration Packs which contain out the necessary code to create business process required without risk.
  • Pre built SOA that will run out of the box on Fusion middleware.

aia2

figure : Oracle AIA (Source www.oracle.com)

Oracle have now published a foundation pack which is series of templates and vanilla processes which can be adopted by a 3rd party to meet their requirements.

Technical products inside Application Integration Architecture

  1. BPEL Process Manager
  2. BPEL Repository
  3. E-Business Suite
  4. Siebel
  5. Adapters
  6. Oracle Warehouse Builder

The latest version comprised of the following products

  • Siebel CRM to Portal Billing - Siebel CRM, FMW, BRM & EBS/Oracle Financials
  • Portal Billing to General Ledger - Siebel CRM, FMW, BRM & EBS/Oracle Financials

Summary

Automating business processes across the application running at multiple plaform is normally a very laborious, complex ,costly and time consuming task.Hoping ,AIA seeks to simplify this process and make it more seamless.

arrow next redSupporting Resources

While researching more about Oracle AIA , these are some interesting links:

arrow next redSome AIA News from Oracle:

  1. Oracle Delivers Communications Industry’s First Pre-Built Integrations Across Enterprise Business Applications
    http://www.oracle.com/corporate/press/2007_nov/111207aiacomms.html
  2. "Oracle Introduces the Application Integration Architecture for SAP Initiative; Enabling Customers to Unify SAP Enterprise Applications" Why It's Hot!Why It's Hot!
    http://www.oracle.com/corporate/press/2007_nov/sap-aia.html

Posted in Centrestage, EBS Suite, Emerging Technologies | 4 Comments »

Managing Return Material Authorization (RMA)

Posted on December 13th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Order Management provides sophisticated tracking of your return material authorizations (RMA). Returns from a customer occur for a variety of reasons including damage, shipment error, or sampling. Return material processing functionality enables you to manage customer expectations while controlling inventory receipts and customer credit processing.

These are the different types of senarios of Return Material Authorization (RMA) type which may exist :

  1. RMA with Credit Only : Your company issues a credit without the customer returning the product.
  2. RMA with Repair : Your customer returns a damaged product. Your company repairs and returns the product to the customer.
  3. RMA with Replacement : Your customer returns a product and your company sends a replacement product rather than issuing a credit.
  4. RMA With Receipt and Credit : Customer returns a product and receives credit.
  5. Returned Item Fails Inspection (Exception case) :Rarely happen , here your customer returns product, Company inspects product and rejects it. Company scraps product or sends product back to Customer. In this case, you have the option of performing an RMA transaction of type:
    • RMA with Repair,
    • RMA with Replacement,
    • RMA with Receipt and Credit.

dgreybarrow Below are setup features that have a significant impact on RMA processing.

  • Return Order Type/Line type for return order
  • Document Sequence
  • Item Attribute in Master Item
  • Price List for return order
  • Return reason codes

dgreybarrow Process Flow:

  • Create RMA Order using sales order window in Order Management
  • Book RMA Order
  • Receipt the RMA using receipts window in Purchasing
  • Check the on hand quantity of the item in Inventory to verify that correct quantity was received
  • Generate credit memo in Accounts Receivable (If Applicable)
  • View the credit memo in order management
  • Check the shipped and fulfilled quantity on the RMA line

RMA

dgreybarrow Below is accounting entry get created in this process

  • During receipt of RMA in Receiving Inventory
    • Receiving Inventory Dr.
    • COGS Cr.
  • During receipt into Subinventory
    • Material Dr.
    • Receiving Inventory Cr.
  • During generation of Credit Memo
    • Revenue a/c Dr.
    • Receivables a/c Cr.

dgreybarrow Below is the tables used in this process

  • OE_ORDER_HEADERS_ALL
  • OE_ORDER_LINES_ALL
  • RCV_SHIPMENT_HEADERS
  • RCV_SHIPMENT_LINES
  • RCV_TRANSACTIONS
  • RA_INTERFACE_LINES
  • RA_CUSTOMER_TRX_LINES_ALL
  • RA_CUSTOMER_TRX_ALL

Posted in Oracle Order Management | No Comments »

Oracle Strengthens Its Application Management Capabilities – says Gartner

Posted on December 12th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Read this:
http://www.oracleappshub.com/news/news-oracle-to-acquire-moniforce/

Last week there was big new for acquisition of Moniforce ,to enhance the Application Performance management capabilities with Oracle existing Product.Gartner's in his report published today, they expected Oracle become a competitor within the application management market.

Read More:
Oracle Strengthens Its Application Management Capabilities
Milind Govekar
11-Dec-2007

Posted in News | No Comments »

Understanding Retroactive Pricing in EBS

Posted on December 12th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Retroactive pricing allows buyers to adjust the price on blanket agreement lines and have the new pricing be updated on all release lines that have not been received against. Over the life of purchasing documents price changes, this functionality allows buyers to make sure that the
price on the blanket agreement is the agreed upon price.

The Retroactive Price Update on Purchasing Documents ‘ concurrent program automatically updates existing blanket releases and standard purchase orders retroactively with price changes from the parent blanket agreement or global purchase agreement. Other changes can
include updates to price breaks quantities, ship–to organization or location, new price breaks, and deletion of existing price breaks.

Take a note:

  1. The Retroactive Price Update on Purchasing Documents concurrent program does not update the prices if purchase orders or releases have any accounting entries (receipt accruals, invoices, encumbrance) associated with them.
  2. It does not process documents associated with blanket Agreement lines that are cumulatively priced.
  3. It only considers price updates from lines of blanket agreements that are currently in thefollowing statuses:
    • Approved
    • Closed
  4. It updates the open Blanket Releases and Standard Purchase Orders against Global Agreements

‘The Retroactive Price Update on Purchasing Documents’ program uses Buyer entered parameter values to retrieve blanket agreement lines that have undergone price changes as well as the release shipments created against these lines. It then updates shipments with any new prices from the blanket agreement and update the timesta mp information on release shipments with that of the blanket agreement line.

Purchasing documents that were in an approved status prior to the update can be automatically submitted for re–approval.

Profile option PO: Allow Retroactive Pricing of POs is need to be set, generally it has to be set to ‘Open Release Only’ to update only all open releases on that Blanket and that the PO Change Order Workflow has been configured to allow automatic re–approval of the updated releases and purchase orders.

Posted in Oracle Purchasing | No Comments »

Diagnostics Made Easy : Oracle Diagnostic Tool -II

Posted on December 10th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

rxRead this

Diagnostics Made Easy : Oracle Diagnostic Tool

In earlier post we have seen how Oracle Diagnotics tool makes life easy for everyone. Lets take some intresting stuff inside the tool.

Applications Collection Tool (ACT)

The Applications Collection Tool (ACT) is a test collecting information about apps technical environment and setup of a given product. This tool is executable via Oracle Diagnostics framework under the tab 'Advanced'. Oracle Diagnostics framework is launch able via OAM.

Many time you will get this message "No Groups have been registered for the Advance Test"? What is meant?

You get this message because there are no currently available diagnostics tools for that particular product. So you haven't missed any step... It is correct behavior. Information of all currently available diagnostics tools you can find in the Diagnostic Tests Catalog for E-Business Suite.

Is some things Changed from Security side?

Yes,from Jan-07 Support diagnostics (IZU) patch, diagnostics have now role-based security . It means:

  • Is can be assigned to the current user belongs to one of the valid applications internally defined in the test.
  • The Diagnostic Test available are specific to an EBS module.
  • Each Module's test are organized into a group of related test called "test Group"
  • These grouping are based on what the test scripts have in common from data security standpoint.
  • By having the tests divided into groups, you are able to easily control access, these test groups have a 'sensitivity' assigned as:
    • Low
    • Medium
    • High
  • Role Diagnostic: roles determine the set of operations that can be performed on test groups, based on the sensitivity of the test group. The sensitivity of the test group (high, medium or low) is determined by the developer of the test. The diagnostic roles and tests authorized are as follows.
    Role

    • Super User - User such as SYSADMIN and responsibility like CRM HTML Administration ,Has permission to execute tests, perform configuration, view reports and set up security
    • Application Super User Medium/Low Sensitivity ,All applications - Has permission to execute tests, configure results and view reports Authorized applications - Has permission to execute tests, perform configuration, view reports, and set up security
    • End User those with low Sensitivity , most of the applications has permission to execute tests and configure results.
  • A particular user's access to the diagnostic test is determined by
    • responsibly that he/she is accessing
    • what role are granted to those responsibility
  • If we take a example for BOM module, you will find 5 "test group" , which is listed as:
    • items --Diagnostic test related to Items setup
    • Item Categories---Diagnostic test related to Items Category setup
    • Bills -Diagnostic test related to Bills
    • Routings -Diagnostic test related to Routing
    • ECOs -- Diagnostic test related to ECOs
    • Data Collection - Diagnostic test related to data collection

bom

When should go for Batch Processing?

This option is good when diagnostic test taking too long to execute.This option, located on the home page of the diagnostics framework, allows you to select one or more tests within one or more products for execution in batch mode. It means you can do setup for Period end Close setup in GL as well as Auto invoice setup in AR.

So, this is all about for the Oracle tools diagnostic capability. Now time for comment, question, clarification.:)

Posted in 11i, EBS Suite, General Interest | 1 Comment »

Diagnostics Made Easy : Oracle Diagnostic Tool

Posted on December 10th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Rx

Do you know in Oracle eBusiness Suite Diagnostics is a free tool provided by Oracle to ease the gathering and analyzing of information from your eBusiness Suite specific to a existing issue or setup.

bluOracle Diagnostic Tool Responsibility

The Oracle Diagnostic Tool is provided by Oracle to ease the gathering and analyzing of information from your eBusiness suite when diagnosis an existing data issue, transactional problem or setup error through a complete set up responsibility.

purpOracle Support Diagnostics benefits

Problem Avoidance: Identify and solve potential issues before suffering their symptoms

Formatted Output: Conveniently display the information gathered, the finding of the analysis and appropriate action to take if necessary

Ease to use: This tool is easy to use and is designed for both the functional and technical user. Identify and solve existing issues without external assistance

Self Services Resolution: Resolving Problem without the need to contact oracle support

Reduction in resolution time: minimizing the time spent to resolve an issue by increasing support engineer as well as end user efficiency

No Technical skill required: No special SQL*Plus/operating system access required.

Testing Hub: Because of Central location of all tests, it is the hub for all Diagnostic testing.

yel Important Points

  • The diagnostic tool does not alter the data or setup in your system i.e. no updates, inserts, or deletes happen.
  • Sensitive customer information is not collected or displayed.
  • The diagnostic tool are organized into one of the following groups

Read the rest of this entry »

Posted in 11i, EBS Suite, General Interest | 8 Comments »

R12 SLA vis-à-vis AX of 11i

Posted on December 8th, 2007 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

Read this:

We have already seen oracle new Oracle Sub ledger Accounting replaces the Global Accounting Engine, which normally used for European & Regional Localizations need in earlier versions. SLA itself extends the AX engine functionality by providing customizable accounting rules via a flexible

Is SLA a clone of AX?
Yes, almost the functionality was derived from there itself, lets see vis-à-vis to uptake some of the functionality in these two products.

AX SLA VISAVIS1

Not only functionality, some of the reports replaces the corresponding reports of the Global Accounting Engine.

AX SLA VISAVIS2

The good is that both the Global Accounting Engine(AX) and Oracle Subledger Accounting(SLA) generate accounting from a compiled definition of accounting rules defined by users. Oracle Subledger Accounting further maintains version control on the rules enabling users to modify the rules while maintaining auditability.

What you say..sounds good :)

Posted in EBS Suite, Functional, R12, Release12, Subledger Accounting | 2 Comments »

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