Intercompany Transactions

Presentation

Intercompany Transactions in Oracle

R12 and Differences between Oracle
R12 and 11i
Monday, April 7, 2014
1:00 2:00 p.m.
Level 3, San Polo - 3504
Prepared by:
Paul Kirch & Jay Chandran
Paul Kirch, Inc. and Simplex Data Technologies

REMINDER
Check in on the
COLLABORATE mobile app

COLLABORATE14 Recommended Sessions

Date/Time

Location

Session

Session Title

Presenter (s)

Tue 8 Apr
4:15 PM-5:15 PM

Level 1, Marco
Polo 801

13940

Implementing Oracle eB Tax Globally

With China Golden Tax, India TDS,
European, and Asian VAT & U.S.

Paul Kirch

Tue 8 Apr
5:30 PM-6:30 PM

Level 1, Marco
Polo - 801

13913

Alexander Fiteni

Wed 9 April
11 AM - 12:00 PM

Level 1, Marco
Polo - 801

14526

eBTax Integration Gaps - Resolve

Missing Tax Drivers in Applications
Modules
Fully automating eBTax when
upgrading from 11i to R12 with new ebusiness Tax rules

Fri 11 Apr
11 AM - 12:00 PM

Level 1, Marco
Polo 803

14564

Fusion Tax For European VAT, Best

Practice

Andrew Bohnet

Andrew Bohnet

Upcoming Webinar Series:

July, 2014 Detailed Intercompany in R12
August 2014

Intercompany & Tax Configuration

September 2014

Fusion Financials

Details to be announced on simplexdtech.com

REMINDER
Check in on the
COLLABORATE mobile app

Paul Kirch

Summary:
Paul is a senior program manager with
over 22 years experience managing
programs, with over 10 years delivering
large complex global business
transformation projects. Paul has
worked on and/or delivered 17+ Oracle
full life cycle implementations, and has
extensive international experience
working in Europe, South America,
Israel, and the principal Asian countries.
In addition to his package
implementation experience, Paul has
also led package selection programs,
business process reengineering/
transformation programs, business case
development , and supply chain
operational effectiveness initiatives.
Paul has led programs utilizing Oracle
Financials, Supply Chain, HR/Payroll and
Projects modules in all releases from
Oracle 9.4.2 through Oracle R.12.1.3
and Fusion Release 5.
Paul lives in San Francisco, California
and is currently working in the San
Francisco area on a global
implementation project.

Relevant Work Experiences:

Formerly Director, Oracle EBS and Fusion Practice at large India-based Integrator
Developed proposals and led practice for India-based system integrator. Responsibilities
included creating artifacts for project delivery methodology, creating implementation
methodology for Fusion project and hiring staff into the Fusion Practice. Successful in
selling Fusion projects to 1 regional restaurant chain and to a government national lab.

Client: Major High End Clothing Retailer | Role: Program/ Project Manager
Led a 12 month Oracle R12 Assessment and Implementation project in which project team
assessed the impact of migrating over 400 custom objects to Oracle R12 (12.1.6). Project scope
included Oracle R12 functional and technical upgrade and reimplementation of Oracle Projects
modules (Project billing, costing, management modules) Project solution included Oracle STT eB
Tax solution, Oracle Procurement, iSupplier, HR/ Payroll and OIC. Project value: $4.2 million.

Client: Major Games Software Development Company| Role: Financials & Tax Lead
Led a Order to Cash (OTC) project team tasked with implementing Oracle SOA Suite of products as
part of an Oracle R12 (12.1.6) upgrade project. Team reversed engineered a number of major
modifications created during the Oracle 11.5.10 implementation, using Oracle SLA, Ledger/Ledger
Sets, and eB Tax to replace customizations with standard out of the box functionality. Project
team size: 25 consultants. Project scope: Worldwide, including Asia Pacific and Europe.

Client: Major Construction Company (Brazil & U.S)| Role: AP Lead and U.S Tax SME
Led a project team engaged in the United States implementation of Oracle R12 (12.1.4). Project
scope included: Oracle Financials, including Oracle eB Tax (Sales & Use Tax), Supply Chain, HR and
PeopleSoft Payroll. Project team developed a template to allow company to implement a global
sourcing/ procurement company for Brazilian-based construction project teams.

Jay Chandran

Jay Chandran has over 15 years of diverse experience in the fields of

Finance, Accounting, Business Process Re-engineering and ERP
consulting. He has held senior positions in the Oracle eBusiness Suite
Consulting, a regional accounting firm in California and Corporate
Controllership in the industry. Jay is the Managing Partner of SimpleX
Data Technologies, a managed service provider company in California
that helps companies increase their competitive position by reducing
expenses related to implementation and on-going maintenence of
Oracle ERP and database systems. Jay is a Certified Public Accountant
(inactive status) from California and holds a Masters degree in
Accounting from Ole Miss.

Agenda
Definition of Terms
Conceptual Understanding of Intercompany transactions in Oracle R12:
Internal Drop Shipment
External Drop Shipment
Single Node Intercompany (Internal Replenishment Order)
Global Purchase Agreement (GPA) and GPA Returns
Multiple Node Intercompany
Challenges in R12
Profit in Inventory (PII) and PPV Accounting
Unsupported Multiple Hop Intercompany Transactions
Global Purchase Order (GPA) Returns in 11i versus R12
AGIS (Advanced Global Intercompany System) and Solution Approach
SLA- and GL-based Accounting Solution for PII and PPV
Conclusion

Definition of Terms

Multi- Org Concepts

Ledgers, Data Access Sets, and Ledger Sets

Reporting Currencies and Secondary Ledger(s)
Company Codes/ Balancing Segment Values (BSVs)
Legal Entities
Business Group
Operating Units
Inventory Org

Terms
Data Access Sets can be used to segment Ledgers so that multiple
companies use a common GL with appropriate transactional security
Oracle uses company codes or Balancing Segment Values (BSVs) to
define the level at which debits=credits in Oracle General Ledger. At the
subledger level, Oracle uses the concept of Operating Units to define
separate business units
In Oracle R12, Oracle introduces the concept of a Legal Entity in Oracle
General Ledger. The Legal Entity or Establishment captures the VAT
Registration Number and creates a legal address
The Legal Entity can be used to lock down BSVs. This functionality is
extremely important in Oracle eB Tax in determining the appropriate
rates to use on a specific transaction (place of supply)
Inter-company transactions are defined as transactions between
related-company legal entities; Intra-company transactions are
transactions between BSVs that belong to the same legal entity

Inter-company Overview
Operating Unit Intercompany Functionality: Oracles Operating Unit
is designed to hold an operational entity and its transactions
separate from others OUs. In order for Oracles Shipping Networks/
Intercompany Transaction Flows to work correctly, two operating
units must be defined which transact with one another. Oracle uses
the two operating units structure to enable intercompany
transactions for OM, INV, PA , AR, and AP transactions.
Balancing Segment Intercompany Functionality: The GL Balancing
Segment is designed to maintain an entitys financial information.
With its automatic balancing of I/C journals Oracles GL module
provides I/C functionality that is independent of the OU concept,
described above.
AGIS Intercompany Functionality: In Oracle R12, Oracles AGIS
extends the GIS functionality created in 11i and allows users to
create intercompany transactions, including the underlying I/C
AR/AP invoices. The relationship and entries between Initiator and
Recipient in AGIS define which entities can transact and create
intercompany AR/AP transactions, and whether these transactions
require approval.

History of Intercompany Processing in Oracle

Supported Transactions flows: (from Oracle White Paper)

Internal Drop-Ship (older functionality 10.7)
External Drop-Ship (released in 11.5.3)
Standard Single Node Inter-company (11.5.9)
Global Purchase Agreements (GPA) (11.5.10)
Multiple Node Inter-company (not supported in Oracle R12)
Global Intercompany/ Advanced Intercompany System (GIS/AGIS)

Conceptual Understanding of
Intercompany Transaction Business
Flows

This is a subtitle or bulleted list

Internal Drop Ship

Customer
Bill-to

Ship-to

Sale and
Invoice
Entity A
Selling Entity
INV-Org A
OM: Book Sales Order - Reserve
with Ship-From Warehouse
of Inv Org B
AR: Trade Invoice To Customer
AP: Create IC AP Invoice from
Entity B

Shipment

IC Invoice

Entity B
Shipping
Entity
INV-Org
B
OM: Pick Release, Ship-Confirm, Inv
Interface, Costing
AR: Create IC Invoice To Entity A

External Drop Ship

Customer
Bill-to

Ship-to

Shipment

Vendor
of Entity B

Sale and Invoice

Purchase Order, AP
Invoice

Entity A

Entity B

Selling Entity

Shipping Entity

INV-Org A

IC Invoice

INV-Org B

OM: Book/Reserve to Vendor Site of Entity B

PO: Import Requisition, Create PO

AR: Trade Invoice To Customer

PO: Supplier Ship - Receipt of PO

AP: Create IC AP Invoice from Entity B

INV: Create Logical Transactions in A and B

(Sales Order Issue and IC Receipts) and
Costing
AR: Create IC Invoice To Entity A

Single Node Intercompany (Internal Supply and Replenishment)

Entity A
Selling
Entity
INV-Org
A
PO: Internal Requisition
PO: Create Internal Order
AP: Create IC AP Invoice from
Entity B

Shipment and IC
Invoicing

Entity B
Shipping
INV-Org B
OM: Import Internal Sales Order
OM: Reserve, Pick Release, ShipConfirm, Inv Interface, Costing
AR: Create IC Invoice To Entity A

Vendor
Bill-to

Ship-to

Global Purchase Agreement

(Centralized Procurement)

Receive Purchase Order, Ship to

Entity A
GPA Entity

Shipment

INV-Org A
PO: Purchase Order (Auto)
AP: Create IC AP Invoice from
Entity B

PO: Create Requisition

Requisition for Item

On GPA
Entity C
Accounting
INV-Org C

Intercompany AP

Entity B
Procuring
INV-Org B

INV: Create Intercompany AR

INV: Create Intercompany AP
INV: Create
AP: Create IC Invoice To Entity A
AR: Create IC Invoice to Entity B

AR: Create IC Invoice To Entity A

Intercompany AR

Multiple Hop Intercompany

Entity A
Selling Entity

Shipment

INV-Org A
OM: Import Internal Order
Pick, Pack and Ship

PO: Create Internal Requisition

PO: Create Internal Order

IR/ISO
AR: Create IC Invoice To Entity C

AP: Create IC AP Invoice from

Entity C

Intercompany AP

Enhancement request #
12539412. (Bug 12539412 :
MULTI-NODE INTERNAL
DROP SHIP SALES ORDERS)

Entity B
Procuring
INV-Org B

Entity C
Accounting
INV-Org C
INV: Create Intercompany AR
INV: Create Intercompany AP
INV: Create
AP: Create IC Invoice To Entity A
AR: Create IC Invoice to Entity B

Intercompany AR

AGIS and Solution Approach

AGIS or Advanced Intercompany Syste

SLA or Subledger Accounting
Standard Oracle

Advanced Global Intercompany System

(AGIS)
The resolution to the first problem How do we develop a mechanism to
support multi-hop intercompany trransactions? lay in using AGIS as the
means of creating the required intercompany AR and AP transactions.

Advanced Global Intercompany System

(AGIS)
Create I/C Multi-hop
transactions and
identify these
transactions in the
MTL_Transactions
table

Create an I/C
transaction in AGIS

ADI Spreadsheet Upload

ADI to Load Multihop Intercompany Transactions

Use ADI to create I/C transactions from data elements on

MTL_Transactions table and load to AGIS, creating I/C AR and AP
invoices

Standard Oracle creates a Profit in Inventory (PII) for the Intercompany Single
Node Transaction

Thank you for your time!!