Upgrade to R12 Now Improvements in Cost Management

Presented by: Douglas Volz

Upgrade to R12 Now OAUG eLearning Sessions

Presentation
Upgrade to R12 Now A Financials Overview Upgrade to R12 Now A Deep Dive into General Ledger Upgrade to R12 Now The International and MultiNational Arena Upgrade to R12 Now Improvements in Cost Management Upgrade to R12 Now Manufacturing and Order Processing Upgrade to R12 Now Realizing Enterprise Value with Projects R12 Upgrade to R12 Now Round Table Discussion

Date
Jul 19, 2012 Jul 26, 2012

Presenter
Lee Briggs Mohan Iyer Marsha Edgell/Thomas Simkiss Douglas Volz

Company

Aug 2, 2012

Aug 9, 2012

Aug 15, 2012

Bob Bullman

Aug 23, 2012 Aug 30, 2012

Mike Lennon Thomas Simkiss

Douglas Volz
Professional Summary Helping people use Oracle since 1990 for Cost Accounting and related Financials, Manufacturing and EAM modules. 30+ years industry, design and consulting experience, specializing in the design, implementation and project delivery for Cost Management business solutions Specific areas of expertise include profit in inventory, intercompany, A/P accruals, multi-org inventory reporting, WIP analysis, inventory reconciliation and margin analysis Presenter at Collaborate (OAUG) and UKOUG since 1996 Multi-national experience in twelve countries Qualification Summary Former co-designer for Oracle Cost Management Lead the OAUG Cost Management Special Interest Group Prior Accounting and Cost Management industry experience

+1 510 755 7050 doug@volzconsulting.com www.volzconsulting.com

Sample Project Experience:

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Contact Information
Thomas Simkiss, JD, CPA Tsimkiss@BizTech.com Lee Briggs Lbriggs@BizTech.com Bob Bullman Bbullman@BizTech.com Mike Lennon Mlennon@BizTech.com Mohan Iyer mohan@fscpsolutions.com Marsha Edgell Medgell@BizTech.com Douglas Volz doug@volzconsulting.com 4 4

Agenda R12 Cost Management Related Features

MOAC Multi-Org Access Control Subledger Accounting OPM & Discrete Costing Re-Designed A/P Accruals COGS Recognition Cost-Related BOM Features Period Close Drilldown As-of Dates for Inventory Valuation Reconciliation Challenges Cost Rollup Changes Summary

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R12 Multi-Org Access Control

Mostly affects operating unit level functions Allows you to access information across multiple operating units without changing responsibilities Set up a security profile listing the operating units to access Run Security List Maintenance concurrent program Assign the security profile using the MO: Security Profile

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R12 Multi-Org Access Control

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SLA: Primary and Secondary Ledgers

Primary and Secondary Ledgers
In Release 12 Subledger Accounting replaced Global AX Primary to secondary ledger mapping is much better

Corporate Consolidated Ledger Secondary Ledger

Korea (KRW)

Corporate Consolidated Ledger (USD) European LSPs SLs LSPs European PL (USD) USA PL (USD)

Switzerland (CHE) Asia-Pac LEs Swiss PL (USD)

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Oracle Discrete Costing and SLA

Flexible variance account recognition for:
Invoice price and purchase variances Average cost adjustment Standard cost adjustment Manufacturing variances Account aliases Freight charges Most other inventory, manufacturing and related account entries

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Oracle Process Costing and SLA

Converged inventory model (started in Release 11i) Inventory Organizations that are Process will use Process Costing Process users are denied access to Discrete Costing forms Process Enabled organizations can not setup costs in the Discrete Costing application Sub Ledger Architecture (SLA) replaces OPM MAC

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OPM MAC Transitions to SLA

11i OPM
GMI
(OPM Inventory)

Purchasing

Order Management

GMD, GME

Cost Setup

Calculate Cost

Store Costs

MAC

Oracle GL

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OPM MAC Transitions to SLA

R12 OPM
Oracle Inventory Purchasing Order Management GMD, GME

Cost Setup

Calculate Cost

Store Costs

SLA

Oracle GL

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OPM MAC Transitions to SLA

OPM MAC
Completed material and/or resource transactions

SLA
Completed material and/or resource transactions

OPM Costing Engine generates costs

OPM Costing Engine generates costs

Cost Pre-processor will create accounting Events OPM Subledger process processes these transactions to create Journal entries SLA accounting program processes the events to create the journal entries

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OPM MAC Transitions to SLA

Most of the steps are automated using migration scripts All the Account Definitions are migrated as ADRs Manual Steps to be completed include:
Assign Account Derivation Rules to Journal Line Definitions Validate Application Accounting Definition Assign User Subledger Accounting Method to Ledger

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OPM MAC Transitions to SLA

Historical OPM Subledger distribution data not migrated to SLA Data refers to OPM Inventory Historical data available in query mode

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OPM MAC Transitions to SLA

Update the Account Derivation Rule conditions. Ex: Add Item/Item Class/Organizations

Validate the Application Accounting Definition

Run OPM Accounting Pre-Processor Run OPM Accounting Pre-Processor

Run Create Accounting in Draft mode

Check Create Accounting report and Journal Entries report

Run Create Accounting in Final mode to create GL accounting entries

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OPM MAC Transitions to SLA

NO LOSS of functionality by moving to SLA model New menus created under OPM Financials for new SLA forms Fiscal Policy and Event Fiscal Policy screens retained with minor modifications. Most of the fields will be read-only. OPM Event model mapped to SLA event model

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SLA Process Overview

Subledger accounting is an intermediate step between subledger products and the Oracle General Ledger Each transaction that requires accounting is represented by a complete and balanced subledger journal entry, stored in a common data model.

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SLA Setup and Process Overview

JOURNAL ENTRY SETUPS PROCESS Enter Transaction(s)

Define/copy and modify account derivation rules

Cost Manager Define/copy and modify journal line types Create Accounting* Define/copy and modify descriptions Transfer Journal Entries to GL

*Run Create Accounting Cost Management concurrent request for accounting all transactions from the Cost Management SLA responsibility. Receiving Accounting can be generated in the Purchasing and Costing responsibilities using the Create Accounting Receiving concurrent request. These requests have an option to transfer the entries into General Ledger, as either unposted or posted. A separate G/L process is also available.

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Subledger Accounting
SLA Transaction Process Flow
Accounting Configurations Transactions Subledger Journal Entries GL Journal Entries and Balances Subledger Balances Journal Entry Setup

Accounting Program Accounting Events

Cost Management

SLA

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Subledger Accounting
SLA Basic Architecture
Enter Transaction(s)

OPM and Discrete Cost Managers

Same Cost Transaction Accounting Tables as in R11i

One Common Accounting Subledger Table

Transaction Accounting Tables

SLA Accounting Tables

XLA_EVENTS XLA_AE_HEADERS XLA_AE_LINES XLA_DISTRIBUTION_LI NKS GL_ INTERFACE

G/L Tables
GL_LEDGERS GL_JE_BATCHES GL_JE_HEADERS GL_JE_LINES

Create Accounting

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R12 Cost Accounting and Inquiries

(Discrete Costing Example)

Even if you use Standard Costing in R12 you must record accounting entries by cost element

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Subledger Accounting and Inquiries

(Discrete Costing View Accounting Example)

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New SLA Reports: Journal Entries & Account Analysis Reports

Menu path: System Administrator => Security => Responsibility => Request

Use System Administrator to put this on your custom menu and custom Request Group

There are two G/L SLA reports to try. You may prefer the Account Analysis Report as it has the account range parameters already displayed
(XLAAARPT)

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New SLA Reports: Subledger Reporting Across All Modules

Custom Menu Path: General Ledger, Vision Operations (USA) => Reports => Request => Standard => Account Analysis Report

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New SLA Reports: Subledger Reporting Across All Modules

Custom Menu path: Cost Management => Report => Transactions => Account Analysis Report

Tailor this report in BI Publisher to add or remove available columns.

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New SLA Reports: Subledger Reporting Across All Modules

Custom Menu Path: General Ledger, Vision Operations (USA) => Reports => Request => Standard => Journal Entries Report

Tailor this report in the Concurrent Program definition to display additional parameters such as account ranges. They are seeded but not displayed
(XLAJELINESRPT)

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New SLA Reports: Subledger Reporting Across All Modules

Custom Menu path: General Ledger, Vision Operations (USA) => Reports => Request => Standard => Journal Entries Report

Tailor this report in BI Publisher to add or remove available columns.

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New SLA Reports: Subledger Reporting Across All Modules

Menu path: System Administrator => Concurrent => Program => Define => Journal Entries Report

There are many available parameters for you to use. Customize the BI Publisher template to enable these parameters

These same concepts work for the Journal Entries Cost Management Report as well

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COGS Recognition
In R12 customer shipment entries go to deferred COGS Revenue and COGS are explicitly matched AR: Autoinvoice & Revenue Recognition Master Program CST: Inventory Cost Processor or Record Order Management CST: Collect Revenue Recognition Information CST: Then Generate COGS Recognition Events New Accounting Entries to clear deferred COGS Use the COGS Revenue and COGS Matching Report
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COGS Recognition Accounting Entries

New Accounting Entries to clear deferred COGS
Inventory 1. Customer Shipment 2. COGS Recognition Deferred COGS True COGS

10

10 10 10

Use the COGS Revenue Matching Report

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New Deferred COGS Account

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COGS Recognition (Continued)

Dependencies
This new feature introduces a dependency in the Receivables and Costing period close processes Costing will process COGS recognition events in a closed inventory period until the Receivables period status is set to CLOSED You have to run Create Accounting after you have closed your inventory orgs
Having to remember to run COGS Recognition Processes followed by Create Accounting may create confusion at month-end Slide 33

Related BOM Features

Fixed Component Usage Support:
Support for lot-based materials that have a fixed usage regardless of the job size for discrete WIP jobs, OSFM lot-based jobs and Flow Manufacturing

Component Yield Support:

You can now specify component yield factors which are separate from the assembly shrinkage. The Cost Rollup and related WIP and Planning programs support this new feature.

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Period Close Diagnostics

Forms Drilldown
Using the same Inventory Accounting Periods form you can drilldown to associated forms to view the problem transactions

New workflow to notify of failing transactions Period Close Pending Transactions Report
Report for the transactions holding up the inventory accounting period

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A/P Accruals
Perpetual A/P Accruals are Completely Rewritten
Monthly load into summary tables Excellent detail and summary reporting (same report/two templates) A/P Accrual write-offs go to your G/L Works right out of the box!

Period End Accruals:

Calculate Accrual Balances at PO Distribution Level Period-end accrual entries stored in a separate accounting table and automatically reversed in the new month Uninvoiced Receipts Report and Period-End Accruals use same underlying code / same results Slide 36

A/P Accruals
Challenges with R12 Perpetual A/P Accruals
Only shows your net position, only remaining balances
Must reconcile month-by-month, cannot go back Can be difficult to identify reconciliation issues

Intercompany A/P Accruals are now on the Miscellaneous A/P Accrual Reconciliation Report

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Reconciliation Improvements
Inventory Value Reports have an As of Date
Inventory Value Report Receiving Value Report Intransit Value Report All Inventories Value Report

This new feature solves the report cut-off issues at period-end

Slide 38

Reconciliation Challenges
Subledger Accounting and Inventory Reconciliation
Most Release 12 Valuation Reports No Longer Show Accounts
Release 12 dropped the valuation accounts on most inventory reports as you could change your SLA rules and affect your valuation accounts

These Reports Dropped Because of SLA Concerns:

Receiving Value by Destination Account Report Subinventory Account Value Report Cost Group Account Value Report If you accrue expenses at time of receipt, you have limited visibility for expenses remaining in your Receiving Inspection asset balances Slide 39

Reconciliation Challenges (Contd)

Material and WIP Distribution Inquiries and Reports
Release 12 Material and WIP distribution inquiries & reports do not reflect the SLA results But SLA Journal Reports do not show operational information
(you can tailor the output, there are another 50+ hidden fields)

Release 12 records the Material accounting and WIP accounting entries by cost element rendering the old 11i inquiries and reports more difficult to use, especially for Standard Costing.
If using Standard Costing, in R12, all WIP & Material accounting entries are written by Cost Element / you can summarize in SLA but you dont have the same detail reporting in SLA The material transaction accounting table may triple in size when you go from R11i summary entries to R12 entries by Cost Element Slide 40

Subledger Accounting
SLA Basic Architecture
Enter Transaction(s)

Cost Manager

Same Cost Transaction Accounting Tables

One Common Accounting Subledger Table

Transaction Accounting Tables

SLA Accounting Tables

XLA_EVENTS XLA_AE_HEADERS XLA_AE_LINES XLA_DISTRIBUTION_LI NKS GL_ INTERFACE

G/L Tables
GL_LEDGERS GL_JE_BATCHES GL_JE_HEADERS GL_JE_LINES

Create Accounting

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Cost Rollup Changes

The Supply Chain Cost Rollup and Cost Rollup have been combined

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Cost Rollup Changes

When you specify an Assignment Set you run the Supply Chain Cost Rollup Slide 43

Reporting Changes for R12

(12.1 & Above)
Latest Release 12 has XML reports, lots and lots of them (But not where you expect them)

Slide 44

Summary
Subledger Accounting solves many account classification issues Yet Subledger Accounting causes additional reconciliation headaches Yet one more interface and batch job More levels of indirection: multiple accounting tables Which accounting table to tell your auditors and how to explain to them it is different? Must run Cost Management Subledger Period Close Exceptions Report (by ledger but you can use Ledger Sets as well)

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Summary (Continued)
COGS Recognition works well, just have to get used to having new inventory COGS entries after you close the inventory accounting periods New period close diagnostics Inventory reconciliation issues are improved and also hindered in Release 12
Inventory value reports have as as of date But most inventory value reports have no valuation accounts Still only single warehouse Period Close Reconciliation Report not multi-org
(consider custom reports from period close snapshot table CST_PERIOD_SUMMARY)

Cost Management Reports Now Use BI Publisher

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For More Information

OAUG Cost Mgmt SIG: www.volzconsulting.com/oaugcostsig.html Collaborate Papers: www.volzconsulting.com/resources.html

Collaborate and OAUG Cost Management Presentations A/P Accruals (Cost Mgmt SIG):
March 2011 Presentation A/P Accruals for Release 12 May 2011 Presentation Tracing Sale of Inventory Through Oracle November 2010 Presentation Inventory Reconciliation Collaborate09 Presentation Cost Accounting As You Want It EBS R12 Cost Accounting with SLA Overview of Discrete Costing for Manufacturing Slide 47

COGS Recognition (Cost Mgmt SIG): Inventory Reconciliation (Collaborate and Cost Mgmt SIG): Subledger Accounting (Collaborate and Cost Mgmt SIG):

Overview of Discrete Costing (OAUG Discrete MFG SIG Nov. 2010):

Acknowledgements

Oracle Cost Development Partners in crime at my clients

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Douglas Volz (doug@volzconsulting.com) Professional Background

Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in Project and Cost Management. He has 30 years accumulated experience, including 5 years in Oracle Development (codesigning Oracle Cost Management) and 12 years in industry in Cost and Accounting Management positions. His Manufacturing and Cost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation, and multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous management accounting positions for telecommunications, defense, and electronics companies. In his consulting roles, Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P.R.O.C., Norway, Japan, Italy, Switzerland and Germany. Doug leads the OAUG Cost Management Special Interest Group. He also advises and participates on the Oracle Customer Advisory Board for Fusion Costing and for the SCM Financial Orchestration Functional Forum.

Core Expertise
Multi-organization, Multi-currency Implementations Cost Accounting Processes Project Management and Senior Project Advisor Core manufacturing & EAM processes Cost Management EAM Inventory Bills of Material WIP Systems Integration and Data Conversions

Experience
Sample of clients served: Beckman Coulter (US) Matsushita (UK, Mexico) Celgene (US, Switzerland) Logitech (US, Taiwan, P.R.C.) Matsushita (UK, Mexico) NTL (now Virgin Media) TCI International (US) Onninen AS (Norway)

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Any Questions?
Doug Volz doug@volzconsulting.com