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 REMINDER
Paul Kirch, Inc. and Simplex Data Technologies Check in on the
COLLABORATE mobile app
COLLABORATE14 – Recommended Sessions
Date/Time Location Session Session Title Presenter (s)

Tue 8 Apr Level 1, Marco 13940 Implementing Oracle eB Tax Globally Paul Kirch
4:15 PM-5:15 PM Polo – 801 With China Golden Tax, India TDS,
European, and Asian VAT & U.S.

Tue 8 Apr Level 1, Marco 13913 eBTax Integration Gaps - Resolve Alexander Fiteni
5:30 PM-6:30 PM Polo - 801 Missing Tax Drivers in Applications
Modules
Wed 9 April Level 1, Marco 14526 Fully automating eBTax when Andrew Bohnet
11 AM - 12:00 PM Polo - 801 upgrading from 11i to R12 with new e-
business Tax rules
Fri 11 Apr Level 1, Marco 14564 Fusion Tax For European VAT, Best Andrew Bohnet
11 AM - 12:00 PM Polo – 803 Practice

Upcoming Webinar Series:

July, 2014 Detailed Intercompany in R12
August 2014 Intercompany & Tax Configuration
September 2014 Fusion Financials REMINDER
Check in on the
Details to be announced on simplexdtech.com COLLABORATE mobile app

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.
Paul Kirch
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.
3
 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 (BSV’s) 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” BSV’s. 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: Oracle’s Operating Unit
is designed to hold an operational entity and its transactions
separate from others OUs. In order for Oracle’s 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 entity’s financial information.
With its automatic balancing of I/C journals Oracle’s GL module
provides I/C functionality that is independent of the OU concept,
described above.

■ AGIS Intercompany Functionality: In Oracle R12, Oracle’s 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 Shipment

Invoice

Entity A Entity B
Selling Entity Shipping
IC Invoice
INV-Org A Entity
INV-Org B

OM: Book Sales Order - Reserve OM: Pick Release, Ship-Confirm, Inv
with Ship-From Warehouse Interface, Costing
of Inv Org B AR: Create IC Invoice To Entity A
AR: Trade Invoice To Customer

AP: Create IC AP Invoice from

Entity B
 External Drop Ship

Customer
Shipment Vendor
Bill-to Ship-to
of Entity B
Sale and Invoice
Purchase Order, AP
Invoice

Entity A Entity B
Selling Entity Shipping Entity
IC Invoice
INV-Org A 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”

INV: Create Logical Transactions in A and B
AP: Create IC AP Invoice from Entity 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 Entity B
Shipment and IC
“Selling Invoicing Shipping
Entity” INV-Org B
INV-Org A
PO: Internal Requisition OM: Import Internal Sales Order
PO: Create Internal Order OM: Reserve, Pick Release, Ship-
Confirm, Inv Interface, Costing
AP: Create IC AP Invoice from AR: Create IC Invoice To Entity A
Entity B
 Vendor Global Purchase Agreement
(Centralized Procurement)
Bill-to Ship-to
Receive Purchase Order, Ship to
Entity B
Shipment “Procuring”
Entity A
“GPA Entity” INV-Org B

INV-Org A PO: Create Requisition

PO: Purchase Order (Auto)

Requisition for Item AR: Create IC Invoice To Entity A
AP: Create IC AP Invoice from On GPA
Entity B
Entity C
“Accounting” Intercompany AR
INV-Org C

INV: Create Intercompany AR

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

Shipment Entity B
Entity A “Procuring”
“Selling Entity” INV-Org B
INV-Org A
PO: Create Internal Requisition
OM: Import Internal Order PO: Create Internal Order
Pick, Pack and Ship
IR/ISO
AP: Create IC AP Invoice from AR: Create IC Invoice To Entity C
Entity C
Entity C
Intercompany AP “Accounting” Intercompany AR
INV-Org C

INV: Create Intercompany AR

Enhancement request #
INV: Create Intercompany AP
12539412. (Bug 12539412 :
INV: Create
MULTI-NODE INTERNAL
AP: Create IC Invoice To Entity A
DROP SHIP SALES ORDERS)
AR: Create IC Invoice to Entity B
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!!