Written by David Haimes

As Intercompany transactions are very likely to cross systems they are a good candidate for integration in a ‘Hub’ of some sort.

In R12 the Financials Services Accounting Hub (FSAH) allows integration of third party systems to Oracle and is incredibly powerful and flexible.

Let’s use a simple example:

Company A and B both use two different Ledgers. A Sales Invoice is issued by Company A (to Company B) for $5,000

The accounting needs to be created as below, they need to be booked with the same accounting date in the same period.

In Company A

Debit Intercompany AR $5,000
Credit Intercompany sales $5,000

In Company B

Debit Expense or inventory (per content), $5,000
Credit Intercompany AP, $5,000

So there’s a number of options that come to mind (in no particular order).

1) Using Oracle Accounting Hub you can account for transactions form third party systems, it uses the Subledger accounting engine to process accounting events defined for the third party system. If your invoice systems are third party applications, you could create 2 events (one for each company/ledger/party to the transaction) for the sales invoice and get the full accounting out of the single system integration.

2) Enter these transactions in AGIS, the specific accounting will be entered/generated and approvals from company A and B obtained before AGIS either books it direct to GL or generates the Invoice for company A and B if required.

3) It may not be ideal to force users to navigate to a different screen (or change some import process, EDI, XML feed etc) to issue Intercompany invoices from other invoices as in 2) above. So continue to enter in your regular sales invoice system but run a process which detects an invoice is Intercompany and cancels it, then generates a transaction for it in AGIS (via the Open Interfaces) or FSAH.

I don’t think any one of these is right for all situations, detailed analysis of the particular implementation environment and requirements needs to be done to figure out the best approach. If you have any thoughts, better suggestions or experience then please share them in the comments.

A lot of people are asking when various sessions are, readers of this blog are probably interested in Oracle EBS financials, Helle posted on Oracle Mix a couple of useful links. I recommend looking at this pdf which lists all the financials sessions including demogrounds, apps lounges, presentations etc.

My session is listed there, I look forward to seeing some of your there.

Thursday 25th, 3:00 p.m.

Moscone West 2006

Are Intercompany Processing and Reconciliation Currently Pain Points for Your Enterprise?

David Haimes, Oracle; Helle Hennings, Oracle

I blogged last year about the meet the Experts Lounge, well this year it has been renamed to Applications Lounge. I haven’t been asked to attend this year, so if you want to ask me any questions or provide feedback you’ll have to come to the session above, find me at the DEMOgrounds, the Blogger Meetup or follow me in twitter, or use this blog all year round – remember customer interaction is not just for Oracle Open World, it’s for life.

There is a white paper available on metalink (metalink note 418649.1) that describes in detail each set up step you need to perform to set up AGIS.  It is a very nice document with screen shots to show you every step of the way and there are also some viewlets that show you the set up in progress.

This is a pretty good starting point if you are setting up AGIS

Fixed Asset?

Something I often forget to mention is the enhancement of Intercompany functionality in Fixed Assets (FA) that has been provided in R12. So here is my attempt to explain it, based on an old email discussion with the FA team, I wouldn’t describe myslef as an FA expert, but if there are any comments or questions I might be able to find an FA expert to get an answer.

In 11i FA stores reference accounts in two setup entities; Book Controls and Categories. The intercompany Payables and Receivables accounts were stored directly on the book, only the natural accounts segment were stored for these two accounts. The Account Generator definition would combine the natural account with other sources to get a full account combination. Out of the box, those sources were a default ccid which is also on the book and a ccid from the asset assignment. So the balancing segment is derived from the asset assignment, the natural account from the values on the book, and other segments from the default account.

The intercompany would kick in for two transaction types “Transfer” and “Unit Adjustment”. However, other transactions could result in intercompany impacts, but they would not be generated in FA so GL would do the balancing when the accounting was posted there.

So in R12 FA uses the AGIS Intercompany balancing feature, which is called from SLA and so we’ll balance all transactions that are out of balance right there in the subledger without having to let some of it hit GL and with all the flexible rules available in the new Intercompany Accounts Set Up.

The content catalog is available so you can go and search for sessions.

There’s an Intercompany session (S299151), it is not scheduled yet and as I am one of the presenters I can tell you it definitely isn’t written yet, next week I’ll get started on that with my copresenter from strategy, Helle.  the details of the session are below.  If you have any suggestions about what we should cover, how we might cover it or anything else for the session it would be great to hear from you – add them to the comments and let’s see if we can try and tailor the presentation to the audience a little.

Session ID:	S299151
Session Title:	Are Intercompany Processing and Reconciliation Currently a Pain Point for Your Enterprise?
Session Abstract:	Having problems reconciling your intercompany activity? Would you like better documentation and visibility into your various intercompany activities? Are acquisitions or changing legal structures making intercompany processing more expensive and time-consuming? Attend this session, which discusses and demos capabilities of Oracle Advanced Global Intercompany System in Release 12 and implementation options such as using this application as a standalone hub for all your intercompany activity across multiple ERP instances from multiple vendors.
Track:	APPLICATIONS, Oracle E-Business Suite
Focus Areas:	Not Applicable
Session Type:	Conference Session
Product Area:	Financial Management
Duration:	60 minutes
Room:	Rm 2006
Speaker(s)/Company:	David Haimes, Oracle.; Helle Hennings, Oracle

I noticed today on Stephen Chan’s blog that this White Paper is available on metalink

Best Practices for Adopting Oracle E-Business Suite, Release 12 (Metalink Note 580299.1)

I haven’t reviewed the document yet, despite there being a section on AGIS. As soon as I resolve the problem I’m having with my metalink login I will take a look. I understand it was pulled together by Anne Carlson, who I know reads this blog becasue she mailed me just today with a question about it, I’m hoping some of the useful posts from this blog made the cut.

I want to use this opportunity to plug two other guides that are new in R12 and I highly recommend you read if you are looking at upgrading to R12.

Oracle Financials Concepts Guide, Release 12 (Part No. B28873-01

Oracle Financials and Oracle Procurement Functional Upgrade Guide: Release 11i to Release 12 (Part No. B31543-01)

I discuss them a little more along with a few other resources in this post.

UPDATE (June 16th):

I reviewed the White Paper and the AGIS section is fairly sparse – I will be contacting the author to try and get more detail in there.

However on the whole I think it’s a great document and essential reading for anyone looking to implement  or upgrade to R12.  Now if we can just publish that information on a blog, then we’ll truly have a living document, I’ll ask that question of the document owners.

When I was about 10 years old I got a new electric train set for Christmas, but before I got to play with it I had to pinch a plug from one of my siblings toys and fit the only available (and dangerously mismatched) fuse in it. Then I had to read a complicated set of instructions to assemble a delicate set of parts and it was a minor miracle that I had it working before the New Year.

Now when I buy something new, the first thing I do is open the box, turn it on and press buttons to work out how to use it, if I get stuck I maybe look to see if they have a quick start guide. Consumer goods manufacturers make things very intuitive and ready to work right out of the box these days and we have grown to expect that. Remember that iMac add? step 1: plug into power, step 2: plug into a phone line, step 3: – there is no step 3! Wow can I have an ERP system like that please?

When designing AGIS for R12 we tried to minimize the time it would take to get started entering transactions in an initiative we internally called ‘AGIS out of the Box’. I have to give credit to this idea to my former bosses Joe and Terrance for initiating this, but the whole team stopped, sat down and thought about what we could do to allow users to open the box and start using AGIS right away.

We came up with a few ideas

1) No profile options

No not a single one, we created a system options page so no need to search through thousands of profile options or read our minds (or even the manual) to figure out what options there are, they are where you might expect them; in a tab marked ‘Options’

2) Seeded System Options

We ship with the options for the most straightforward (according to us) options set already; change them if you want, we won’t be offended

3) Seeded Transaction Type

We seeded a default transactions type, again with the most simple options (no approvals and no invoicing required) so you can use that or create your own if you prefer.

4) Automatically create Intercompany Organizations

You’ve already taken the time to enter your Legal Entites, or maybe they were upgraded from 11i so just kick off our process to classify them all as Intercompany Organizations for you. This might save some people a lot of typing and to be honest, it was not too time consuming to code. Again create them yourself if you prefer a more granular definition of your Intercompany Orgs

5) Super User, Super fast Security Set Up

If you have some users who need to have access to all Intercompany Organizations, we have a button on the security page that will do that for you. I just hope your read this or noticed it before you typed them in manually!

6) Create Intercompany Customers and Suppliers

If you need invoices for your AGIS transactions then you might end up creating a lot of Customers and Suppliers, sites for each OU and then you need to associate them to an Intercompany Org so we know which one to use when. That’s too much, so we try to help create them for you from our Customer and Supplier Association UI, just pick an LE and we’ll create everything that needs behind the scenes for all the Orgs and OU. Again if you want you can do it manually, no pressure to do it our way.

Now just because we added a few features in one product it doesn’t mean R12 is as easy to set up as an iMac. What it does show is that by switching our way of thinking we were able to provide some useful features to ease set up at a very low cost to development. So it is possible to simplify our setup and if we put our minds to it I think all products could find easy (ie. low cost, low risk) ways to save implementors time. It’s too easy to just throw our hands in the air and say that ERP software is complex by nature and that’s why our set up is so difficult and time consuming, then add another profile option that customers need to set but only find out about when they log an SR because a feature has stopped working. People used to think personal computers and the internet were for geeks, but now my mum uses it to do her shopping.

What do you think, will we ever get ERP out of the box? Sound off in the comments.

One of the key features introduced with the new Advanced Global Intercompany (AGIS) in R12 of Oracle E-Business Suite is the ability to create documentation for Intercompany transactions. The correct documentation is required in many countries for Intercompany trading, this essentially means I need to provide a Receivables Invoice for the Legal Entity Providing the goods or service and a payables invoice for the receiving Legal Entity. These invoices should have any taxes that are applicable in the jurisdictions, for that type of service.

We do not firce you to create invoices for all Intercompany Activity, you can still create just a GL Journal entry if you prefer. The AGIS transactions flow is illustrated in the diagram below.

You can see that we check if invoices are required and there are two places that we look for that. First is the AGIS transaction type flag, seen on the AGIS Transaction Page in the Set Up Tab.

<click image to see full size>

You can also create a rule in the Legal Entity setup, we create that rule at the registration level. This is set by selecting the Legal Function ‘Create Intercompany Invoice’ when entering the Legal Entity Registration. If the this rule is set for one of the Legal Entity involved in an AGIS transaction it will take precedence over the Transaction Type rule and the invoice will be created.

We create an AR invoice (via an Invoice API or the Open Interface tables) at that point the eTax module will kick in and calculate the tax for you and add that to the invoice. When the AR invoice has been created we create the AP invoice (via the AP Invoice Interface) using the invoice number from the AR invoice – so should be easy to match those invoices. We also ensure that the same information required by eTax is on the AP invoice so the tax calculation will be the same on the AR and AP invoices.

On of the key aspects of AGIS is that we will not create an AR or AP invoice or a GL journal until both sides of the transactions have approved it and we checked that the appropriate periods are open in GL, AP or AR. This means that there is no possibility of one side of the transaction going through and then the other side rejecting or changing the Accounting Date so they hit different periods or anything else that will make reconciliation and elimination of Intercompany cumbersome.

Written by Bidisha Silveira

I’m going to give a little more detail on how the Interactive Financial reports David described here were put together. In 4 simple steps (with pictures!)

Step 1:

The Reconciliation Data Extract background program is submitted which collects all the data and generates an xml file

Step 2:

To view the reconciliation data we use a page built in OAFramework. The BI Publisher region to view the formatted report is embedded in this page.

When you click submit the xml file generated from Step 1 along with details of the layout template and the type of output required (eg Excel or html or pdf) is passed to the BI Publisher engine. The BI Publisher engine processes this information and displays the formatted output on the current page.

Now you are ready to go. The first report displays the summary of the Payables and Receivables balances between a pair of trading Legal Entities.

In order to drill down further, the hyperlinks on the Payables Receivables Balance amounts can be clicked.

Step 3:

The hyperlinks in the Reconciliation Summary region link back to the same page, containing as parameters the details of the Transacting and Trading Legal Entity for which the details have been requested.

Example of how the hyperlinks are coded in the template:
$url&TransLE=:TRANSACTING_LE&TradLE=:TRADING_PARTNER_LE&rows=All??target=_top

The controller for the Reconciliation OAFramework page looks at the parameters and determines which template has to be used to show the next level of details.

A new window is opened to display the second level of the reconciliation details. The name of the template, details of the xml file created in step 1 and the type of output required is passed to the BI Publisher engine. The BI Publisher engine displays the formatted output based on the parameters passed.

To view the journals that make up the Receivables and Payables balance, the hyperlinks on the Amount fields can be clicked.

Step 4:

As before, the hyperlinks in the ‘Summary by Source’ region link back to the same page, containing as parameters the details of the Transacting Legal Entity, Trading Legal Entity, Source and Category for which the details have been requested.

Example of how the hyperlink is coded in the template:
$url&TransLE=:SRC_TRANS_LE&TradLE=:SRC_TRAD_LE&Curr=:TRX_CURR&JrnlSrc=:JOURNAL_SOURCE&JrnlCat=:JOURNAL_CATEGORY &AcctType=R??target=_top

This gives a really powerful online report that is very easy for users to configure by just modifying the templates.

Written by Rohit Kathuria and David Haimes

In order to take advantage of the automatic Intercompany balancing during GL posting and SLA Accounting you first need to define the accounts you want us to use.

Intercompany and Intracompany Accounts in R12 are defined in two different Set Up Pages, the Intracompany Balancing Rules are what we had in 11i for Intercompany Accounts (confusing I know) – this is where you will find the rules you had in 11i of you are upgrading from 11i. If you don’t want to take advantage of the Legal Entity Configurator product and define Legal Entities and map them to your accounting structure, you can still go ahead and use the intracompany rules. If you start to map your Legal Entities to Ledgers and/or Balancing Segment Values (BSV) then you will want to be sure you complete the job, so there is no ambiguity in your setup. Consider the example below for BSV 10, 20, 30, 40, 80 and 90 :

The France Ledger is mapped to the FR LE, so all BSV in that ledger are assumed to be owned by LE France. However the UK Ledger has BSV 10 and 20 mapped to the UK LE, but 80 and 90 are not mapped to anything we have no way to know what LE they are assigned to.

You will be able to set up Intracompany balancing rules

• Between 10 and 20
• Between 80 and 90
• between 30 and 40

You can set up Intercompany Accounts between

• 10 and 30 or 40
• 20 and 30 or 40
• LE France and LE UK

All the above are unambiguous, we know what we are dealing with. The 80 and 90 BSV are in the same ledger with no LE at Ledger or BSV level so we just assume that any transactions between 80 and 90 are intracompany.

We would not allow you to create Intracompany rules between

• 80 and 10 or 20
• 90 and 10 or 20

This is because we don’t know if 80 and 90 are in the UK LE or not, if they are then assign those BSV to LE UK too and you’re good to go.

If 80 and 90 aren’t in the UK LE then what LE do they belong to? Once you map them to the to the appropriate LE then you will need to define Intercompany accounts for them.

Managing a large number of responsibilities can become a complex, time consuming and expensive activity. It is also very frustrating for users if they have to constantly switch responsibility if they have a number of roles, this is a big issue in 11i Global Intercompany System as you could only have one Balancing Segment Value (BSV) per GIS responsibility and there can be a large number of BSV often with one person responsible for entering and approving intercompany transactions for many bsv. For example there may be a controller responsible for approving all transactions for the dozens of EMEA subsidiaries.

When we created the new Advanced Global Intercompany Product in R12 we set out to address this issue and came up with a whole new transaction security model. We use a grants based model where a particular user can be granted access to one or more intercompany Organizations (this is the R12 term for the 11i GSI Subsidiaries).

<Note click on image to see full size>

So now I have been granted access to 3 organizations, what can I do?

I can log in under a single responsibility and see transactions for all many organizations in the same screen, approve them, update them and reject them etc. The screen below shows a number of recipient organizations that I have access to all in the same search results.

<Note click on image to see full size>

If tomorrow I am assigned access to an additional Intercompany organization, then I will see that in the same screen, using the same responsibility, there is no need for me to access any different responsibility. I will those transactions requiring my attention all together in the same UI, using the same responsibility I already use.

We use a feature called FND Grants to implement this security model, that was introduced (I think) in 11.5.9. Without going into the nuts and bolts of it, the model allows you store SQL statements to describe how you determine the access to your objects a user would have. At runtime you call an API that returns a where clause that is appended to your search results to restrict the data a user can access. If you’re building customizations you could use FND Grants too. If there’s sufficient interest I can write up a ‘How to use FND Grants post’ with full details, at least I can add it to my blog post to do list!

In R12 we introduced AGIS periods that control the transactions entered in AGIS, this is a feature that is often misunderstood. The usual question is – Why do I want another period? I’ll give some ideas why you might want one, but if you decide you don’t need one, don’t worry we made it optional so you don’t have to use it. If you decide to use it just pick one of your GL Calendars to use for your Intercompany periods, if you never enter a calendar in the system options periods will not be enabled and you can enter transactions whenever you want with no interference from the system.

So, I ask again – Why do I want another period ?

I tend to bill Intercompany as the top barrier to fast close, you need to reconcile both sides of the Intercompany activity and make sure that they will eliminate on consolidation. This can be a time consuming activity, especially when you have subsidiaries all around the globe in all kinds of time zones, it is ot always possible to just pick up the phone and get the accountant you need from the other side of your transaction to ask them why it hasn’t been booked on their side yet. What advantage Intercompany may have is that corporate has some ability to mandate the timing of the transactions. for example I can say that all education cross charges must be submitted by close minus 5 days, but I cannot do that with receivables transactions, I want to give the sales guys every last minute to get deals booked for a period. So this is where Intercompany Periods become useful, I want to get all my subsids to book Intercompany early in the close cycle so we can start the reconciliation process, so I will close my AGIS period maybe 5 days before my Gl period so I can get a heads start on the reconciliation work.

What if my Mega Corp Caymen Islands Legal Entity wants to buy Tiny Corp USA, but all the Cash is in Mega Corp Las Vegas ? Leave IC Loans open until the last minute to process these but close everything else. Yes you can close Intercompany Periods by the AGIS transaction types to give you more granular control. The UI looks like this

As you attempt to close a period you will b presented with a listing if any open transactions, you can click on them and complete or close them manually or chose to sweep them to the next period.

Note that you cannot sweep a transaction if it is in certain status, this is to make sure it is not posted to one side and then the transaction swept and the other side of the transaction is posted in another period.

So in summary these periods are optional, for some of you they will be very useful, but others will decide to ignore them, which is fine too.

In Oracle Ebusiness Suite 11i, the Legal Entity is tied closely to a set of books and operating Unit, so your Legal Structure has to be defined in the way you set up your apps partitions (OU, Set of Books etc.). In R12 financials breaks away from that with the introduction of the Legal Entity Configurator allowing you to model your Legal Structure separately from the partitions in your ERP system. Then you mark certain items with an owning LE, rather than use the OU or set of books to derive the LE. So let’s see what this buys you.

Let’s first look at what we map Legal Entities to

1. Accounting Structures – Balancing Segment Values and Ledgers
2. Tax Rules in eTax – Who I am and where I am registered/located determines what tax I need to pay
3. Bank Account – Who owns that bank account and the cash in it
4. Payables and Receivalbes Invoicing – the owner of that transaction, sometimes referred to as LE stamping
5. Intercompany Accounts and Intercompany Processing Rules

There are a number of features that you get from this, probably the biggest is tax, the new eTax module in in R12 allows very flexible definition of tax rules, based on the Legal Entites and the tax registrations. It makes your tax calculation and reporting a breeze – at least that is what the eTax development team tell me – I have no reason to doubt them, but I am not an expert in this product so I’m not going to try and give details here.

Intercompany is obviously a big feature, we now base the Intercompany rules on the From (transacting or Initiating) LE and the To (trading partner or Recipient) LE, which not only allows more realistic rules, but provides us with the mapping we need to give you the neat Interactive Reconciliation Reporting.

Also on the Intercompany Front it allows us to define a couple of important rules. Firstly we can define Intercompany Exceptions, that is for LE x, I might want to state that it should not do Intercompany with y and z. Secondly I can set a Legal Rule to tell me when there is a Legal requirement for an AGIS trsansaction to generate an Invoice rather than just create GL journals.

Bank Account ownership is now by a LEgal Entity, so we can more easily determine when a cash transaction is crossing a Legal Entity and intercompany accounting is needed.

There are also a large number of Legal reports which have Legal Entity as a parameter, so the numerous reports shipped in R12 will make it easy to the compliance and statutary details you need on each Legal Entity that has to report. The Oracle Financials globalization products ship the majority of these reports.

For more details on these features, you should start with the Release Content Document, the Functional Upgrade Guide, The Financials Implementation Guide and the product User Guides.  See this post of useful Oracle Financials resources

The short answer is sort of. Which is not much help to anyone, hopefully you will have a few moments to read on and I can explain myself. This post assumes that you understand the relationship between Legal Entities and Ledgers which I discussed in an earlier post.

In R12, a new Legal Entity Configurator was introduced in financials and Legal Entities defined here are are assigned to Ledgers and/or Balancing Segments (Company Codes). However it is not possible to assign a Financials Legal Entity to an Operating Unit, you can only define a Default Legal Context (DLC) to an Operating Unit. This assignment can cause confusion as it is only possible to assign one DLC, but I can use more than one LE in that Operating Unit. The key word in DLC is default.

When I am in Payables or Receivables the LE is stamped on the transactions and used to identify the Legal Owner for Legal reporting as well as Tax calculation. The invoice exists within an OU and that OU has a ledger which will account the transactions, if that has more than one LE associated with it then a hierarchy of LE derivation is used to default an LE, the last resort being the DLC.

For example in AR the Legal Entity derivation hierarchy for transactions is

1. Transaction Type
2. Batch Source

Assigning a LE to a transaction type or batch source is optional and only the LE’s mapped to the Ledger associated with the OU are available to assign.

So in R12 we have much better support for many LE accounted in a single OU as we clearly mark the LE on the transactions.

In R12 the Advanced Global Intercompany System was introduced and one of the main goals was to make the reconciliation process more efficient. Intercompany is often the top barrier to a fast period close, because you have to be sure you eliminated it all to zero, so your parent company does not report a profit from trading internally. Fail to do this and you might go to jail, I have no legal training but when it comes to accounting irregularity I understand claiming it was an honest mistake is not much of a defense.

So what we want to do is check every credit I booked to my Intercompany account for trading with you, has a debit in your Intercompany accounts in the same period. So our GL account balances should match and if they don’t I need to find out where the differences are, which means drilldown on the balances. Or even better we do some matching of what we know is ok and show you the journals we couldn’t match and you drill to just those ones to find the problem.

So we turned to XML Publisher to build some reports that we could embed in our UI. We took advantage of the XML Publisher OA Framework region and created a number of extracts with increasing degrees of detail. The top level shows the account balances for the trading partner pairs and any differences between the two.

To drill into the details of the balances or difference amounts I just click on the links and they direct you back to the OA Framework page calling the template and/or extract showing the next level of detail.

What’s also neat is I can download any of these reports into Excel; sort them, order them cut and paste rows and maybe email them to somebody to investigate the differences. All the amounts in the excel spreadsheet also have the links so I just click on that link in excel to drill back into the applications and see the next level of detail.

We call this interactive reconciliation reporting and we think you might like it.

UPDATE: More details available in this post by Bidisha

I have an Intercompany group on Oracle Mix and I want to invite all readers of this blog to join and start posting ideas, discussions and also sharing experiences.

It doesn’t have to be specific to Oracel products, it could be ideas for new features, better collateral or whatever you want to start discussions about and maybe have voted on by other members.

So far things are quiet in there, I am reluctant to post my ideas, because frankly I think you probably have quite enough of my thoughts on this blog and those inside Oracle development probably know my thoughts by now. The Idea of Oracle mix is to have you, the customer (or potential customer) lead and join in the discussion.

In R12 the Intercompany Accounts setup is broken out from GL and included in the Advanced Global Intercompany System (AGIS) product (Don’t worry you don’t need any additional license for this product). There is a separate set up screen for Intercompany and Intracompany Accounts. The same set up pages are available through the Accounting Set Up Manager as well as AGIS so you can pick your navigation path.

The Intracompany accounts are defined for pairs of Balancing Segment Values (BSV) within the same ledger; this set up is similar to the 11i approach and we upgrade 11i Intercompany accounts to Intracompany accounts here. You don’t need to uptake the Legal Entity Configurator product(new in R12) to define these.

In order to enter Intercompany Accounts you need use Legal Entity Configurator to define your Legal Entities and map them to ledgers and/or BSV. You then define accounts to use when certain pairs of Legal Entities trade.

In R12 you can now define a separate payable and receivable account for each Inter/Intracompany trading relationship. In 11i you would just define the due to/due from account and that account was used for both the payables and receivables I had with the specified trading partner.

These will be used for any AGIS transactions you create and also by the automatic intercompany balancing in GL and SLA. Doing the Intercompany balancing at the transaction level in SLA is a big enhancement for R12 and one I will talk about and give examples of in another post.

I was recently asked – Do I need to define an Intercompany Segment in my secondary ledger if the primary it is attached to has an Intercompany Segment?

There is no restriction so you can have same an Intercompany Segment on your primary but not on your secondary. However I would always recommend having an Intercompany segment in both ledgers, the benefits for reporting it gives you apply equally to a secondary ledger as a primary.

If you are using primary as your local ledger and secondary for corporate ledger, the intercompany segment will help you to eliminate intercompany correctly when you consolidate your corporate books.

In short, my advice would be to have an Intercompany segment in the secondary too, you might need the reporting and tracking by this segment in the future and the cost to add it now is much, much less than trying to change your chart of accounts after implementation.

When I present about Oracle Intercompany products I always start with a couple of slides explaining the difference between Intercompany and Intracompany and why we might care about the difference. This is sometimes obvious but often the two terms are used interchangeably or the term Intercompany is used generically to discuss Inter and Intra company (Oracle Apps is certainly guilty of the latter). So here goes…

InterCompany Transactions are between two or more related internal legal entities with common control, i.e. in the same enterprise (Inter = Latin for “BETWEEN”)

IntraCompany Transactions are between two or more entities within the same legal entity (Intra = Latin for “WITHIN”)

So that’s it then and a free latin lesson to boot. No? Want more?

Well the real difference is that Intracompany processing is determined by company management, whereas Intercompany has to follow the law.

The amount the R&D department pays the manufacturing department of the same LE for some test chips(of the silicon kind) is to be sorted out between themselves. However when my manufacturing company in Ireland sell chips to their sister company in Germany you can imagine the tax authorities care about how much they charge because they get a % of it in taxes. This what transfer pricing is all about, it is important to get it right and you need to follow the rules and be prepared to open up your books to the tax people to demonstrate you followed the rules.

In R12 we have changed the way you set up the accounts formerly known as Intercompany accounts. You can enter Intercompany Accounts which are between pairs of Legal Entities, regardless of the ledger, chart of accounts, etc they are on. There is also the Intracompany Accounts screen where the accounts are defined from BSV to BSV with all the options that are available in 11i. More on this in later posts.

UPDATE: I have written a number of new related posts

• An example of Inter and Intra set up
• Where to set up Intercompany and Intracompany accounts
• An introduction to the R12 Legal Entity Configurator product

R12 introduces the new product Advanced Global Intercompany System (AGIS), which takes forward the features provided by GIS in 11i GL and adds a number of important new capabilities. The major new capabilities are:

• Creation of Documentation (ie. Payables and Receivables Invoices) for AGIS transactions
• Web ADI Integration to facilitate uploading transactions from Excel
• One Sender to many receivers in the same transaction batch (the receivers can be in different ledgers, with different chart of accounts, currencies, periods etc)
• Integration with Oracle Approvals Manager for fully flexible approval rules with no coding
• Introduction of Intercompany Periods, which can be opened and closed by AGIS transaction type
• New user grants based security so many subsidiaries can be accessed from the same responsibility
• Online Reconciliation reporting tool, allows drilldown from account balances to the transactions. Uses XML Publisher to provide export to Excel and customization of outputs

The Intercompany balancing feature in GL is now under the AGIS product and has some new features

• Define Intercompany Payables and receivabls accounts by Legal Entity
• Define separate Payables and Receivables accounts for each direction of Intercompany trading relationships
• Intercompany Balancing performed in the subledger when transactions are accounted by SLA

An important point to note is that although we add a lot of new features any GIS set up you have in 11i will be upgraded and you can keep running as in 11i and start taking advntage f the new features if and when you are ready and it makes sense to you.

In future posts I can get into the detail of how some of these new features work and are set up and who may want so use them and why.

In release 12 of Oracle financials we decided to pull the existing Global Intercompany System (GIS) functionality out of the GL product, add a whole bunch of new functionality and make it a product in its own right. We decided to call this new product (wait for it…) Advanced Global Intercompany System (AGIS) – I bet you didn’t see that name coming!

Anyway that flash of inspiration for the name was just the start, all Oracle products need a product code of 2 or 3 letters which is used in our source control structure, bug database, object naming standards and all kinds of places. As you may have noticed Oracle has a fair number of products so first choices like INT or GIS were not available and after a long exchange with the people who control these we went for FUN. Now people who have worked with me me over the last few years will already know the puns in this area have been done to death, so I’ll spare you those here.

We also have some other features in FUN that like AGIS have impact in many financials areas (e.g. Netting) so we came up with the product name ‘Oracle Financials Common Modules’ to represent everything under the FUN umbrella. So if you are looking in any Oracle documentation or collateral for AGIS and cannot find it, you might want to search for ‘Oracle Financials Common Modules’ or look simply seek out FUN

One of the most common questions I get asked is

‘Do we need to define an Intercompany segment in our chart of accounts?’

The answer is:

‘We do not require an Intercompany Segment, but we still recommend defining one’.

Even if you do not have a great deal of intercompany activity at the moment, it is worth having one defined now as it is difficult to add one later.

Another question I have been asked is

‘Can I define the same segment to be my balancing segment (aka Company Code) and my Intercompany segment?’

The answer I give here is

‘I would very strongly advise against this, you will not get the benefits of an Intercompany segment by doing this’

For example, if we have a chart of accounts structure with 3 segments:

Company – Natural Account – Intercompany

Company Segment has the Balancing Segment qualifier and Intercompany has the Intercompany Qualifier.

We have three values for the company segment, 01, 02, 03 – they represent the Legal Entities. We have set up the natural account 555555 as our Intercompany payables and receivables account.

So if we have a journal like this entered in GL

01.789789.00 Dr $1,000

02.978978.00 Cr $1,000

Intercompany balancing will be called during posting and we will get two extra intercompany balancing lines added to balance the journal by balancing segment.

01.555555.02 Cr $1,000
02.555555.01 Dr $1,000

Balancing populates the Intercompany segment with the value of the trading partner to show who this intercompany activity is between, we can now easily run segment based reports and determin the intercompany activity between 01 and 02 and 02 and 01, ensure they eliminate and all that good stuff.

So what happens if you set the same segment to be both your balancing segment and your intercompany segment? Essentially nothing, intercompany balancing would detect this situation and not try to insert the value of the trading partner into the intercompany segment.

You may notice that in the Vision demo instances there are some chart of accounts with the same segment as both the Intercompany and Balancing segment(Vision Operations is one example!), this does not mean it is recommended. For R12, the Apps Demo Services team (Max Melbin and Günter Wemhöner) did a great job creating new chart of accounts, ledgers in the Vision database which are used in the R12 financials demo flows. The Ledger names they created start with ‘SSC’ if you want to take a look.