Lots of Oracle e-Business Suite customers are dealing with manual work to handle invoices of which the costs should be spread across multiple periods, for example 6 or 12 months instead of being taken immediately. This without being items meant for the ‘fixed assets’ administration.
Lots of Oracle e-Business Suite customers are dealing with manual work to handle invoices of which the costs should be spread across multiple periods, for example 6 or 12 months instead of being taken immediately. This without being items meant for the ‘fixed assets’ administration.
Invoices of which you can think of are invoices for social security insurances (which are for the complete year) or invoices for certain subscriptions. Oracle R12 has great functionality for this, but some (slightly advanced) configuration is needed for this and there are certainly in Europe some areas of concern with regard to tax/vat.
Subledger Accounting Engine
In Oracle R12 all accounting entries in the General Ledger are coming from the ‘Subledger Accounting Engine’, often abbreviated as ‘SLA’. This engine makes it possible to generate accounting entries based on a transaction for which ‘rules’ can be defined in a flexible way in SLA. In this respect SLA is the single point in the ERP system in which all account derivation rules are stored.
Solution for MultiPeriod Accounting
It is this SLA ‘layer’ which also contains possibilities to configure ‘MultiPeriod Accounting’ (MPA).
When entering invoices (or uploading them via a scan tool) you can flag the ‘deferred’ option and specify over which periods the costs should be spread.
Flagging these options on a invoice will only have effect when you have configured MPA in the SLA. It does not work automatically.
In this example we will use the default distribution account at invoice line level to posts the monthly costs over 5 months (Dec, Jan, Feb, Mar, Apr) while the total invoice line amount of 900 will be posted to a balance sheet account defined in SLA in December 2015.
One of the areas of concern in Europe is whether the tax/vat is involved. In this example the tax is NOT recoverable and should as such be included in the costs. What you can also see is that the (by the tax module) added tax line is the tax for line 1 and 2 together. This is causing a difficulty as only the tax related to line 2 should be spread according to MPA over 5 months, while the tax related to line 1 should be taken into the costs immediately.
After configuring this with a smart mechanism to distinguish the 210 Euro tax between line 1 and 2 only the tax related to line 2 is spread.
When looking at the generated accounting entries, this is what you see (click to enlarge).
The entry for invoice line 2 in the first month (December) in this example is:
Dr Prepaid Costs (B/S acct 1281100) 400 (Costs part)
Dr Prepaid Costs (B/S acct 1281100) 84 (Non recoverable VAT part)
While the entry for invoice line 1 is December is:
Dr Costs (expense acct 4100000) 600
Dr Costs (expense acct 4100000) 126
The created liability entry for this in December is:
Cr Liability (1511100) 1210
Each month in which a part of the costs of line 2 should be expensed the following entry will be created automatically.
Costs (expense acct 4811200) 80 (cost part)
@ Prepaid Costs (B/S acct 1281100) 80
Costs (expense acct 4811200) 16,80 (non recoverable tax part)
@ Prepaid Costs (B/S acct 1281100) 16,80
This entry is created in December, January, February, March and April, after that the balance of the prepaid expense balance sheet account is cleared out.
A very useful functionality and often not used or not used to the full extent!
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Source: https://mathieukamp.wordpress.com/ – This blog is written by our colleague Mathieu Kamp.
