Sub Ledger Accounting Cost Management – SLA Steps

Prior to R12, the accounting flow is as follows:

Sub Ledger Accounting(SLA)

11i Accounting Flow

The Accounts Specified by the

User while transaction flows to the
GL and there is no option of
configuring the accounts once the
Costing of the transaction has
been done.

Copyright © 2007, Oracle. All rights reserved 3

In R12, SLA uses events for processing transactions. An event is the recording of a
change of status in the transaction life cycle, i.e., invoice approved, payment received,
period close, etc. This allows for a clear separation between transactions and accounting
representation. Events are the bridge between transactions and journal entries, so product
teams are involved for coordinating actions based on event models.

Events

Event Entities have Event Classes. Each Event Class has Event Types.
The Work in Process list below shows the Main Event Entity is WIP Accounting.
The Event Classes are then listed with each Event Type that is part of the Event Class.

There are four Main Entities for Cost Management:

1) Work in Process:
WIP Accounting Events
Event Class:
WIP Absorption
 Event Type:
Resource Absorption
Resource Overhead Absorption
Scrap Absorption
Outside Processing
Event Type:
OSP Transaction
ShopFloor Delivery for Direct Items
IPV transfer to Work Order
WIP Variance
Event Type:
Period Close Variance
Job close Variance
Final Completion Variance
WIP Lot
Event Type:
WIP Lot Split
WIP Lot Merge
WIP Lot Update Quantity
WIP Lot Bonus
WIP Cost Update
Event Type:
WIP Cost Update
2) Inventory:
Material Accounting Events
Event Classes:
PO Delivery in Inventory WIP Material Lot
Sales Order Issue Logical Intercompany
Internal Order to Expense Retro price adjustment
WIP Material Material cost update
Consigned Inventory Ownership Transfer Miscellaneous
IntraOrg transfer Direct Interorg
Shipment
Intransit Interorg Receipt – FOB Receipt Direct Interorg Receipts
Intransit Interorg Shipment – FOB Shipment
All other intransit interorg transactions
3) Purchasing/Receiving
Write Off Accounting Events
4)Receiving Accounting Events
Sub Ledger Accounting(SLA)
Key Concepts

• Event Model: definition of the subledger transaction types and

lifecycle
• Entity : Classification of source of transaction
• Event Class: Classifies transaction types for accounting rule
purposes
• Event Type: for each transaction type, defines possible actions
with accounting significance
ENTITY Material Transaction, Receiving
or WIP or Write Off

EVENT Logical grouping of events which

CLASS have similar kind of accounting

The most granular level of

EVENT business event which has
TYPE accounting impact

Copyright © 2007, Oracle. All rights reserved 6

Sub Ledger Accounting(SLA)

Setup – Event Model

Hierarchy of events consists

of these four main groups

Correspond to existing
transaction types and are
grouped into Event classes based
on similarities in their accounting

Copyright © 2007, Oracle. All rights reserved 7

 Sub Ledger Accounting(SLA)
Setup – Event Class Options

This Event class has a

potential encumbrance
journal entry

These options are not

selected for any Cost
Management Event classes
since the accounted amounts
are always provided to SLA

This information is shown for

an accounting event
belonging to this event class
when the event is viewed in
SLA

Copyright © 2007, Oracle. All rights reserved 8

R12 Subledger Accounting Rules:

SLA uses a rules-based accounting engine that posts entries into GL. The rules used by
the engine are user defined. The rules are stored in a common repository for all subledger
applications. A subledger application would be a product area, such as Inventory,
Payables, Receivables, Purchasing, etc.

The SLA process allows for the display of the inventory valuation accounts to be seen for
a user defined date range. The engine also allows the accounting department to maintain
control over accounting and chart of accounts for the ledgers used.

When rules are created, the rules engine will override user entered accounts that might be
incorrect. This is important to control user errors that can occur within a period. The rules
will automatically redirect the costs to the correct account. The rules can be created for
most item attributes to allow for granularity of costs if so desired.
 Sub Ledger Accounting(SLA)
Setup and Process

PROCESS
JOURNAL ENTRY SETUPS

Enter Transaction(s)
Define/copy and modify
journal line types

Cost Manager
Define/copy and modify
account derivation rules

Create Accounting* Transfer Journal Entries to GL

Define/copy and modify

descriptions *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

responsibilities using the ‘Create Accounting – Receiving’ concurrent
request.

These requests have an option to transfer the entries created to

General Ledger. A separate process is also available.

Copyright © 2007, Oracle. All rights reserved 2

Basic Steps to Build Accounts:

Accounting Methods Builder

Ledger
|
Subledger Accounting Method (SLAM)
|
Application Accounting Method (AAM)
|
Journal Line Definition (JLD)
|
---------------------------------
| |
Journal Line Type Account Derivation Rule
(JLT) (ADR)
|
Sources
|
Transaction Objects

The process is built from the bottom up.

These steps are needed for each different journal line type that is going to be used. For
example, Inventory valuation, Receiving valuation, WIP valuation, Cost of Goods Sold.

Step 1 Create Account Derivation Rule (ADR)

Sub Ledger Accounting(SLA)

Setup – Account Derivation Rule

This source refers to the account from

MTL_TRANSACTION_ACCOUNTS,
WIP_TRANSACTION_ACCOUNTS, and
RCV_RECEIVING_SUB_LEDGER

Copyright © 2007, Oracle. All rights reserved 9

Step 2 Define conditions required for the ADR created

Step 3 Create Journal Line Definitions (JDL) for an event class

a- query the LOV of seeded event classes
b- copy the seeded event class using the Copy Definition button
c- replace existing ADR in the Journal Line type form with the new ADR
this is in the Line Assignments sections, using Line Type
 Sub Ledger Accounting(SLA)
Setup – Journal Line Definitions

These are the possible

journal line types that can
be generated for this event
class

The Account Derivation

Rule that provides the
account for this journal
line type

Copyright © 2007, Oracle. All rights reserved 12

Step 4 Create new Applications Accounting Definition (AAD)

a- query for the seeded AAD
b- copy from this to create a new AAD
c- associate the new JLD assignments created in Step 3
d- validate the definition. If successful continue to next step or continue creating
the JLDs required. If unsuccessful, check the setup for all steps above before moving to
next steps.
 Sub Ledger Accounting(SLA)
Setup – Application Accounting Definitions

Oracle ships three Application

Accounting Definitions for Cost
Management application. They are:
–Cost Management: US GAAP
–Cost Management Encumbrance: US
GAAP with encumbrance accounting
–Federal Costing: Supports Federal
requirements

Copyright © 2007, Oracle. All rights reserved 13

Step 5 Associate the new AAD with the Subledger Accounting Method (SLAM)
a- query SLAMs to view existing methods
b- for the existing AAD enter an end date to stop this from being used
c- attach the new AAD with the start date
 Sub Ledger Accounting(SLA)
Setup – Subledger Accounting Method

Cost Management application

accounting definition is shipped
with the Standard Accrual
Subledger Accounting method

Copyright © 2007, Oracle. All rights reserved 14

Step 6 Assign the SLAM to the Ledger

 Sub Ledger Accounting(SLA)
Setup – Ledger

When customers create a new

ledger, they will have to
associate it with the subledger
accounting method

Copyright © 2007, Oracle. All rights reserved 15

After the rules are established, the Cost Management – SLA responsibility allows for the
creation of the user-defined accounting data. The request group related to this process
includes all SLA processes as well as standard accounting processes.

For inventory transactions, a transaction would be received or costed. The transaction

will then be passed to GL via the Create Accounting – Cost Management program.
So for a Miscellaneous receipt, the following occurs:
User creates misc receipt
Cost Manager processes transaction
Create Accounting - Cost Management Inventory Category process is run.
This validates the accounts to be used as per any rules that have been defined.
If no rule defined for a transaction event then the default account value set for the
organization is used.
If the setting were final and post, the details would be transferred to GL. If no
transfer to GL was indicated and the setting was final and post, then the Transfer to GL
process still needs to be run via CSTGLTRN - Transfer Journal Entries to GL.

Create Accounting – Cost Management

This process is tied to the Cost Management – SLA process and uses the following
Process Categories:
Inventory Receiving
Work in Process Third Party Merge
 Manual

The process then completes or shows errors that need correction.

Sub Ledger Accounting(SLA)

Process: Responsibility

A new responsibility that can

run ‘Create Accounting –
Cost Management’ needs the
application set to ‘Cost
Management’. ‘Create
Accounting – Receiving’ can
be run only in a responsibility
tied to the ‘Purchasing’
application

New Request group that

includes all the costing and
costing related SLA
concurrent requests
(including ‘Create Accounting
– Cost Management’).
‘Create Accounting –
Receiving’ has been added
to Purchasing request group

New Menu ‘Cost Management

and Subledger Accounting’ for
Costing and SLA menu
functions

Copyright © 2007, Oracle. All rights reserved 16

The Create Accounting - Cost Management request creates accrual journal entries,
accrual reversals, and multi-period journal entries.

Sub Ledger Accounting(SLA)

Process: Create Accounting – Cost Management

Program available
only within Cost
Management – SLA
responsibility

Copyright © 2007, Oracle. All rights reserved 17

Create Accounting – Cost Management Parameters:

Required; limits accounting events to the
chosen ledger If profile option SLA: Enable
Data Access Security in Subledgers = Yes,
Ledger
only the ledgers included in the SL Access
Sets assigned to the responsibility is on the
LOV
Optional; Restricts events selected to
particular process category. The program
Process Category selects events with event types that are part
of the event class assigned to the process
category.
Required; End date for the program to use.
End Date Will only process those events with event
dates on or before the end date.
Optional; Determines if entries created in
Draft or Final mode.Draft Mode –Transfer
to GL, Post in GL, and GL Batch Name
Mode
fields are disabled as the draft entries cannot
be transferred to GL; It is recommended to
run in draft first to check for errors
 Required; Limits the creation of accounting
to those events that previously failed. If set
Errors
to Yes the program will process all events
with the status of error.
Optional; determines if the report showing
Report the results of the SLA program is in
summary or detail.
Required if mode = Final; Determines if the
subledger journal entries are transferred to
Transfer to GL
GL. Journal Import is not launched if set to
Yes
Required if mode = Final or Create
Post in GL
Accounting is set to No
Optional; user entered batch name appears
GL Batch Name in transferred GL Subledger journal entries.
Transfer to GL must be set to Yes
Required; identifies the org each accounting
Include User Transaction Identifiers
entry belongs to

To transfer the details to GL:

1- Set the parameter in the Create Accounting to Yes
2- If parameter is set to No, then the Transfer to GL process must be run manually as
this will only create accounting but no values are passed to GL.

There is an option to make the journal entry and post the journals automatically at the
time of submitting the Create Accounting program itself.
This option is used by setting the profile SLA: Disable Journal Import to "NO" .This
will be the most preferred setting for this profile option and this indicates that Journal
Import will ALWAYS accompany the transfer of data from Subledger.
Another main implication of this value is that, on failure of Journal Import, the data
will be rolled back to SLA tables and hence there will not be any data in
GL_INTERFACE. For R12, when the transactions are costed, the details for the transfer
to GL are stored in the SLA tables and not in mtl_transaction_accounts or in the
wip_transaction_accounts tables.

Also, part of the setup includes the Organization parameter setup for Transfer to GL.
This has values of Yes or No in R12 and are required to be set to allow Transfer to GL.

Product teams are responsible for the following:

Identify transaction entities with accounting impacts
Define event types that correspond to different status in the lifecycle
Create events for transactions when passing from status to another …this is transparent
to the customer although the creation is triggered by the user action.
Define transaction objects that provide data that SLA uses to create journal entries
Population of transaction objects is the responsibility of product teams
SLA Team is responsible for the following:
Defining data model for events
Develop/Maintain programs and APIs that create and maintain events and related
objects
Processing events as part of the Create Accounting programs

Definitions:
--------------------
Accounting Methods Builder
This is the process that created a SLAM and assigns it to the Ledger.

Ledger
The ledger determines the rules that are applied when accounting is generated. Ledgers
replace Set of Books. Each Operating Unit is associated with a Primary Ledger. Multiple
Legal Entities can be tied to a Ledger through the accounting set up flow. Multiple
SLAMs can be assigned to a Ledger. There can be a primary and Secondary ledger setup
that can use different accounting methods in each ledger.

The 3C’s is now known as the 4C’s:

Chart of Accounts
Calendar
Currency
Accounting convention

Examples of Subledger Methods (SLAMs)

US GAAP FRENCH GAAP
Accrual Basis Accounting Cash Basis Accounting

The following SLAMS are seeded in Oracle:

Standard Accrual Encumbrance and US Federal
Standard Cash

Subledger Accounting Method (SLAM)

This is the subledger accounting method that is built and assigned to a Ledger. This will
be created via the Accounting Methods Builder and includes all the details needed to
created the appropriate journal entries.

Application Accounting Definitions (AAD)

The application accounting definitions is made up of the Journal Line Definition, Journal
line types, and Accounting Derivation Rules. These are developed using the event classes
and types. A new AAD can be created or a seeded AAD can be used. The details are
assigned and validated to be certain the setup at this level is correct.

Journal Line Definitions (JLD)

JLT, ADR and JED are combined to create the JDL for an event. These can be shared
across AADs and can be used to create sets of line assignments for event classes and
types.

For Cost Management, The Journal Entry Description is not seeded by default in Costing
application accounting definition.

Journal Line Types (JLT)

The types are defined for each particular class to be used. These must be assigned to the
Journal Line Definition (JDL) to be used. These determine the journal entry line options
to be used. These options include identifying the natural side used (debit, credit,
gain/loss), accounting class, summarization, and other conditions that will cause the rule
to create a journal entry.

Accounting Derivation Rule (ADR)

This is used to determine the accounting combinations that will be used for the journal
entries. Various rules can be defined. These can be defined by segment, accounting
combination, or value set. The simplest way to derive an account is to establish the
account as a constant value-use the account combination that is defined in the accounting
chart of accounts.

Mapping Sets
These sets are optional and user defined. If the user determines that the seeded details are
insufficient, then mapping sets can be setup to allow for more specialization in the
accounts. This is not supported by development as this would require customization.
Seeded details are supported as they are provided by Oracle code.

Transaction Objects/Sources
Transaction objects and sources carry transaction information into the rules defined for
the accounting chart of accounts.

Event:
An event is the recording of a change of status in the transaction life cycle, i.e., invoice
approved, payment received, period close, etc. These are defined for each
SLAM used. Event classes and event types are used to create the events to be used

Event Class
This classifies the types of transactions that are to be accounted for. An example of an
event class is WIP Variance.

Event Type
This defines actions that are possible for an event class that has potential accounting
significance. Examples for the WIP Variance Event CLASS would have event TYPES
defined for Period Close Variance, Job Close Variance, and Final Completion Variance.

References:
SLA Powerpoint slides created by Anup Jha Cost Development