An Oracle Whitepaper

Oracle Financial Consolidation and Close Cloud Service

How Oracle Financial Consolidation and Close Cloud Service handles
Intercompany elimination?

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Disclaimer

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 INDEX

CONTENTS

INTRODUCTION ............................................................................................................................................ 4
BRIEF OF INTERCOMPANY ELIMINATIONS .................................................................................................. 4
PREREQUISITES TO PERFORM INTERCOMPANY ELIMINATIONS IN FCCS................................................... 5
HOW ELIMINATION PROCESS HAPPENS IN FCCS ........................................................................................ 6
SETTING UP PLUG ACCOUNTS FOR INTERCOMPANY DATA ....................................................................... 7
SETTING UP ACCOUNTS FOR INTERCOMPANY DATA ................................................................................. 8
SETTING UP ENTITIES FOR INTERCOMPANY DATA ................................................................................... 12
ELIMINATING INTERCOMPANY DIFFERENCE AT SINGLE CURRENCY ENTITY ........................................... 15
ELIMINATING INTERCOMPANY DIFFERENCE AT MULTI CURRENCY ENTITIES ......................................... 16
SUMMARY .................................................................................................................................................. 19

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Introduction

Brief of Intercompany eliminations

Transactions between two entities in an organization are called intercompany transactions.

The example on the slide illustrates the intercompany transaction process:

1. The East Sales organization makes a sale to an outside customer.
2. The goods are shipped from an internal factory, (West sales).
3. West sales sends an intercompany invoice to East Sales for the goods that West Factory shipped.
Entities that conduct intercompany transactions are known as intercompany partners (ICPS).

During data consolidation, FCCS automatically eliminates intercompany balances.

For the example on the above slide,

Intercompany balances in MA and NY are eliminated at the East sales entity.
Intercompany balances MA and CA are eliminated at the USA Sales entity

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Prerequisites to perform intercompany eliminations in FCCS.
While creating the FCCS application the below option in the Create application features should be
enabled.

Intercompany data
 Yes, with Tracking (Intercompany elimination is enabled along with tracking)
 Yes, without tracking (Intercompany elimination is enabled without tracking)
 No (Intercompany dimension itself is not created)

After once this feature is enabled, you cannot disable it.

The logic of Intercompany elimination in FCCS is same as HFM (Hyperion financial management).

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 How Elimination Process happens in FCCS

Elimination Of intercompany balances occurs during data consolidation.

During the elimination process, differences between intercompany account balances are posted to a
plug account.

For the example on the slide, CA leased equipment worth USD $1,500 from NY. When data is
consolidated, the intercompany balances for the Intercompany payable and Intercompany receivable
intercompany accounts are eliminated at the first common parent, the USA Sales entity.

Plug Accounts
If there are any differences between the intercompany account balances in FCCS, These differences in
intercompany accounts are stored at PLUG accounts.

The example in the below a USD $1500 Sales intercompany payable balance against a USD $1600
Purchases intercompany receivable balance. When consolidation is performed. the USD$100 difference
is placed in the intercompany difference plug account Intercompany RecPay Diff

Intercompany Accounts Plug account

Intercompany payable Intercompany receivable Intercompany RecPay Diff

1500 1400 100

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 Setting up Plug Accounts for Intercompany Data
To demonstrate, we require 1 asset, 1 liability account and 1 Plug account as below in sample application

 Intercompany receivable (ASSET Account)

 Intercompany Payable (LIABILITY Account)
 Intercompany RecPay Diff (PLUG Account)

Go through the below screenshots for setting up a plug account.

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To make an account as PLUG account,

1. Edit the Account

2. Click on Attribute values
3. Add “Plug_ACC_YES” attribute under “Is Plug Account”.
4. Save

Setting up Accounts for Intercompany Data

To set Intercompany Account dimensions properties go through the below screenshots

ASSET Account

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To make an account as Intercompany account

1. Edit the Account

2. Click on Attribute values
3. Add “IC_ACC_YES” attribute under “Intercompany Account”
4. Assign a plug account to store the intercompany difference value.
5. Expand “Plug Account” to see the created plug accounts.
6. Save

And follow the same for other liability account.

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Liability Account

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To make an account member to participate intercompany elimination, two attribute values should be
assigned,

1. Edit the Account

2. Click on Attribute values
3. Add “IC_ACC_YES” attribute under “Intercompany Account”
4. Assign a plug account to store the intercompany difference value.
5. Expand “Plug Account” to see the created plug accounts.
6. Save.

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 Setting up Entities for Intercompany Data

For demonstration, we require 2 entities

 E01_101_1120 (NY)
 E01_101_1210 (CA)
In the below Example the intercompany will eliminate at common parent of “NY “and “CA” which is

“USA SALES”.

How to make entities to participate in Intercompany elimination,

1. Edit the required entity, which should be participated in ICP elimination.

2. Click on Attribute values.
3. Add “ICP_Entity_Yes” under Intercompany entity.
4. Save.

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Adding this Attribute Value “ICP_Entity_Yes” to the entities will automatically add those entities to the
ICP Dimension below under “FCCS_Intercompany Entities” with the name “ICP_<Entity Name>”,
As below screen shot.

For Example If you make “E01_1010_1120” as Intercompany entity, In ICP dimension it will be
automatically created as “ICP_E01_1010_1120”.

If an Entity is marked as Intercompany and later the Intercompany Attribute is removed for entity, the
associated Intercompany member in ICP dimension must be removed manually.

After making all the changes to the metadata hierarchy, refresh database should be performed.

Now we are ready with all the required settings in account and entity dimensions to perform elimination
between two entities.

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To understand the intercompany elimination process easily, build a simple ad-hoc form as per below
screenshot.

In FCCS to see the eliminated data two dimensions plays a vital role,

 Consolidation dimension
 Data Source dimension member

For Intercompany Elimination, the proper intersection to view Eliminations is

Consolidation dimension member – FCCS_Elimination

Data Source dimension member – FCCS_Intercompany Eliminations

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 Eliminating intercompany difference at Single currency entity

In this test case intercompany elimination will be happening between the entities of same currency,

Therefore, translation will not be in effect.

In the above screenshot,

For “Intercompany Receivable” account transaction between Sydney and Melbourne is “2000”

For ““Intercompany payable” account Melbourne to Sydney is “1700”.

After running the consolidation, in the above screenshot,

Difference between two Intercompany transactions got stored at plug account, which is

“Intercompany receivable payable difference” = -300

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The eliminated values can be tracked at “FCCS_Intercompany Elimination” member of data source
dimension as below screenshot.

As the intercompany tracking is enabled for this application the reverse values are posted to the
FCCS_intercompany Elimination member of Datasource dimension.

Eliminating intercompany difference at Multi currency entities

In this test case intercompany elimination is happening between NY and Denmark corporate, which are
having different currencies,

In the above scenario,

Denmark corporate currency is “DKK” which has a parent EMEA (Currency: EURO)

NY currency is USD.

Denmark corporate and NY entities common parent is total Geography where Intercompany
transactions are eliminated.

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You can go through below screenshots for entity hierarchy and exchange rates,

Exchange Rates between the currencies are below.

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In the above screenshot,

For “Intercompany Receivable” account transaction between NY and Denmark Corporate is “10”

For ““Intercompany payable” account Denmark Corporate and NY is “5”.

After running consolidation, intercompany transactions are as below,

Difference between two Intercompany transactions got stored at plug account, which is

“Intercompany receivable payable difference” = -75 [-80-(-5)]

To see how this was consolidated go through below calculations.

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 Exchange Consolidated
DATA rates Data
USD 80 1 80
EURO 20 4 80
DKK 10 2 20

Exchange Consolidated
DATA rates Data
USD 5 1 5
EURO 4
DKK 2

Summary

Intercompany eliminations are processed when certain conditions are met in Oracle financial
consolidation close cloud.

1. Account must be set as an Intercompany account,

2. The account must have a Plug account Assigned to it.

When these conditions are met and an Intercompany Elimination is processed,

1. FCCS will reverse the signage (+/-) of data value inputted and store the reversed value at
FCCS_Elimination member of Consolidation dimension, the remaining POV will be the same.
2. If Intercompany tracking is enabled, reverse value of inputted data is posted to
FCCS_Intercompany Elimination of Data Source Dimension.(Only if Intercompany tracking is
enabled while creating the FCCS application).
3. The difference/eliminated value of the two Intercompany values are Stored at Plug Account.

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