Joint Venture Accounting

Purpose of JVA
Companies typically form joint venture partnerships to minimize risks involved in capital-intensive
operations that demand a long payback period.

A joint venture partnership consists of an operating partner (operator) and one or more non-operating
partners who combine monetary or personnel resources to share a project’s expenses and revenues.

The operator manages the venture, arranges venture activities, and maintains accounting records.

The operator remits venture expenses, collects revenues, and distributes these to the partners, according to
their ownership shares.

Joint Venture Accounting (JVA) Objects

The Main JVA Objects:

Object Name Description

Joint Operating Agreement (JOA) A JOA is a formal agreement that specifies the
conditions for a joint operation. This covers the
working interests of the partners and their
properties, as well as overheads and penalties.
Joint Venture This is an association of two or more partners,
formed to share a venture’s risks, costs, and
revenues. Each partner’s share is proportional
to their working interest in the venture.

Equity Type The JOA has different development stages,

such as engineering and design, construction,
and production. Different partners participate at
each stage. JVA manages the different stages
by using equity types. An equity type explains
a particular association of partners. This
definition may be related to time, phase or
purpose and is linked with a specific equity
 group.
Equity Group An equity group represents an association of
venture partners and their working interests. An
equity group may consist of all or some of the
venture partners.
Joint Venture Partner This is a partner mentioned in the JOA with a
working interest in a venture. One partner,
called the operator, manages the operation. The
remaining non-operating partners share
expenses and revenues.
Recovery and Billing Indicators You assign a recovery indicator to a cost object
to indicate whether or not expenses, posted
using the cost object, are billable to JVA
partners. You assign billable costs to the
appropriate partners. Non-billable expenses are
assigned to the operator. Billing indicators are
assigned to billable postings and identify the
type of posting involved, including cash call,
normal expenditure, and audit adjustment to a
particular partner account.

JVA Integration Activities

We can run JVA using different data models

 classic JVA using the special ledger data model

 JVA running on Universal Journal

Classic JVA:
SAP JVA receives the original documents and creates additional JVA documents. The SAP JVA
documents contain additional venture information, including the joint venture, equity group, and recovery
(RI) indicator. Some lines of the SAP JVA document can be split, such as the vendor, customer, and tax
information lines.

JVIM Line Item Splitting

The JVIM splits relevant document lines (tax lines, discount lines, vendor lines) based on the venture and
cost object information of the split basis lines. Each relevant document line is split into as many lines as
there is different venture and cost object information in a split basis.

FI Document:

Splitting Document

Overview of JVA on ACDOCA

Compared to the classic JVA, JVA on ACDOCA keeps the same business logic. The most important
transactions are available as apps via SAP Fiori launchpad.

The classic design of JVA is based on the Special Ledger technology: There are six so-called "fixed
special ledgers" (4A, 4B, 4C, 4D, 4E, 4F) that are used to save the accounting documents that are relevant
for JVA.

The data are saved in several database tables, the most important ones being JVSO1, JVTO1, JVSO2,
JVTO2, T8JTPM.

The main source of documents in the JVA ledgers are the ERP components FI, CO, MM, and SD which
JVA is closely integrated with. Via the Accounting Interface, JVA checks every FI and CO document if it
is relevant for JVA. If this is the case, the document is taken over, and posted to the JV ledgers. In case of
FI documents, the document is usually split. This means that in the JVA ledgers the CO-relevant balances
usually differ from the ones in FI and CO.

The Universal Journal (= database table ACDOCA) is the “single source of truth” for all accounting data.
It contains all documents posted with the components FI, CO, MM, SD. According to this general
approach, the UJE contains all JVA-relevant data and is the source of all JVA processes and reporting.
When working with JVA on ACDOCA, the following applies:

 The overall footprint of the JV accounting data is reduced fundamentally (because the
JVA ledgers are replaced by the table ACDOCA that exists anyway and has all the
relevant data (in case you have deployed JVA on ACDOCA on release 1909 and later).
 Automatic re-conciliation between FI, JVA and CO is guaranteed because the FI, JVA
and CO documents are identical (based on the finance document split).
 JVA can utilize the new functionalities introduced through the ACDOCA design, for
example: up to 10 local currencies; fast retrieval of aggregated data; new reporting tools
(e.g. finance statement by venture).

The basic JVA functionality remains the same; the existing JVA business processes and the data flow is
not changed fundamentally. The only major changes to the data flow are to the transaction codes GJ90,
GJ91, GJNO that are made obsolete or replaced by the corresponding FI transactions. Nevertheless, there
are functional and UI changes in many transactions and areas: new drilldown functions for several
transactions (e.g. cutback, equity change), new bank switching program (funding); streamlined GUI;
improved output; improved message handling.
To activate the JVA on ACDOCA functionality, you have to activate the business function
"JVA_ON_ACDOCA" via transaction SFW5. When this business function is active, no data are saved to
the classic ledgers anymore (except for the plan data in JVPO1).

Topic Remarks
JVA ledgers All JVA accounting data is stored in the
database tables ACDOCA.
For planning with JVA data, use the classic
planning functionality that is based on table
COEJ. The planning documents are posted via
the Accounting Interface so that the JV table
JVPO1 is still updated through this process.

Database tables: The following fields are used with ACDOCA:

BILLM, POM, JVACTIVITY, CBRUNID,
CBRACCT, CBOBJNR, S_RECIND,
ACDOCA PVNAME, PEGRUP.

The BILLM and POM values are derived in

cash call programs and accordingly sent to
interface to post to ACDOCA.

The field JVACTIVITY stores information

which the JV process has created the line. This
is important for several follow-up processes
(esp. equity adjustment and suspense).

The fields CBRUNID, CBRACCT, CBOBJNR

are used by the cutback process to store a
unique run ID, the original account and the
original cost object (before mapping). The
fields S_RECIND is filled by several CO
processes to store the sender recovery indicator.

The fields PVNAME and PEGRUP are used in

venture balancing lines to store the partner
venture and the partner equity group to
determine the liabilities between ventures
(former bank switching).

Transactions The JVA transactions that process JV data


Internal documents
Integration Manager/derivations
Cost object reporting
Carry-Forward
Bank Switching
retrieve the data from table ACDOCA instead of
the JVA tables. All JVA transactions that
retrieve or create accounting data (esp. month-
end transactions) are affected by this.
The new transactions support all local
currencies available in ACDOCA.
The month-end JVA transactions that used to
post to the JV tables now post to ACDOCA
directly (without FI/BSEG document).
The classic JVA document creation
functionality (JV Integration Manager) is not
active anymore. The enrichment functions are
active, however (to derive the cost object from
given assets; to derive the cost object from
valuation area/type; to derive the housebank).
To enable the JVA working interest reporting,
the lines posting to non-cost elements store cost
objects.
To allow for proper inception-to-date
processing, the balance carry forward amounts
are posted in ACDOCA in a way that all
relevant data are available for the affected
transactions. The FI carry forward transaction is
extended by cost objects and the venture
accounting data, including the new fields
CBRUNID and JVACTIVITY (required for
inception-to-date and for suspense).
In case JVA on ACDOCA is active, carry-
forward functionalities are covered by FI. For
more information,
The classic solution to clear venture bank
accounts ("Bank Switching") is replaced by the
new "Funding" transactions that are based on
correct data flow information in ACDOCA.
JV Bank Switching / JV Funding

In Joint Venture Accounting on ACDOCA, the Bank Switching process has been changed with the new
ACDOCA solution and is now called JV Funding.

In JVA on ACDOCA, the JV Funding functionality replaces what is called Venture Bank Switching in
classic JVA. The following table compares the two solutions.

JVA Funding in JVA on ACDOCA JV Bank Switching in Classic JVA

Terminology: Balancing of accounts is referred to as “bank
switches”.
Balancing of accounts is referred to as
“reimbursements”.
Functionality: Balancing of accounts only; no reporting of
liabilities
Balancing of accounts (reimbursement) and
interest calculation; easy and fast reporting of
liabilities based on the Universal Journal

Processing steps: All logic is executed in one step at the end of a

month in the bank switching program
(transaction code: GJ20)
1. data preparation at document posting

2. re-imbursement at month-end

3. interest calculation at month-end

Auditability: Complex and hidden logic

Flexible and transparent calculations

Liability reporting: No liability reporting

 Simple reporting from the Universal Journal
based on accounts

Editability of runs: Month-end runs cannot be edited or cancelled

Proposals can be edited and cancelled

JV Funding Overview
The main process of JV funding consists of data capture/liability determination, reimbursement, and
interest calculation.

JV funding provides functionality to adjust liabilities between ventures that have occurred in inter-venture
scenarios. The process to balance the relevant inter-venture accounts is called reimbursement. The inter-
venture liabilities are determined at document posting and posted to special inter-venture accounts. The
reimbursement is executed at the end of a month via a so-called funding run. Additionally, if required,
interests can be calculated and charged via an extra program.

JV funding can only be used in company codes where Joint Venture Accounting is active.
Additionally, the functionality needs to be activated via the JVA detail company code settings
(transaction code: GJZD).

The activation of JV funding needs to be done before the posting for the next fiscal period starts.
JV funding cannot be executed for previous fiscal periods when JV funding was not active.

JV funding consists of the following three steps:

  During document posting: Data Capture/liability determination, including the substitution
of non-funded payments, actualization of the corp.pay recovery indicator, and the
enrichment of balance items

 At the end of a month: Reimbursement

 At the end of a month: Interest Calculation

The data capture for JV funding is executed during the posting of FI or CO documents. It identifies any
inter-venture liabilities and adds additional lines to the FI/CO document, using the inter-venture account.
These lines are the basis of any follow-up processing. Additionally, at this step accounting journals
posting to JV bank accounts are adjusted so that cash switches and corporate-paid costs are eliminated.
This requires two main adjustments that are described below: the adjustment of the JV assignment and the
corporate payment actualization.

Period Coverage in JVA

Billable postings in JVA can only be made in the proper periods 1-12.

JVA does not support the four special periods 13 to 16. Consequently, the same applies to JVA
reporting.

If you switch on inception to date for a company code, cutback will not pick up the balance
carryforward amount, but all previous periods 1 to 12 from all previous years. Any billable
posting to the special periods are not considered.

If you need reporting in special periods, use the standards FI and reporting tools.

Classical JVA
JVA with NewGL Integration
JVA on ACDOCA
Joint Venture Accounting (JVA)
Processes

 Material and asset transfers between ventures

 Allocations and settlement with ventures

 Equity group change management

 Equity group suspense

 Partner carried interest

 Cash calls

 Partner netting (expense with revenue)

  Parallel currencies

 Partner billing

 Cutback to venture partners including intercompany

 Joint venture audit reporting

Master Data
 Creating and Changing Joint Operating Agreements

 Setting Up Equity Groups

 Setting Up and Changing a Joint Venture

 Assigning Equity Groups and Equity Types

 Setting up Joint Venture Accounting Cost Objects: Overview

 Suspending and Removing Projects, Partners, and Equity Groups from Suspense

 Intercompany Mapping

 Maintaining Prepaid Inventory Materials

A joint operating agreement (JOA) is a contract specifying the conditions of a joint venture operation.
JOAs range in complexity. A JOA can include provisions for legal, tax, financial, engineering, and other
considerations negotiated by the venture partners.

 Joint ventures

 Equity groups - an equity group contains a group of JVA partners

 Cost calculation rules, percentages such as general overhead, parent company overhead,
payroll burden for the joint ventures in the JOA and sets of accounts
 Penalty categories for carried interest (CI) and net profit interest group (NPI) processes