Oracle Release 12 - Ledgers and Ledger Sets

The organisational structures in release 12 include a new classification of ledgers, and together with ledger sets have the characteristics of sets of books, with the period close taking place at ledger set level.

Oracle outline 3 organisational axis - legal, business and functional.

Ledgers fall on the legal axis, providing a mechanism to record Establishments, Registrations, Jurisdictions, Legal Authorities and Associations. Legal entities own assets, financial transactions and have regulatory obligations. At it’s simplest a legal organisation (including public sector bodies) has a balance sheet, journal entries and some form of company return. Any Oracle set up needs to support these basic requirements.

Equating ledgers to the old sets of books we still have the 3 Cs – Chart of Accounts, Currency and Calendar, with a new C – Accounting Method (ok it needs some imagination).

So what can be considered within the fourth C – Accounting Method?

Country – Statutory charts of accounts have long defined the requirement for different sets of books, however with the use of sub-ledger accounting rules a further dimension is added to country specific requirements.

Jurisdiction – Even within a country there may be more than one set of rules that may necessitate separate ledgers

Case Study: One company found the tax laws between Beijing and Shanghai differed significantly for their organisation so 2 sets of books were deemed to be required.]

Case Study: Specific indirect taxation rules applied to one part of a business so separate sub-ledgers were required to handle that requirement.

Corporate Governance – Directors of a company are legally responsible for the activities of a company. With 11i, the sharing of a set of books can raise questions as to who has overall responsibility.

Case Study: Single set of books shared by 4 balancing entities caused reconciliation, control and responsibility problems. Company directors welcomed own set of books as it improved their control and corporate governance.

In release 12, 4 ledgers –essentially legal entities – and legal associations could solve 12 the problem encountered in the case study.

Accounting Sequencing – Many tax jurisdictions require that a legal entity has it’s own set of accounting sequence numbers, and that all the transactions in a ledger apply to that sequence. This is imperative where accounting entry reports such as the Libro Giornale in Italy, and the Brazilian General Ledger Daily Book. This requirement is common in Southern Europe, Eastern Europe and Latin America, with much of continental Europe looking for distinct sequence numbers.

What release 12 brings is a greater use of the Legal Entity organisational classification than we saw in previous versions. The key features being tax calculations, inter-company balancing and bank ownership at legal entity level.