Its R12, How Do I Balance My Accrued Accounts Payable (AAP) Account?

Cost Management SIG

October 16, 2012

Agenda

Introduction
Robert Smith currently is a Manager at KPMG, LLP with over 17 years of experience working with Oracle Applications as user and consultant.

Purpose of AAP Process Reconciliation Setup and Process Reconciliation Write-Offs Reconciliation Logic and Example Accounting Setup Lessons Learned Q&A

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.

KPMGs Global Reach

Organizational Structure and Global Footprint

KPMG International is a global network of professional firms providing audit, tax, and advisory services, drawing from the skills and experiences of 140,000 professionals across 150 countries. KPMG International provides services to 79 percent of the Global 1200, managing their large, complex projects using consistent sets of standards. Our global network of professionals operates under common core values, adheres to uniform quality control standards, uses globally consistent technologies, toolkits and methodologies with an persistent focus on delivering quality. Our worldwide presence and deep strength of talent allow us to leverage specific skill sets, industry knowledge, and global resources on an as-needed basis. KPMG LLP (KPMG), the US member firm of KPMG International, traces its origins back to 1897. As one of the worlds largest independent accounting firms, we are proud to provide many of the worlds largest entities with services, including 75 companies in the FORTUNE 100.

KPMG International Countries: 150 Professionals: 143,000+ Partners: 7,900 Revenue: $22.7 B Global Advisory Professionals: Americas EMEA ASPAC 7K 20K 5K

KPMG Services
KPMG is a service provider independent from any suppliers or products, fostering an independent view and position.

100+ global methods and toolkits to bring the firms vast knowledge to each client

Audit
Provides independent audit services designed to enhance the reliability of information prepared by clients for use by investors, creditors and other stakeholders, including countryspecific statutory requirements

Advisory
Helps clients to tackle growth, governance, and performance challenges, combining specialist skills around the world to provide objective advice and execution to help preserve and improve value

Tax
Helps clients throughout the world stay on top of tax-related developments and address a host of international, federal, state, and local tax issues

KPMG, LLP (US) Offices: 87 Professionals: 30,000+ Partners: 1,882 Revenue: $6 B

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

KPMGs Key Oracle Strengths

Oracle Global Delivery Strength: 2,000+ resources in 35 countries/member firms World Class Business Process Transformation capabilities Deep Oracle expertise in Financial Management (Oracle & PeopleSoft),
HCM (PeopleSoft), EPM (Hyperion & Essbase), Business Intelligence (OBIEE & BI Analytics), and GRC

Long history of innovations and inaugural implementation successes in

Oracle E-Business, PeopleSoft HCM, Oracle Business Intelligence, Hyperion Fusion Edition, and PeopleSoft Financials

Leading implementer of PeopleSoft 9.1, including the industrys very first

9.1 implementation

Developing SCM capabilities, with strong expertise in OPM and Demantra Oracle Platinum Partner with an extensive set of Specializations
o Diamond Level Certification in process

Oracle Fusion Early Adopter Partner Program, selected to lead Fusion

Financials and HCM go-to-market initiatives

Oracle TITAN Award winning RapidSolutionsSM methodology KPMG LABSSM provide fully configured, industry-leading Oracle E-Business,
PeopleSoft HCM & Financials, Oracle Business Intelligence OBIEE and Analytics reference environments
2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

KPMG Management Consultings Oracle Capabilities Snapshot

Management Consulting
KPMGs World Class Business Process Transformation Capabilities COO / BU Leads HR Executive

CFO

CIO

Financial Management

Business Effectiveness

People & Change

IT Strategy & Performance

Oracle Capabilities

Key Facts
Oracle Platinum Partner Specialized: Oracle E-Business, PeopleSoft, Hyperion, Business Intelligence & Analytics Oracle Fusion Early Adopter Partner Program Diamond Level Certification Initiative in process Focus on Oracle-enabled Global Value Delivery Method Global Delivery Strength: 2,000+ resources in 35 countries
Financials

Supply Chain Management

Human Capital Management

Information Management Data Quality Management Strategic Platform Alignment Cloud Strategy and Deployment ERP Performance Management & Implementation Security and Risk Rationalization Outsourcing Enablement

Financial Controls & Reporting Budgeting, Planning, & Forecasting

Procurement

Payroll

Process & Discrete Manufacturing Order Fulfillment

Benefits

Across Industries

Transfer Pricing Governance, Risk & Compliance International Financial Reporting Standards
Enterprise Performance Management & Essbase

Compensation

Value Chain Planning Advanced Supply Chain Planning Demand Management

Talent Management

Time & Labor

Workforce Planning

BI Financial Analytics
2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

BI Procurement & Spend Analytics

BI HR Analytics

BI Project Analytics

Oracle Product Experience

Oracle has long recognized KPMGs industry domain expertise and leadership position; viewing KPMG practitioners as trusted business advisors and industry thought leaders. We work closely with Oracles Sales teams, especially in the rollout of new releases, and have a long history working with Oracles Product Strategy & Development teams. The relationship our practitioners share with Oracle becomes a direct value to each of our clients when seeking rapid resolution to product issues.

One of the 1st to successfully implement Oracle E-Business R12.

Leading implementer of v9.1 solutions. The 1st to implement HCM v9.1, HCM 8.9 and Revenue Management v8.9.

Leading implementer of Oracle BI solutions, including OBI EE and BI Analytic Applications. One of the 1st to implement Project and HR Analytics 7.9.6

A leader in GRC Transformation services. The 1st to successfully implement Oracle EGRCM 8.6.

A preferred Fusion HCM Partner, one of only 8 selected globally.

Deep experience implementing Oracle EPM solutions, including Hyperion and Essbase. The 1st to successfully implement HFM Fusion.

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Scope of KPMGs Oracle Capabilities

The following represents a full spectrum of resources we can bring to every initiative:
ORACLE EXPERTISE Platinum Partner RAPIDSOLUTIONSSM Fusion Council Member TITAN Award Winning Methodology tailored Member of the E-Business, for PeopleSoft 9.1 PeopleSoft, Fusion, Business Process-based Orientation Intelligence & Fusion Middleware Stresses Knowledge Transfer Product Focus Groups Incorporates Industry Best Practices OAUG Partner Quest Partner KPMG TOOLKITSM Hosted Client Collaboration Suite Process Analysis & Design Tools Requirements Database Customization Templates Test Script Library Project Administration Tools

BUSINESS PROCESS FOCUS Financial Management IT Strategy & Performance Business Effectiveness People & Change SERVICE PROGRAMS Implementation & Upgrade Business Transformation & Process Optimization ERP Strategy & Roadmaps Value Upgrade Assessment HealthCheckSM Review System Selection Assistance Technical Infrastructure Planning Enterprise Application Integration Customized Training

Our Clients

TECHNICAL EXPERTISE Planning & Architecture Hardware/Software Assessment KPMG LABSSM & Configurations Upgrade & Implementation Custom Development Lab Environments Database Administration Support Services & Optimization Demonstration & Interface Development Training Environments Data Conversion Automation Testing Facilities System Performance Tuning PeopleSoft v9.1, EBS 12.1, Middleware / Integration OBIEE 11g, BI Apps 7.9.6, Demantra 7.3, Hyperion Fusion
2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

CHANGE & TRAINING FOCUS EBS, PeopleSoft, BI, Change Management & Training Expertise Process-based training methodology Job Impact and Change Strategies

INDUSTRY FOCUS Consumer Goods Communications & Media Energy & Utilities Financial Services Government & Public Sector Healthcare Manufacturing Professional Services Retail Transportation

Purpose of AAP Process

To identify potential issues with receiving and purchasing transactions that could impact the accuracy of the AP accrual accounts recorded in the General Ledger Quantities differ between receipts and invoices Discrepancies in vendor billings Invoices matched to incorrect purchase order Receiving against wrong purchase order Miscellaneous transactions that do not belong to the accrual accounts Freight and tax payables entries that are incorrectly posted to the accrual accounts

The AAP reconciliation process has been feared or strongly disliked Now with Release 12, users have access to a comprehensive reconciliation report and the ability to write off obsolete transactions

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Setup/Process

Reconciliation Setup/Process
Yes Yes
Reconciliation Summary Reconciliation Detail Write-Off Summary Write-Off Details

Set Accrual Accounts

New Transaction Data

Accrual Load Program

Choose for Write-Off

Yes

Choose for Reversal

No No

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Setup/Process

Reconciliation Setup/Process
Identify accrual accounts to be reconciled

Set Accrual Accounts

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Setup/Process

Reconciliation Setup/Process
Enter transactions throughout the month as normal Load program populates the following tables: CST_AP_PO_RECONCILIATION CST_MISC_RECONCILIATION CST_RECONCILIATION_SUMMARY Only transactions having a net balance will populate the tables

New Transaction Data

Accrual Load Program

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Setup/Process

Reconciliation Setup/Process
Summary Accrual Reconciliation Report is used to determine the accrual accounts have balances

Reconciliation Summary Reconciliation Detail

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Setup/Process

Reconciliation Setup/Process
The AP and PO Accrual Reconciliation Report is used to view the accrual accounts having a net balance not equal to zero

Reconciliation Summary Reconciliation Detail

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Setup/Process

Reconciliation Setup/Process
The Miscellaneous Accrual Reconciliation Report is used to view miscellaneous invoices not matched to PO or PO receipts

Reconciliation Summary Reconciliation Detail

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Write-Offs

Reconciliation Write-Offs
Review transactions and decide to write off. Ensure all transactions are completed and posted or reports reviewing may not be accurate. Write-Off will automatically generate general ledger transactions.

Choose for Write-Off

Yes

Write-Off Summary Write-Off Details

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Write-Offs

Reconciliation Write-Offs

Choose for Write-Off

Yes

Write-Off Summary Write-Off Details

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Write-Offs

Reconciliation Write-Offs
After write-off and running accounting, transactions can be reviewed and see the accounting generated

Choose for Write-Off

Yes

Write-Off Summary Write-Off Details

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

Comparison of 11i and R12 AAP Accrual Process

11i
Reconciliation Rebuild retrieved data falling within relevant date range, regardless of status of fully invoiced, partially invoiced, un-invoiced or written off Reconciliation Reports are reported by PO lines

R12
Concentrates on PO distributions rather than lines and aggregate totals

Load program uses to date parameter as a cut-off date to obtain PO distributions having a net balance which simplifies process and improves performance Reconciliation reports only show distributions with balances resulting only relevant data that directly impacts the current Net Accrual Balance Reconciliation is based on age of PO Distributions not the transaction date of the whole transaction Accrual write-offs are removed from the reconciliation reports and write off entries are systematically created The reconciliation reports should only be used to reconcile current balances

Accrual Write-offs are removed from the reconciliation report, but the user has to manually

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

Walk through of example. For simplicity assume only 1 item is involved and PO price is $10

Period 1 January 2012 PO#1 PO#2 PO#1 PO#2 PO#1 PO#2 Ordered 10 Ordered 10 Received 5 Received 5 Invoiced 5 Invoiced 4 01/01/2012 01/01/2012 01/01/2012 01/01/2012 01/31/2012 01/31/2012

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

After the Accrual Load Program is run for January the following will be populated in the CST_RECONCILIATION_SUMMARY and CST_AP_PO_RECONCILIATION respectively

Only PO2 because PO1 self cleared

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

User decides to write off transaction Summary and detail shown respectively

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

User realizes the write-off was a mistake and reverses the write off The summary and detail impact are shown to the right

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

After the reversal the transaction will reappear on the reconciliation report

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Reconciliation Logic/Example

Reconciliation Logic / Example

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

Accounting Setup

Receiving
Within standard Oracle the user can define the inventory accrual account to be used at the organization level Many times this is not enough so now in R12 users can utilize the Subledger Accounting (SLA) setups to map the accrual account based on various user decided attributes

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

27

Accounting Setup

Payables
Within standard Oracle the user can define the AP Accrual account to be used at the Supplier and Supplier Site level Many times this is does not offer enough flexibility so now in R12 users can utilize the SLA setups to map the Payables accrual account based on various user decided attributes

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

28

Accounting Setup

Write-Offs
Within standard Oracle the default offset account that is used when writing off an accrual transaction is the charge account on the PO distribution if the destination type of the PO distribution is Expense If the destination type of the PO distribution is inventory than the default account is the variance account on the PO distribution (Purchase Price Variance) If this default account does not provided enough flexibility then the user can use the R12 SLA setups to map the Write-Off offset as they wish The mapping for the write-off can be found in the Cost Management module

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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Lessons Learned

Transactions must be accounted Reconciliation should be done every month The data on the Oracle reports is what is in the system Transactions not final accounted do not appear on the reports SLA rules not consistent on the purchasing and payables side can cause out of balances between report and genera ledger

2011 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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Thank you
Robert Smith robertwsmith@kpmg.com

2012 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.