Inter-Company

In Oracle, GL based intercompany clearing entries are determined based upon the net debit and credit balances of a journal. When there are multiple debit and credit balances by company in a journal, it is not possible for Oracle to determine which company is dealing with which one. This is known as a “Many to Many” situation. Hence, all intercompany transactions balance against the “All Other” company. The alternative that Oracle offers for companies that wish to see an intercompany segment value is to use the Default Clearing Company option, which will then balance all transactions against a particular company.

Oracle intercompany serves to balance journals by balancing segment as a part of posting. This ensures that the books remain balanced by the balancing segment. It does not necessarily ensure that Oracle’s intercompany is generated to accurately reflect the true intercompany and balances the journals by balancing segment.

Baytree Solution

Baytree Associates has developed a unique and creative solution for our clients to help them accurately state their intercompany balances for Accounts Payable and Project Accounting. This process works within the GL prior to Oracle’s intercompany process to help ensure that the intercompany accurately reflects the true intercompany entries and balances the journals by balancing segment.

The custom process is executed prior to the posting of the journals. It executes against the journal lines after they have been saved into the GL_INTERFACE or PA_GL_INTERFACE tables. The client does have the option to allow Oracle to generate the standard intercompany entries and then reverse the existing Oracle GL entries and generate the correct intercompany entries.

An example of an accounts payable entry and the resulting intercompany entries generated is shown below. Example shown is assuming that the intercompany account is the same for intercompany payable and receivable for each company.

By comparison, Oracle would generate the following entry for the same journal. Initially it would calculate the net debit/credit balance for each company. Since the entries are for more than one company, Oracle would use the company set up for “All Other” transactions. For purposes of demonstration, we will assume the “All Other” company is set up as 005.

The net debit/credit balances by company would be:

001 (98,001.00)
002 12,001.00
003 81,001.00
004 (500.00)

Benefits of the Baytree Solution

• Does not impact subledger processes. Our solution is based in the General Ledger.
• Process is in use at multiple clients today.
• Does not impact the ability to drill back to the subledger details.
• The process will work correctly whether the client posts in summary or detail.
• Provides the ability to trace the intercompany transactions, when required.
• The solution is built under the developer guidelines provided by Oracle.
• Intercompany clearing entries are based upon transaction details, not at a total level.
• The process can be executed multiple times during a given period allowing review of intercompany balances at any point in time.
• Generated transactions must result in a balanced journal by balancing segment.
• The solution is an outside process and is easily upgradeable.
• The code is very transportable and re-usable.