OLFM Accounting R12.1

Accounting Whitepaper
Oracle Lease and Finance

Management
R12.1
Accounting
Introduction ....................................................................................................... 3
Overview of the accounting infrastructure .................................................... 4
Preparing for ledger and subledger accounting setup .................................. 6
Accounting values derived from formulas .................................................... 6
Contract scenario .......................................................................................... 6
Transaction in source application ............................................................... 7
Accounting in subledger .............................................................................. 8
Accounting values derived from streams ..................................................... 10
Contract scenario ........................................................................................ 10
Transaction in source application ............................................................. 10
Accounting in subledger ............................................................................ 11
Accounting in other applications .................................................................. 12
Multi-GAAP accounting ................................................................................ 15
Transaction and accounting inquiry ............................................................. 19
Conclusion ........................................................................................................ 19
Accounting in Oracle Lease and Finance Management Page 2

Accounting
INTRODUCTION
Oracle Lease and Finance Management has introduced new accounting

infrastructure in R12.1 for lease accounting. New accounting infrastructure
provides multiple accounting configuration options to address both simple and
complex accounting requirements of the leasing organization. Accounting
configuration options allow users flexibility in using contract information to
generate required accounting for contract transactions and to meet complex
accounting requirements. This white paper guides the users through the subledger
accounting method setup for accounting transactions generated in Oracle Lease
and Finance Management.
It is recommended that users familiarize themselves with the accounting related
information available in the Release 12.1 versions of following guides:
 Oracle Lease and Finance Management User’s guide
 Oracle Lease and Finance Management Implementation Guide
 Oracle Financial Implementation Guide
 Oracle General Ledger User’s Guide
 Oracle General Ledger Implementation Guide
 Oracle Subledger Accounting Implementation Guide
 Oracle Payables Implementation Guide
 Oracle Receivables Implementation Guide
 Oracle Assets Implementation guide
Some of the important terms used in this whitepaper are defined in the sequence
that they are configured:
 Journal Line Type (JLT): Journal line types determine the characteristics
of subledger journal entry lines. These characteristics include whether
the line is used to create actual entries, whether the line is a debit or a
credit, whether matching lines are merged, and whether data is
transferred to the general ledger in summary or detail form.

 Account Derivation Rule (ADR): Account derivation rules determine the
account codes for subledger journal entries.
 Journal Line Definition: Journal lines definitions determines the subledger
journal entries to be created by allowing user to create sets of line
assignments (journal line types, journal entry descriptions, and account
derivation rules) for an event class or event type. You can assign
multiple journal lines definitions to an event class or event type.
 Application Accounting Definition (AAD): An application accounting
definition is a collection of components or rules that determine how
Subledger Accounting processes accounting events to create subledger
and general ledger journal entries.
 Subledger Accounting Method (SLAM): A subledger accounting method
is a grouping of application accounting definitions that comply with a
common set of accounting requirements.
 Sources: Sources are contextual and reference data or information related
to a transaction.
 Secondary ledger: Ledger associated with a primary ledger. Refer to Oracle
General Ledger User Guide for more details.
 Subledger Accounting (SLA): Subledger Accounting is an Oracle E-
Business Suite module that centrally manages the accounting of all
transactions generated in transaction modules like Oracle Lease and
Finance Management, Receivables, Payables and other applications.
OVERVIEW OF THE ACCOUNTING INFRASTRUCTURE
Oracle Lease and Finance Management generates contract and asset transactions
throughout the contract and asset lifecycle. Under the new infrastructure in R12.1,
values for sources for every transaction are also generated. Sources are contextual
and reference data or information related to a transaction. Sources are used to
define conditional setup in Subledger Accounting Method to ensure that the
specific SLAM components are used for accounting process based on the sources
values for a transaction. Similarly, other Oracle E-Business Suite applications like
Receivables, Payables and Assets generate transactions and related source values.
The ‘Create Accounting’ process evaluates transactions, associated source values
and the accounting setup in the subledger accounting method associated with the
ledger to create the subledger journal entry. General ledger (GL) journals are
created by grouping one or more subledger journals. Users can define subledger
accounting methods for each ledger to use different accounting rules. While the
new subledger and ledger infrastructure is preconfigured to meet the common
needs, users can configure accounting to meet complex requirements.

The new features for accounting functionality in Oracle Lease and Finance
Management are:
1. Account Code Derivation: User may choose one of following.
 Accounting Template Set: Oracle Lease and Finance Management
generates account codes for transaction accounting based on
accounting template set at time of transaction creation and it may
o use the seeded subledger accounting method that uses
above account codes for accounting the transaction at the
time of accounting process
o use a modified subledger accounting method that evaluates
setups to generate new account codes for accounting the
transaction at the time of accounting process
 Account Method Builder: Oracle Lease and Finance Management
does not generate account codes when a transaction is created.
Account codes are generated by evaluating the subledger accounting
method setup at time of accounting process.
2. Automated Accounting in Secondary Ledger: In addition to accounting
for contract transactions in a primary ledger, users can setup SLAM using
different accounting principles to do accounting in a secondary ledger
automatically.
3. Configurable journals: Accounting setup in Subledger accounting method
provides flexibility for
 Journal entry definition for every event class / event type
 Definition of journal entry components conditional on
contract/transaction values

 Account code derivation conditional on contract/transaction values
PREPARING FOR LEDGER AND SUBLEDGER ACCOUNTING SETUP
Before any transaction for contract is created and accounted, users need to
complete ledger and subledger setups based on the organization structure and
business needs. The key steps are:
1. Associate ledgers to each Operating Unit creating accounting
transactions
2. Setup accounting rules for each primary and secondary
representation
3. Setup ledgers for each representation
Users can define the accounting method builder setup by identifying all the
contract and asset transactions that must be accounted from the Oracle Lease and
Finance Management User’s Guide. The transactions need to be categorized into
groups that require similar accounting setup:
1. Accounting values derived from formulas
2. Accounting values derived from streams
3. Accounting in other applications
4. Multi-GAAP accounting
Examples below guide users through the setup in Account Method Builder in SLA
for each of the above categories.
ACCOUNTING VALUES DERIVED FROM FORMULAS
Transactions like booking, rebook, termination use formulas to derive the amounts
to be accounted. Users define accounting templates with formulas to generate the
required number of journal entries. Given below is an example of setup and
accounting of booking transactions for a Direct Finance Lease contract.
Contract scenario
 Contract data are:
Book Classification: Direct Finance Lease
Interest Calculation Method: Fixed
Revenue Recognition Basis: Streams
Contract term: 12
Asset Cost: $12,000.00

Payment schedule: Rent of $1,250.00 per month for 12 months
Transaction in source application

 Setup: Accounting Template Set
Name Transaction Stream Stream Formula

Type Type Purpose
Booking – Booking Unbilled Accounting CONTRACT_SUM
Unbilled Receivables OF_RENTS
Receivables
Booking – Booking Unearned Accounting CONTRACT_UNE
Unearned Income ARNED_REVEN
Income UE
Booking – Booking Residual Accounting CONTRACT_RESI
Residual Value Value DUAL_VALUE
 Transaction: On booking a contract, a transaction is created as follows
Trx header/ TRX # / Line # Accounting Source values

lines Template
Transaction Line Amount Product Transaction Stream Book

# # Type Type Classifi
cation
Header 100 - - 21,000.00 Direct Booking - Direct

Finance Finance
Lease
Line 100 1 Booking – 15,000.00 - - Unbilled -

Unbilled Receivables
Receivables
Line 100 2 Booking – 4,500.00 - - Unearned -

Unearned Income
Income

Line 100 3 Booking – 1,500.00 - - Residual -
Residual Value value
 Accounting event: Following accounting event associated with above

booking transaction is generated.
Ledger Event Event Type Trx # Trx

Class module
Corporate Booking Booking 100 OLFM
Ledger Create
Accounting in subledger
 Setup for booking transaction accounting in Subledger Accounting
Method: On executing the Create Accounting program, the accounting
process creates a journal in the subledger for the transaction. The process
creates one or more journals with one or more debit and credit lines based
on the setup in the Subledger Accounting method. Sample setup is
explained below:
Steps Setup
Determine Event class/ Event Type Booking / Booking Create
of the accounting event
(please see Lease and Finance
Management User Guide for more
information)
Analyze the transaction and transaction Three journal entries are required – one for
lines. Determine the accounting each transaction line
required for each transaction line i.e.
Each journal entry requires one debit and one
number journal entries required and
credit line
number debit and credit journal entry
lines for each entry Entries are:
Dr Unbilled Receivables
Cr Lease Funding
Dr Lease Funding
Cr Unearned Income
Dr Residual
Cr Lease Funding

After determining the number of Two JLTs are defined for all the above journal
journal entry lines to be create as lines with the condition Book classification =
above, configure Journal Line Type Direct Finance Lease
(JLT) for the booking event class.
 Booking DF Dr
Associate required conditions to the
JLT using sources available to the  Booking DF Cr
event class
Identify the account codes to be used Two ADRs are defined with account codes.
for each journal entry lines and Conditions based on Product, Transaction
configure Account Derivation Rules type, stream type are associated with the
(ADR) with required conditions account codes.
associated with each account code
 DF Lease ADR Dr
 DF Lease ADR Cr
Group JLTs and associated ADRs into JLD: Booking JLD
JLDs for event class/type
JLT ADR
Booking DF Dr DF Lease ADR Dr
Booking DF Cr DF Lease ADR Cr
Group all JLDs for each event class /
Event type for OLFM into one
Application Accounting Definition
(AAD)
Group all AADs for each application
into Subledger Accounting Method
(SLAM) for the ledger
 Accounting: Following journal entries shall be generated on completion of

Create Accounting program based on the above subledger accounting
setup
Transaction Line # Accounting Journal Journal Entries Amount
# Template Entry #
100 1 Booking – JE1 Dr Unbilled Receivables 15,000.00
Unbilled
Cr Lease Funding
Receivables
100 2 Booking – JE2 Dr Lease Funding 4,500.00
Unearned
Cr Unearned Income
Income

100 3 Booking – JE3 Dr Residual 1,500.00
Residual
Cr Lease Funding
Value
ACCOUNTING VALUES DERIVED FROM STREAMS

Transactions like accrual, specific loss provision, and receipt application use stream
or transaction amounts for accounting. Users can define one accounting template
without any formula to generate the journal entry. Given below is an example of
setup and accounting of accrual transaction for Direct Finance Lease contract.
Contract scenario
Contract term: 12

 Setup: Accounting Template Set is not defined
 Transaction: On accrual processing of a contract, a transaction is created
as follows:
lines Template
Transaction Line Amount Product Transaction Stream Book

# # Type Type Classificat
ion
Header 101 - - 571.46 Direct Accrual - Direct

Finance Finance
Lease Lease
Line 101 1 - 571.46 - - Lease -

Income


Class module
Corporate Accrual Accrual 101 OLFM
Ledger Create
 Setup for accrual transaction accounting in Subledger Accounting
Method: On executing the Create Accounting program, the accounting
process will create journal in subledger for the transaction. The process
will create one or more journals with one or more debit and credit lines
based on the setup in the Subledger Accounting method. Sample setup is
explained below:
Steps Setup
Determine Event class/ Event Type Accrual / Accrual Create
information)
Analyze the transaction and transaction One journal entries is required
lines. Determine the accounting
credit line
number debit and credit journal entry Entries are:
lines for each entry Dr Unearned Income
Cr Lease Income
 Accrual DF Dr
JLT using sources available to the  Accrual DF Cr
event class
 DF Lease ADR Dr

 DF Lease ADR Cr
Group JLTs and associated ADRs into JLD: Accrual JLD
JLT ADR
Accrual DF Dr DF Lease ADR Dr
Accrual DF Cr DF Lease ADR Cr
Group all JLDs for each event
class/type for OLFM into one
(AAD)
Group all AADs for each application
into Subledger Accounting Method
(SLAM) for the ledger

setup
Transaction # Line # Accounting Journal Journal Entries Amount
Template Entry #
101 1 - JE1 Dr Unearned Income 1,250.00
Cr Lease Income
ACCOUNTING IN OTHER APPLICATIONS

Transactions like billing, disbursements, funding are accounted in other
applications and not from Oracle Lease and Finance Management. Amounts are
derived from the streams or program logic for the transaction. Given below is an
example of setup and accounting of billing transaction for Direct Finance Lease
contract.
Contract scenario
Contract term: 12


 Setup: Accounting Template Set is not defined
 Transaction: On billing a contract, a transaction is created as follows:
lines Template
Transaction # Line # Amount Product Transaction Stream Book
type type Classifi
cation
Header 102 - - 1,250.00 Direct Billing - Direct

Finance Finance
Lease
Line 102 1 - 1,250.00 - - Rent -


Class module
Corporate Invoice Invoice 102 AR
Ledger Create
 Setup for billing transaction accounting in Subledger Accounting Method:
On executing the Create Accounting program, the accounting process will
create journal for in subledger the transaction. The process will create one
or more journals with one or more debit and credit lines based on the
setup in the Subledger Accounting method. Sample setup is explained
below:

Steps Setup
Determine Event class/ Event Type Invoice / Invoice Create
(please see User Guide for more
information)
Analyze the transaction and transaction One journal entries are required
lines. Determine the accounting
credit line
number debit and credit journal entry Entries are:
lines for each entry Dr Receivables
Cr Unbilled Receivables
 Invoice DF Dr
JLT using sources available to the  Invoice DF Cr
event class
 DF Lease ADR Dr
 DF Lease ADR Cr
Group JLTs and associated ADRs into JLD: Booking JLD
JLT ADR
Invoice DF Dr DF Lease ADR Dr
Invoice DF Cr DF Lease ADR Cr
(AAD)
Group all AADs into Subledger
Accounting Method (SLAM) for the
ledger

Accounting: Following journal entries shall be generated on completion of Create
Accounting program based on the above subledger accounting setup
# Template Entry #
100 1 - JE1 Dr Receivables 1,250.00
Cr Unbilled Receivables
MULTI-GAAP ACCOUNTING
The transactions for Multi-GAAP contracts generate one accounting journal for
the primary ledger and another for the secondary ledger based on the associated
subledger accounting method. Given below is an example of setup and accounting
of booking transaction for Multi-GAAP contracts. Please see Lease and Finance
Management Implementation and User Guides for more information on setups
and processes for generating Multi-GAAP accounting.
Contract scenario
Book Classification primary product: Direct Finance Lease
Book Classification reporting product: Operating Lease
Contract term: 12

 Setup: Accounting Template Set

Type Type Purpose
Booking – Booking Unbilled Accounting CONTRACT_SUM
Unbilled Receivables OF_RENTS
Receivables
Booking – Booking Unearned Accounting CONTRACT_UNE
Unearned Income ARNED_REVEN
Income UE
Booking – Booking Residual Accounting CONTRACT_RESI
Residual Value Value DUAL_VALUE
Setup: Financial Product for the reporting representation

Type Type Purpose
Booking – Booking Accounting Accounting CONTRACT_ASS
Accounting ET_COST
 Transactions:
On booking a Multi-GAAP contract, a transaction for primary ledger is
created as follows:
lines Template

Type Type Classifi
cation
Header 103 - - 21,000.00 Direct Booking - Direct

Finance Finance
Lease
Line 103 1 Booking – 15,000.00 - - Unbilled -

Unbilled Receiva
Receivables bles
Line 103 2 Booking – 4,500.00 - - Unearne -

Unearned d
Income Income
Line 103 3 Booking – 1,500.00 - - Residual -

Residual value
Value

On booking a Multi-GAAP contract, a transaction for secondary ledger is
created as follows:
lines Template

Type Type Classifi
cation
Header 103 - - 12,000.00 Operatin Booking - Operati

g Lease ng Lease
Line 103 1 Booking – 12,000.00 - - Account -

Accounting ing
 Accounting events: Following accounting event associated with above

booking transactions is generated.

Class module
Ledger Create
Secondary Create
Ledger
 Setup for booking accounting in Subledger Accounting Method: On
executing the Create Accounting program, the accounting process will
create journal in subledger for the transaction. The process will create one
or more journals with one or more debit and credit lines based on the
setup in the Subledger Accounting Method. Sample setup is explained
below:
Steps Setup for primary ledger Setup for secondary ledger
Determine Event class/ Event Booking / Booking Create Booking / Booking Create
Type of the accounting event
information)

Analyze the transaction and Three journal entries are required – one for One journal entries are required
transaction lines. Determine the each transaction line
Each journal entry requires one debit
accounting required for each
Each journal entry requires one debit and and one credit line
transaction line i.e. number journal
one credit line
entries required and number debit Entries are:
and credit journal entry lines for Entries are:
Dr Lease Clearing
each entry Dr Unbilled Receivables
Cr Lease Funding
Cr Lease Funding
Dr Lease Funding
Cr Unearned Income
Dr Residual
Cr Lease Funding
After determining the number of Two JLTs are defined for all the above Two JLTs are defined for all the above
journal entry lines to be create as journal lines with the condition Book journal lines with the condition Book
above, configure Journal Line Type classification = Direct Finance Lease classification = Operating Lease
 Booking DF Dr  Booking OP Dr
Associate required conditions to
the JLT using sources available to  Booking DF Cr  Booking OP Cr
the event class
Identify the account codes to be Two ADRs are defined with account Two ADRs are defined with account
used for each journal entry lines codes. Conditions based on Product, codes. Conditions based on Product,
and configure Account Derivation Transaction type, stream type are Transaction type, stream type are
Rules (ADR) with required associated with the account codes. associated with the account codes.
conditions associated with each
 DF Lease ADR Dr  OP Lease ADR Dr
account code
 DF Lease ADR Cr  OP Lease ADR Cr
Group JLTs and associated ADRs JLD: Booking JLD JLD: Booking JLD
into JLDs for event class/type
JLT ADR JLT ADR
Booking DF Dr DF Lease ADR Dr Booking OP Dr OP Lease ADR Dr
Booking DF Cr DF Lease ADR Cr Booking OP Cr OP Lease ADR Cr
(AAD)
Group all AADs into Subledger
Accounting Method (SLAM) for
the ledger

setup for primary ledger
Transaction # Line # Accounting Journal Journal Entries Amount
Template Entry #
100 1 Booking – JE1 Dr Unbilled Receivables 15,000.00

Unbilled
Cr Lease Funding
Receivables
100 2 Booking – JE2 Dr Lease Funding 4,500.00

Unearned
Cr Unearned Income
Income
100 3 Booking – JE3 Dr Residual 1,500.00

Residual
Cr Lease Funding
Value
Following journal entries shall be generated on completion of Create Accounting

program based on the above subledger accounting setup for secondary ledger.
# Template Entry #
103 1 Booking – JE1 Dr Lease Clearing 12,000.00
Accounting
Cr Lease Funding
TRANSACTION AND ACCOUNTING INQUIRY
User has options to review the accounting one of the following ways:
 Review all contract transactions and their accounting in Oracle
Leasing and Finance Management
 Review the contract accounting in Trial balance form and drill down
to related transactions
 Reconcile account balances in Ledger with contract data in Oracle
Lease and Finance Management
 Drilldown from journal entry in Ledger to the related transaction
CONCLUSION
Each organization must review its accounting requirements and choose

configuration option that is most suitable for it. Setups using accounting template

set functionality are simple to implement, however flexibility to use available
contract values is limited. Existing customers who are using 11i can upgrade
without changing accounting setups.
The account method builder offers very flexible accounting configuration to
address complex requirements by using contract values to determine the account
codes.
Before selecting the configuration option, you should analyze your business
requirements, evaluate the options available and select the most appropriate
method.

Accounting in Oracle Lease and Finance Management
April 2009
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
oracle.com
Copyright © 2005, Oracle. All rights reserved.

This document is provided for information purposes only and the
contents hereof are subject to change without notice.
This document is not warranted to be error-free, nor subject to any
other warranties or conditions, whether expressed orally or implied
in law, including implied warranties and conditions of merchantability
or fitness for a particular purpose. We specifically disclaim any
liability with respect to this document and no contractual obligations
are formed either directly or indirectly by this document. This document
may not be reproduced or transmitted in any form or by any means,
electronic or mechanical, for any purpose, without our prior written permission.
Oracle, JD Edwards, and PeopleSoft, are registered trademarks of Oracle
Corporation and/or its affiliates. Other names may be trademarks
of their respective owners.

OLFM Accounting R12.1

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

OLFM Accounting R12.1

Uploaded by

Copyright:

Available Formats

Accounting Whitepaper

Oracle Lease and Finance

Accounting in Oracle Lease and Finance Management Page 2

Oracle Lease and Finance Management has introduced new accounting

Accounting in Oracle Lease and Finance Management Page 3

OVERVIEW OF THE ACCOUNTING INFRASTRUCTURE

Accounting in Oracle Lease and Finance Management Page 4

Accounting in Oracle Lease and Finance Management Page 5

PREPARING FOR LEDGER AND SUBLEDGER ACCOUNTING SETUP

ACCOUNTING VALUES DERIVED FROM FORMULAS

Accounting in Oracle Lease and Finance Management Page 6

Transaction in source application

Name Transaction Stream Stream Formula

 Transaction: On booking a contract, a transaction is created as follows

Trx header/ TRX # / Line # Accounting Source values

Transaction Line Amount Product Transaction Stream Book

Header 100 - - 21,000.00 Direct Booking - Direct

Line 100 1 Booking – 15,000.00 - - Unbilled -

Line 100 2 Booking – 4,500.00 - - Unearned -

Accounting in Oracle Lease and Finance Management Page 7

 Accounting event: Following accounting event associated with above

Ledger Event Event Type Trx # Trx

Accounting in Oracle Lease and Finance Management Page 8

 Accounting: Following journal entries shall be generated on completion of

Accounting in Oracle Lease and Finance Management Page 9

ACCOUNTING VALUES DERIVED FROM STREAMS

Transaction in source application

Transaction Line Amount Product Transaction Stream Book

Header 101 - - 571.46 Direct Accrual - Direct

Line 101 1 - 571.46 - - Lease -

 Accounting event: Following accounting event associated with above

Accounting in Oracle Lease and Finance Management Page 10

Accounting in Oracle Lease and Finance Management Page 11

 Accounting: Following journal entries shall be generated on completion of

101 1 - JE1 Dr Unearned Income 1,250.00

ACCOUNTING IN OTHER APPLICATIONS

Accounting in Oracle Lease and Finance Management Page 12

Transaction in source application

Header 102 - - 1,250.00 Direct Billing - Direct

Line 102 1 - 1,250.00 - - Rent -

 Accounting event: Following accounting event associated with above

Ledger Event Event Type Trx # Trx

Accounting in Oracle Lease and Finance Management Page 13

Accounting in Oracle Lease and Finance Management Page 14

Transaction in source application

Accounting in Oracle Lease and Finance Management Page 15

Setup: Financial Product for the reporting representation

Name Transaction Stream Stream Formula

Transaction # Line # Amount Product Transaction Stream Book

Header 103 - - 21,000.00 Direct Booking - Direct

Line 103 1 Booking – 15,000.00 - - Unbilled -

Line 103 2 Booking – 4,500.00 - - Unearne -

Line 103 3 Booking – 1,500.00 - - Residual -

Accounting in Oracle Lease and Finance Management Page 16

Transaction # Line # Amount Product Transaction Stream Book

Header 103 - - 12,000.00 Operatin Booking - Operati

Line 103 1 Booking – 12,000.00 - - Account -

 Accounting events: Following accounting event associated with above

Ledger Event Event Type Trx # Trx

Accounting in Oracle Lease and Finance Management Page 17

Accounting in Oracle Lease and Finance Management Page 18

100 1 Booking – JE1 Dr Unbilled Receivables 15,000.00

100 2 Booking – JE2 Dr Lease Funding 4,500.00

100 3 Booking – JE3 Dr Residual 1,500.00