Blog | Sep 2, 2014

What You Really Need to Know About Subledger Accounting?

Oracle introduced a significant change to the Oracle Financial process in Release 12.x with the implementation of Subledger Accounting (SLA).  This dynamic structure defines how journal entries are generated from subledger transactions with dynamic rules for account creation.  Please realize that SLA is not a specific application or responsibility, but is an integrated service for all applications.  Per Oracle’s whitepaper “The Business Benefits of Oracle Subledger Accounting”, “SLA is a robust, centralized accounting engine and repository that enables true global accounting.” (Source: http://www.oracle.com/us/products/applications/057031.pdf)

However, after listening to the marketing hype about SLA, we often hear our clients ask what does this really mean to me or do I have to use SLA when moving to Release 12.  The short answer is yes; all R12 environments use the SLA tables and processes. However, clients have a huge choice on how to utilize the SLA capabilities.    

On the simplistic end, you could stay with the default SLA rules which leverage the traditional configuration structure.  So for those upgrading from Release 11i, the default SLA configuration would mean no change in the account generation process or how the accounts are defined.  For example, the default inventory accounts are pulled from the Inventory Organization and Subinventory parameters as in Release 11i.

Starting from this ground level, you now have the capabilities to define limitless rules for controlling the accounting process for every transaction.  More specifically, the SLA structure allows you to define rules to control one or more of the GL account segments for all transactions.  Rules can be defined to update the product line segment based on the item assigned to the transaction, alter the department segment based on the customer on an order, or adjust a project segment based on the supplier on the invoice. The possibilities are truly endless.

With all of the power and benefits that SLA has introduced, there are some concerns that need to be considered when upgrading to or implementing R12. If you are considering an R12 upgrade, there is one important decision relating to SLA and the upgrade process that needs consideration.  During the upgrade, the Oracle process converts some (at least six (6) months) of the existing accounting data into the new SLA data model.  By default, all accounting data for the current fiscal year plus the necessary months in the previous year are converted to achieve the six month minimum.  The amount of converted data becomes important when considering new transactions with accounting reversals such as voiding payments that rely on the historical transaction.  If the historical transaction has not been converted to the SLA model, the reversing transaction will fail.

For most of our clients, the default six month rule works perfectly well as their business transactions fall within the six month window and they don’t have any problems.  However, everyone should at least evaluate their likelihood of reversing transactions that would exceed the standard six month window and adjust the upgrade process accordingly.  Oracle does provide a post upgrade conversion program for clients that realize they should have converted more than the minimum after they are live in R12.

The second and potentially more significant concern has been with the reporting side of the SLA implementation. Each functional area provides inquiry capabilities into the SLA transactions and tables so you can view the accounted transactions and journal details.  However, Oracle has not updated all of their standard reports to read the SLA tables.  Instead, reports such as the “Material account distribution detail” report remains linked to the standard subledger tables and therefore do not account for the SLA rules.  Oracle had recognized this limitation but left it to the customer and implementers to develop custom reports to integrate the SLA configurations.

At TriCore we have implemented SLA to resolve several business and technical limitations and believe that Oracle has provided a powerful tool for companies to control their accounting. However, with most things, there are a few limitations that need to be recognized when implementing this functionality.

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More About TriCore Solutions
TriCore Solutions, the application management experts, provides a full suite of scalable and reliable managed application, cloud, infrastructure hosting, and consulting services to enterprise organizations. The company delivers its services and the TriCore Trusted Promise to more than 250 companies worldwide to reduce costs, raise service levels, improve customer experience, increase business agility, and accelerate innovation, unlocking the business value from their IT investments. TriCore Solutions is headquartered in Boston, MA, with offices in India and throughout North America.