Why Upgrade to Release 12? WIIFM? Cost and Related Improvements

1. Why Upgrade to Release 12? WIIFM? Cost and Related Improvements Douglas Volz Douglas Volz Consulting doug@volzconsulting.com Sharon WidmerIndependent Consulting s_widmer@comcast.net

2. Agenda • R12 Cost Related Features • MOAC – Multi-Org Access Control • Subledger Accounting • Re-Designed A/P Accruals • COGS Recognition • Cost-Related BOM Features • Period Close Drilldown • As-of Dates for Inventory Valuation • Reconciliation Challenges • Cost Rollup Changes

3. R12 Multi-Org Access Control • Mostly affects “operating unit” level functions • Allows you to access information across multiple operating units without changing responsibilities • Set up a security profile listing the operating units to access • Run Security List Maintenance concurrent program • Assign the security profile using the MO: Security Profile

4. R12 Multi-Org Access Control

5. SLA: Primary and Secondary Ledgers • Primary and Secondary Ledgers • In Release 12 Subledger Accounting replaced Global AX • Primary to secondary ledger mapping is much better

6. Oracle Discrete Costing SLA enhancements: Flexible variance account recognition for: • Invoice price and purchase variances • Average cost adjustment • Standard cost adjustment • Manufacturing variances • Account aliases • Freight charges • Most other inventory, manufacturing and related account entries

7. SLA Setup and Process Overview PROCESS JOURNAL ENTRY SETUPS Enter Transaction(s) Define/copy and modify account derivation rules Cost Manager Define/copy and modify journal line types Create Accounting* Transfer Journal Entries to GL Define/copy and modify descriptions *Run ‘Create Accounting – Cost Management’ concurrent request for accounting all transactions from the Cost Management – SLA responsibility. Receiving Accounting can be generated in the Purchasing responsibilities using the ‘Create Accounting – Receiving’ concurrent request. These requests have an option to transfer the entries created to General Ledger. A separate process is also available.

8. GL Journal Entries and Balances Transactions Accounting Events Accounting Configurations Subledger Journal Entries Journal Entry Setup Subledger Balances SLA Cost Management Subledger Accounting • SLA for product line accounting, variance recognition Accounting Program

9. Subledger Accounting • SLA Basic Architecture Enter Transaction(s) One Common Accounting Subledger Table Same Cost Transaction Accounting Tables Cost Manager SLA Accounting Tables G/L Tables Transaction Accounting Tables GL_LEDGERS XLA_EVENTS Create Accounting GL_JE_BATCHES XLA_AE_HEADERS GL_INTERFACE GL_JE_HEADERS XLA_AE_LINES GL_JE_LINES XLA_DISTRIBUTION_LINKS

10. Subledger Accounting and Inquiries Tools menu options (View Accounting and View Accounting Events) launch SLA UI pages (HTML) which display the information regarding the accounting event with the transaction and its corresponding accounting Clicking on distributions button shows the default accounting from MTL_TRANSACTION_ACCOUNTS

11. Subledger Accounting and Inquiries - View Accounting Accounting details for the Miscellaneous receipt transaction in the SLA UI (launched from the Tools menu) Accounting is created for all ledgers associated with the primary ledger (Vision Operations (USA))

12. COGS Recognition • In R12 all customer shipment entries go to deferred COGS • Revenue and COGS are explicitly matched • AR: “Autoinvoice” & “Revenue Recognition Master Program” • CST: “Inventory Cost Processor” or “Record Order Management” • CST: “Collect Revenue Recognition Information” • CST: Then “Generate COGS Recognition Events” • New Accounting Entries to clear deferred COGS • Use the COGS Revenue and COGS Matching Report Slide 12

13. COGS Recognition – Accounting Entries • New Accounting Entries to clear deferred COGS • Use the COGS Revenue and COGS Matching Report Deferred COGS “True” COGS Inventory 1. Customer Shipment 10 10 10 10 2. COGS Recognition Slide 13

14. New Deferred COGS Account

15. COGS Recognition (Continued) • Dependencies • This new feature introduces a dependency in the Receivables and Costing period close processes • Costing will process COGS recognition events in a closed inventory period until the Receivables period status is set to CLOSED • You have to run Create Accounting after you have closed your inventory orgs Having to remember to run COGS Recognition Processes followed by Create Accounting may create confusion at month-end

16. Related BOM Features • Fixed Component Usage Support: Support for lot-based materials that have a fixed usage regardless of the job size for discrete WIP jobs, OSFM lot-based jobs and Flow Manufacturing • Component Yield Support: Flexibility to control the value of component yield factors at WIP joblevel. The transaction logic now considers pre-yield BOM quantity per assembly rather than the quantity inflated by shrinkage.

17. Period Close Diagnostics • Forms Drilldown • Using the same Inventory Accounting Periods form you can drilldown to associated forms to view the problem transactions • New workflow to notify of failing transactions • Period Close Pending Transactions Report • Report for the transactions holding up the inventory accounting period

18. A/P Accruals • Perpetual A/P Accruals are Completely Rewritten • Monthly load into summary tables • Excellent detail and summary reporting (same report/different templates) • A/P Accrual write-offs go to your G/L • Works right out of the box! • Period End Accruals: • Calculate Accrual Balances at PO Distribution Level • Period-end accrual entries stored in a separate accounting table and automatically reversed in the new month • Uninvoiced Receipts Report and Period-End Accruals use same underlying code / same results

19. Reconciliation Improvements in R12 Inventory Reconciliation • Inventory Value Reports have an “as of date” • Inventory Value Report • Receiving Value Report • Intransit Value Report • All Inventories Value Report

20. Reconciliation Challenges in R12 Subledger Accounting and Inventory Reconciliation • Which accounts represent inventory and WIP valuation? • Dropped Reports (use: R12 Open Account Balance Listing and Account Analysis report ) • Receiving Value by Destination Account Report • Subinventory Account Value Report • and the Cost Group Account Value Report have been dropped Release 12 dropped the valuation accounts on most inventory reports

21. Reconciliation Challenges in R12 (Continued):Material and WIP Distribution Inquiries and Reports • Release 12 Mat’l and WIP distribution inquiries & reports do not reflect the SLA results • SLA Journal Reports do not show operational information • Release 12 records the Material accounting and WIP accounting entries by cost element – rendering the old 11i inquiries and reports more difficult to use, especially for Standard Costing. Release 12 forces Standard Costing to record WIP & Material entries by Cost Element / you can summarize in SLA but you don’t have the same detail reporting in SLA

22. Basic Table Structure for SLA Module Specific Transaction Accounting Tables Enter Transaction(s) One Common Accounting Subledger Table AccountingProcessor SLA Accounting Tables G/L Tables Transaction Accounting Tables GL_LEDGERS XLA_EVENTS Create Accounting GL_JE_BATCHES Receiving MaterialWIP XLA_AE_HEADERS GL_INTERFACE GL_JE_HEADERS XLA_AE_LINES GL_JE_LINES XLA_DISTRIBUTION_LINKS

23. Cost Rollup Changes • The Supply Chain Cost Rollup and Cost Rollup have been combined

24. Cost Rollup Changes

25. Summary • Subledger Accounting solves many account classification issues • Yet Subledger Accounting causes additional reconciliation headaches • Yet one more interface and batch job • More levels of indirection: multiple accounting tables • Which accounting table to tell your auditors and how to explain to them it is different? • Must run Cost Management Subledger Period Close Exceptions Report (by ledger –but you can use Ledger Sets)

26. Summary (continued) • COGS Recognition works well, just have to get used to entries hitting after you close the inventory accounting periods • New period close diagnostics • Inventory reconciliation issues are improved and also hindered in Release 12 • Inventory value reports have as “as of date” • But most inventory value reports have no valuation accounts • Still only single warehouse • Period Close Reconciliation Report not multi-org (consider custom reports from the period close snapshot table cst_period_close_summary)

27. Acknowledgements • Oracle Cost Development • Partners in crime at our clients

28. Sharon Widmer (s_widmer@comcast.net) Professional Background With over 25 years total work experience, Sharon Widmer is an accomplished Oracle Functional Consultant and Accounting Manager, specializing in manufacturing and distribution companies. She has 14 years experience implementing Oracle Applications, and over 10 years in Accounting for Manufacturing and Distribution companies. Sharon has helped clients with Oracle implementations (Release 11.0.3 through Release 12.1) and process reengineering for Inventory Control and Accounting. Industries she has worked in include High Tech, Building Construction & Industrial Products, Telecommunications, and Life Sciences. In a recent consulting role Sharon helped a Chip Test Equipment manufacturer and their Cost Management team get to the next level. As a SME for Inventory Control and Cost Accounting, she helped them achieve significant process redesign and Oracle configuration changes, which resulted in more accurate Inventory Control and a streamlined, faster Cost Month End Close. . Core Expertise Experience • Data Conversion – Data Cleansing • Standard Costing • Manufacturing Processes • Cost Management • Inventory • Warehouse Management • WIP • Bills of Material • Clients Served: • Form Factor • Stryker Endoscopy • Qualcomm • USG • Toshiba America Business Systems • Amkor Technology • JDS Uniphase

29. Douglas Volz (doug@volzconsulting.com) Professional Background Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in Project and Cost Management. He has 30 years accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management) and 12 years in industry in Cost and Accounting Management positions. His Manufacturing andCost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation, and multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous management accounting positions for telecommunications, defense, and electronics companies. In his consulting roles, Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P.R.O.C., Norway, Japan, Italy and Germany. Doug leads the Cost Sub-Committee, for the OAUG Discrete Manufacturing Special Interest Group. He also advises and participates on the Oracle Customer Advisory Board for Fusion Costing. Core Expertise Experience • Sample of clients served: • Beckman Coulter (US) • Matsushita (UK, Mexico) • NTL (now Virgin Media) • Logitech (US, Taiwan, P.R.C.) • Matsushita (UK, Mexico) • NTL (now Virgin Media) • TCI International (US) • Onninen AS (Norway) • Multi-organization, Multi-currency ERP Implementations • Project Management and Senior Project Advisor • Core manufacturing processes • Cost Management • Inventory • Bills of Material • WIP • Systems Integration and Data Conversions

30. Thanks for allowing us to discuss these topics with you!