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Legal Entity Time Zone Support in Oracle EBusiness Suite 11.5.

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An Oracle White Paper April 2006

Legal Entity Time Zone Support . Do not distribute without Oracle development approval

Legal Entity Time Zone Support

Introduction

In todays increasingly global business environment, business processes once performed in a single location are now spread across the globe among affiliates and strategic partners. perations have effectively become !" by #, $%&. 'erforming business functions in such an environment re(uires locali)ed representations of date and time. *or that reason, the racle e+,usiness Suite --.&.-. release contains features to display, store and report information according to local time )one. The /0ser 'referred Time Zone support in racle e+,usiness Suite --.&.-. 10! is documented in the racle note2$$..#&.-. This white paper addresses another category of such features, referred to as Legal Entity Time Zone Support. Legal Entity Time Zone Support means that you can choose between recording accounting transactions according to a single worldwide reference location 3for e4ample, the time )one of 1orporate 5ead(uarters6 or by referring to the time )one of the legal entity involved. It means that you can select to have a rolling close, which allows you to close periods in relation to the local date, or you can continue to use a single world+wide reference when period close should ta7e place. 1hanges to support Legal Entity Time Zone have been made in 'urchasing, 8eceiving, Inventory, 1ost 9anagement, rder 9anagement and 'rocess 9anufacturing applications and are enumerated in Section ! below. The limitations, implementation and upgrade considerations are e4plained in sections $ and " respectively.

Support Agreement

racle management approval is mandatory before you distribute this document to any non+ racle parties. : separate racle ;evelopment approval is re(uird to implement /Legal Entity Time Zone and be supported by racle ;evelopment. 'lease contact Susan *lierl 3susan.flierl<oracle.com6 to re(uest distribution of this document and to re(uest support.

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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Case Study
1onsider the case of a fictitious multinational enterprise, Lefferts 1orporation=

Operation >lobal 5ead(uarters Lefferts A *rance Lefferts A Capan

Location ?ew @or7, 0S: 'aris, *rance To7yo, Capan

Time Zone >9T +& >9T B>9T BD

Lefferts 1orporation is an E+business Suite customer and maintains its server in ?ew @or7. Lefferts A Capan completes ship confirmation of an order on .-+Can+!..& at -.=.. :9, local time. This transaction is stored with the server date and time, i.e. $-+;ec+ !.." !.=... Eithout conversion to the local time )one, the 1 >S transaction and the :8 invoice are aligned with the ;ecember period, and thus adFustments would need to be made should Lefferts policy re(uire local period accounting. :dditionally=

-. 'eriod closing= Inventory periods are closed and opened in corporate time )one. Lefferts + Capan cannot close its inventory period for ;ec A .", or get a warning message if /early period close is enabled, until it is .-+Can+!..& -"=.. 5rs in Capan, as the date boundary is not yet crossed in the corporate time )one. !. Transaction :ccounting= :ccounting transactions for receipt accruals, inventory transactions 3including Sales rder issues6, EI' transactions , and cost update transactions are posted to >L based on the date in corporate time )one. 9aterial transactions performed at Lefferts + Capan before .-+Can+!..& -"=.. 5rs would be posted to >L period of ;ec + .". $. 'eriod end accruals= 'eriod end e4pense accrual transactions are created in corporate time )one. Ehen ;ec + ." period is closed for Lefferts + Capan, period end accruals for e4pense transactions would include all e4pense transactions made until .-+Can+!..& -"=.. 5rs. ". 'ay on receipt= 'ay on receipt concurrent program would generate and assign a payables invoice to the >L period based on the receipt date in corporate time )one. The invoice generated for receipts made on .-+Can+!..&

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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-.=.. 5rs in Lefferts + Capan would be posted to >L period of ;ec + .". The same is true for automatic debit memo creation for 8TG transactions. &. 9ovement statistics= European Intrastat and E4trastat reports are generated based on transaction dates in corporate time )one. Therefore reports for Lefferts + *rance would display incorrect data, since sales order issue transactions entered on .-+Can+!..& before .%=.. 5rs in 'aris would appear in statistics reports for ;ec A ." period. %. rder 9anagement= 8eceivables invoices and 1 >S generated at ship confirmed will be created and accounted in corporate time )one. Therefore, in Lefferts+ Capan invoice and 1 >S transactions created on .-+Can+ !..& before -"=.. 5rs will be dated $-+;ec+!.." and accounted in ;ec." >L period, this results in accounting the revenue in incorrect period. The /Legal Entity Time Zone features ensure that the /legal date and period derivation and of selected events are converted from the corporate time )one to the time )one of the legal entity in which the event has occurred.
1. ENABLIN LE AL EN!I!" !I#E $ONE

The Legal Entity Time Zone features are enabled using new profile options and the 58 locations definition form.
Application %ro&iles

: new 'rofile ption, /Enable Legal Entity Time Zone, has been added and is available at site level only. ,y default, this profile option is visible to the system administrator only. @ou will need to change its control access in the /:pplication ;eveloper responsibility before it can be turned on.
De&ining !ime $one o& a Legal Entit'

The time )one of a legal entity is defined on the 58 Locations window, as depicted below=

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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If the time )one field is null, then the system behaves as before= the location is considered to be in the 1orporate Time Zone. The location is associated to the Legal Entity on the rgani)ation definition form.

(. LE AL EN!I!" !I#E $ONE )EA!*+ES %*+,-ASIN


+eceipt Accrual Accounting

:ccrual transaction accounting is done at receipt or period end 3for e4pense items6. 'rior to --.&.-., receiving transactions were stored with date onlyH the resultant accrual transactions were created and posted to >L based on receipt dates in 1orporate Time Zone. Therefore, receipts made in Lefferts+Capan on .-+Can+!..& till -"=.. hrs are accounted and posted to ;ec+." >L period.

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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Eith --.&.-., receiving transactions are now time stamped and the accounting date and period derivation ta7e into account the time )one of the legal entity before transfer to >L. Eith legal Entity Time)one, any receipts made in Leffers+Capan on .-+ Can+!..& will be posted to the Can+.& >L period with an accounting date of .-+Can+ !..&.
E.pense %eriod End Accrual

E4pense transactions are often accrued at the period end. 'rior to --.&.-., e4pense transactions were stored in date only format. The e4pense transactions were therefore accrued with reference to the 1orporate Time Zone. In case of Lefferts corporation, in our e4ample cited earlier, this would mean that e4pense receipts made in Lefferts A Capan on .-+Can+!..& before -"=.. 5rs are accrued in ;ec+." period. Eith --.&.-., period end accrual for e4pense transactions is now done with reference to the time )one of the legal entity and correctly accrued in the Can+.& >L period.
,lose / Open %urchasing %eriods

'rior to --.&.-., purchasing periods are closed or opened with reference to the 1orporate Time Zone. Ehen a purchasing period is closed all the uninvoiced e4pense receipts, which are set as /:ccrued by the period end accrual process, are reset as not accrued. *urther no receipts are allowed for the closed period. In case of Lefferts+Capan, if the ;ec!.." purchasing period is closed, no 8eceipts can be entered on Can!..& till -"=.. 58S and also the accrued flag on e4pense receipts are reset incorrectly. Eith --.&.-., purchasing periods can now be closed and opened in the time )one of the legal entity. Ehen receipts are made the validation for purchasing period status is performed based on the legal entity time )one. *urther the accrued flag on uninvoiced e4pense receipts are reset correctly in cohesion with the E4pense period end accrual process.
%a' on +eceipt Invoice ,reation

'ay on receipt auto+invoice creates payables invoices when self+billing is applicable. 'rior to --.&.-., the >L date of the invoice so created was based on the receipt data in 1orporate Time Zone and hence these invoices were aligned to the >L period in 1orporate Time Zone. Therefore, for the case of Lefferts corporation in the e4ample cited earlier, though the receipt is entered at Lefferts A Capan on .-+Can+!..& at -.=.. 5rs, the payable invoice created for this receipt would be aligned with the ;ec+." >L period. Eith --.&.-., invoice >L date is now assigned based on the receipt date in the time )one of the legal entity in which the receipt is made. Eith legal Entity Time)one, invoices created for receipts entered anytime on .-+Can+!..& at Leffers A Capan will have a .-+Can+!..& >L date.

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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Automatic Debit #emo &or +!0 !ransactions

:utomatic debit memos are optionally created when 8TG 38eturn To Gendors6 are entered in 8eceiving. 'rior to --.&.-., the >L date of the debit memos so created was based on the return receipt date in 1orporate Time Zone. . Therefore, for the case of Lefferts corporation in the e4ample cited earlier, though the 8TG is entered at Lefferts A Capan on .-+Can+!..& at -.=.. 5rs, the debit memo created for this receipt would be aligned with the ;ec+." >L period. Eith --.&.-., this date will now be based on 8TG date in the time )one of the legal entity in which the return is entered. Eith legal Entity Time)one, debit memos created for 8TG entered anytime on .-+Can+!..& at Leffers A Capan will have a .-+ Can+!..& >L date.

NOTE= Legal Entity Time Zone features do not address encumbrance accounting transactions. Therefore you should not enable these features if you are using encumbrance accounting.
IN0EN!O+"
Inventor' !ransaction Accounting

Ehen inventory transactions are transferred to >L they are aligned with the appropriate >L period based on the transaction dates. 'rior to --.&.-., these transactions were aligned based on the transaction dates in 1orporate Time Zone and the accounting dates as well as >L period derivation is based on corporate time )one. 5ence, a miscellaneous issue made in Lefferts+Capan on .-+Can+!..& at -.=.. 5rs is aligned with ;ec." period. Eith --.&.-., these transactions are now aligned with >L periods based on transaction dates in the time )one of the legal entity in which the transactions have ta7en place.
Inventor' %eriod ,ontrol

Inventory transactions are allowed only in open periods. 'rior to --.&.-., this validation for period status was performed with reference to the 1orporate Time Zone. Therefore, users in Lefferts A Capan, in our e4ample above, cannot enter transactions on .-+Can+!..& till -"=.. 5rs if the ;ec+." period is closed. Eith --.&.-., the validation for close I open period status is now done with reference to the Time )one of the Legal Entity and users in Leffers A Capan can enter transactions any time on .-+Can+!..& regardless of the ;ec+." period status.
Inventor' %eriod ,lose

Inventory period 1lose does not allow closing periods before period end or, if the /early period close feature is enabled, displays a warning message to the user so, prior to --.&.-., Leffers A Capan users will not be able to close the ;ec+." period, or will get a warning message, until -#=.. 5rs on .-+Can+!..&. Eith --.&.-. Leffers A Capan users will be able to close the ;ec+." period, or not get a disturbing warning message, as soon as the day has passed 3i.e anytime on .-+ Can+!..&6 in the Time)one of their legal Entity

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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#ovement Statistics

European Intrastat and E4trastat are created with date wise movement transactions. 'rior to --.&.-., the transaction dates were reported with reference to the 1orporate Time Zone. Leffers A *rance arrival and dispatch transactions occurring before %=.. :9 on .-+Can+!..& in *rance are reported in the ;ec+." Intrastat period. Eith --.&.-., these reports will now report the transaction dates based on the time )one of the legal entity. In the e4ample above, Leffers A *rance arrival and dispatch transactions occurring anytime on .-+Can+!..& in *rance will always be posted to the Can+.& Intrastat period regardless of the server Time)one.
%+O,ESS #AN*)A,!*+IN
O%# transaction accounting

Ehen '9 inventory transactions are transferred to >L they are aligned with the appropriate >L period based on the transaction dates. 'rior to --.&.-., these transactions were aligned based on the transaction dates in 1orporate Time Zone. Eith --.&.-., these transactions are now aligned with >L periods based on transaction dates in the time )one of the legal entity in which the transactions have ta7en place.
1O+2 IN %+O,ESS
1I% Accounting !ransactions

EI' accounting transactions are created for EI' Issues, Cob completions and Cob closures. 'rior to --.&.-., these accounting transactions were aligned to appropriate >L period based on the transaction dates in 1orporate Time Zone. 5ence, when a EI' Fob operation is completed at Lefferts+Capan on .-+Can+!..& before -"=.. hrs, the resource accounting transactions are aligned with the ;ec." period. Eith --.&.-., these transactions are now aligned with >L periods based on transaction dates in the time )one of the legal entity in which the transactions have ta7en place.
O+DE+ #ANA E#EN!
A+ Auto3invoice ,reation

Invoices for sales order shipments, made in order management, are created by the auto+invoice concurrent program. 'rior to --.&.-., the invoice date of the invoice so created was based on the shipment date in the 1orporate Time Zone and hence could be earlier or later to the shipment date at the shipping location. Therefore, when a sales order shipment is made from Lefferts A Capan, on .-+Can+!..& at -.=.. 5rs, the invoice was created in receivables with an invoice date of $-+;ec+!..". Eith --.&.-., Invoice dates and >L dates are now based on the time )one of the legal entity from which the goods are shipped, this would ensure that the invoice and the resulting revenue accounting is aligned with the locali)ed >L period.

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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Therefore, when a sales order shipment is made from Lefferts A Capan, on .-+Can+ !..& at -.=.. 5rs 3or anytime on .-+Can+!..&6 , the invoice created in receivables with an invoice date of .-+Can+!..&.
4. LI#I!A!IONS

The E+,usiness Suite coverage of legal entity time )one re(uirements is limited to the above features only. : few limitations are highlighted bellow so that you can determine whether or not the legal entity time )one features meet your needs. ;,I= If you are using ;aily ,usiness Intelligence, some metrics may not correspond with adFusted time )one data. The effect of these differences are often mild, since the effect of adFusting time )one related financial data is, at most, a !" hour shifting of transactions at the beginning and ending of the month. Typically these difference are not material. ?evertheless, you are encouraged to test important financial metrics in corporate time vs. local time to ascertain whether any differences will materially affect decision ma7ing based on those J'Is. *inancials= E4cept for auto+invoice or debit memo documents created through upstream products such as rder 9anagement and 'rocurement 3listed in section !6, all the dates for manually created transactions within *inancials will be defaulted to the corporate time )one. If the user wishes to enter a manual transaction and default certain dates 3>L dates6 in the conte4t of the legal entity and not in the conte4t of the corporate time )one 3server time )one6, the user will need to manually adFust the date and not accept the system defaulted date. 8eports= 8eports do not display transaction datesItimes in Legal Entity Time Zone, including internal reports which are used in the period end reconciliation process. S19= Supporting Legal Entity Time Zone has not yet been addressed entirely throughout Supply 1hain 9anagement 3S196. *eatures which should not be used in combination with Legal Entity Time Zone include Encumbrance :ccounting, 'eriodic 1osting, and 1onsigned Inventory 'ay+on+0se Invoice 1reation.

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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5. I#%LE#EN!A!ION ,ONSIDE+A!IONS

:ctivating the Legal Entity Time Zone support features may entail changes to financial information, and therefore we suggest that senior *inance employees be included in the determination as to whether the solution is correct for your company. Suppose that your 1alifornia based global enterprise has a subsidiary in To7yo. Today, there is a single accounting close worldwide. That means some transactions which ta7e place on .-+C:? in Capan will be reported as ;ecember transactions for the enterprise because the 'acific Time server will stamp these transactions as happening on $-+;E1 for the global business. Ehen you turn on the Legal Entity Time Zone features, these same transactions will be reported as having ta7en place in Canuary, not ;ecember. The effect is to shift the accounting period by one day, including transactions in the current period which otherwise would have been reported in the previous period, and e4cluding transactions which otherwise would have been included in the current period. This shift of accounting periods will generally have an immaterial effect on financial information so long as sales, e4penses, and other financial transactions are not heavily concentrated into the last days of the month. If they are concentrated in such a way, the first period of adoption will absorb the most significant change. Ee recommend that you determine the effects of implementing Legal Entity Time Zone Support prior to adopting this approach. ?ew customers implementing --.&.-. should ta7e into consideration the following factorsH Implementation of /0ser 'referred Time Zone. 0ser procedure for entering date and time information, whether it is entered in 1orporate Time Zone or Local time )one.

If /0ser 'referred Time Zone is not implemented and the date and time details are entered in local time )one then this feature should not be implemented.
*% +ADE ,ONSIDE+A!IONS

5istorical transactions, in closed or open periods are not impacted by this feature and are ? T reassigned to the correct period and accounting dates based on Legal Entity Time Zone.

Legal Entity Time Zone Support . Do not distribute without Oracle development approval
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1hite %aper !itle )ebruar' (667 Author8 9anardhan idi:ala regor' ,omlish ; )rederic Dubois; Susan )Lierl ,ontributing Authors8 Oracle ,orporation 1orld -ead<uarters 766 Oracle %ar=wa' +edwood Shores; ,A >56?7 *.S.A. 1orldwide In<uiries8 %hone8 @1.?76.76?.A666 )a.8 @1.?76.76?.A(66 www.oracle.com Oracle ,orporation provides the so&tware that powers the Internet. Oracle is a registered trademar= o& Oracle ,orporation. 0arious product and service names re&erenced herein ma' be trademar=s o& Oracle ,orporation. All other product and service names mentioned ma' be trademar=s o& their respective owners. ,op'right B (66( Oracle ,orporation All rights reserved.

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