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Could you share your experience when setting up the functional currency in your business?
Do you use CAT CODES to allocate the JDE Company (Lowest level at which you can setup a functional currency) to the correct legal entity or segment in your business?
ADM - Switzerland
I totally get your first paragraph and second paragraph on functional currency and none functional currency ledgers and BI reporting team.
Like you say BI achieves something similar to XA but on the trial balance level, this unfortunately doesn't meet the requirement of Romania's statutory reporting which means the work around to get a transaction by transaction restatement is to have the AA as RON's (Romania's currency Leu) although the economical environment is EUR (as its the currency in which that entity generates and expends cash). This leads to hedging your EUR flows back to RON's and then back to USD since we are also a US company. Are you aware if BI can go deeper in to the restatement and go into transactional restatement using 1 rate per day throughout the days in the month rather than a month-end exchange rate?
I'll split out the response on the cost allocation.
Thanks a lot
Functional Currency Key Design Decision, AP and Treasury
Our AA ledger is our functional (???) currency ledger. Our XA ledger is the consolidated USD reporting ledger. Our CA ledger is local (???) ledger. For example, we have a UK company demoninated in British Pound Sterling (GBP). If we have a transaction with one of the other companies that is denominated in Canadian Dollars, JDE knows to book the JEs by company and ledger typ (CA / AA) appropriately to keep ledger types, currencies, and companies in balance on the JEs.
Since we are a US company, all of the lower level CA > AA JEs or other entries flow up to the XA ledger (Believe we have a series of programs (R09801 to post the CA / AA entries, R11411 to restate from AA to XA, and then R09801 - different version - to post the XA entries). We have some divisions or regions that manage multiple companies with span multiple functional currencies. For their management purposes, they want to see everything in their functional currency, similar to USD on the XA ledger. JDE doesn't achieve that for us. So, our Business Intelligence (BI) team has written reports that achieve it. It looks at the AA ledger balances for the companies selected, applies the month-end exchange rate from JDE and reports in the desired currency, thereby achieving something similar to the XA ledger for USD.
As for the allocations, I'm not intimately familiar with our program but will do my best. We have a series of Business Unit Category Codes that define our organization hierarchy. They're not in Category Code number sequence but let's assume they are from top down Cat Code 11, 12, 13, 14, 15, 16, and 16 (e.g., Division, Region…) We have a page that defines the allocation percentages to allocate to the divisions (top level Cat Code). Based on this, we define a given set of accounts (e.g., Medical & Benefits, other overhead) to the divisions. It looks at all of the Corporate division costs within an account range, sums it up, multiplies it by the allocation percentage, credits the 100% total out of the Corporate BUs to the allocation account and debits the divisions to the same allocation account according to their percentage. We currently only have this automated at the division level. It used to be a series of very manual steps. It has been well received by Corporate Accounting and are wanting to replicate the functionality for as many of their allocation JEs as possible. I'm not sure that we have it completely plug and play to just be configurable. We are probably taking the first Allocation program and then copying and modifying it for use according to the others.
Your question was specific to service fees. I assume our logic could be applied to your service fees reference. We started with Corporate Costs and have expanded to Medical / Benefits / 401(k), etc. We're going to open it up to let the divisions allocate their costs down the change (e.g., Cat Code 11 to 12, 12 to 13, etc.). It has reduced the multiple hour manual effort to about a 15 minute batch job...and we used to run it multiple times per day during close. It's been a life saver for Corporate Accounting.
Dear Kriss and Kevin,
Thanks for your return.
Kevin you outlined exactly what I am looking into and I have more insight about this having spent a fair amount of time with a JDE BA.
Yes, you can have multiple JDE Company (with different functional currencies, AA ledger) under the same ledger entity.
Standard JDE functionality allows sub-consolidation of multiple multi-currency ledgers under the same Legal entity, so no issue there either.
This issue arises in some countries in eastern Europe when you have a legal requirement to report in a detailed manner, transaction by transaction (and not trial balances) in the local currency. In some cases your local currency doesn't represent the primary economic environment. Hence the need of a 2nd detailed ledger.
Have any of you came across the issue where you would need a third detailed ledger, if yes how did you solve this? (understand allocation doesn't work in JDE, is the only solution double entry bookings?)
One last question for Kriss, can you explain further your custom allocation program which allocates costs to the other divisions (I guess you mean business divisions)? how do you define/setup the Category codes, an example could help. For example if corporate needs to assign services fees to the business on a monthly basis can that be automated?
I am not sure I understand the question completely, either.
But, if Kriss' assumption is correct that you have multiple JDE company numbers representing one legal entity, try using the same Address Book number for each of the JDE company numbers. However, I don't think, in that scenario, that I would recommend different base currencies for each of these JDE company numbers representating one legal entity. But, I cannot say that I have tried that, either.
Hope this helps.
JDE Finance Consultant
Prophet One Solutions
I'm not quite sure I understand your question but will take a shot at it.
We use the Company Code field in JDE on the BU to define both legal and logical entities. In cases where a legal entity spans multiple companies, we use a separate Category Code to store the Federal Employer ID Number (FEIN = US Tax ID). Our tax department files the tax returns based on the roll up of these US entities. I can't answer for our foreign entities.
As for allocations, we use a custom allocations program that allocates our Corporate division costs to the other divisions based on other Category Codes that define our organization hierarchy.
Director, Financial Applications
Gallagher Technology Services | GTS Corporate Applications
Arthur J. Gallagher & Co.