Friends if you are working in Oracle Cloud ERP you can see a new functionality. Multiple balancing segment in Oracle Cloud ERP.
Why it is new functionality ?
Because in Oracle E Business Suite we can only assign one segment as a balancing segment qualifier. Usually that is company segment or legal entity segment .At company segment level we need to balance our journal and accounting entries. We can not assign the balancing segment qualifier in Oracle EBS .
But in Oracle Fusion ERP there is option to assign 3 balancing segment level or qualifiers .What is the significance here ?
Do you think that its really required in practical business scenarios?
Let us understand with a case study.
Assigning a balancing segment qualifier is good enough to handle your accounting for a organization. But there are some big companies who want to report their accounting at multiple segment level.
You know that segments are different dimensions of a financial reporting structure. Some companies need to report their financial position at different level. They may need to balance their accounting at legal entity level and management segment level.
How they can do in Oracle?
They can do it In Oracle fusion by using multiple balancing segment level. In Oracle EBS it was not possible in seeded functionality. If you need to report at multiple balancing segment level you have to do customization.
We will take example of a MNC who implemented Multiple balancing segments in EBS with the help of some customization.
Case Study-Multiple balancing segment in Oracle
They have defined a global Chart of Accounts which contains a number of segments. The first two segments are Legal Entity (LE) and Management Entity (ME). These 2 segments are relevant for this case study. The Legal Entity segment represents the Legal Identifier for Tax or Statutory purposes.
This MNC has a number of businesses operating in more than 100 countries around the world like Oil & Gas, Power & Water, Healthcare, Aviation, Appliances etc. Each of these sector of businesses has sub-businesses.
For example, Power and Water has 5 to 6 Tier 1Profit and Loss Centers like Power Generation, Renewables, Nuclear, Distributed Power and Water. Businesses/sub-businesses can share Legal Entities.
For most of the businesses, the ME segment represents a division within a business/sub-business. Some of the businesses are using the ME to differentiate between Product lines or other important business specific measurements.
So here they wanted two balancing segment. One for Legal entity segment and other one for Management entity segment. They had reported the requirement to generate a balanced Trial Balance at both the country/statutory level as well as business/P&L level.
In Oracle fusion it is pretty simple task .Just to assign primary and secondary segment level to Legal entity level and Management entity level.
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But for EBS they did some customization to achieve this .This requirement was addressed by concatenating the LE and ME into 1 segment in the Oracle Chart of Accounts. It then had to be broken up into separate segments for reporting and sending to the consolidation Ledger. There are some other Patch needed to applied with the help of Oracle .I am not going much in to detailed customization.
The important point you need to understand here the significance of multiple balancing segments. Oracle always observes the unique client requirement and enhances and upgrades its ERP Product accordingly to make it more user friendly.
It is not mandatory to use multiple segment qualifier. But if your business needs , you can leverage this functionality to get financial reporting in more detailed and authentic way.