Dual Accounting

Dual GAAP Accounting and Dual Chart of Accounts


ERP Configuration Challenge

An international implementation needs to fulfill at least two objectives simultaneously: ensure single global processes for corporate management and reporting AND ensure local compliance according local GAAP, tax, currency and language requirements. Oracle EBS functionality provides sufficient tools to accommodate both needs without compromising either one. A corporate decision must be made regarding the primary transaction process, chart of accounts and GAAP accounting regime before the implementation is started. Without a unified financial process companies traditionally let their foreign subsidiaries conduct primary transactions according to local COA and local GAAP rules. Monthly mapping to the US COA and adjustment entries to US GAAP are made before financial trial balance is submitted.

Celantra Expert Solutions

Increasingly best-practice international finance operations, however, now use a unified process model with all primary transactions in US GAAP. Celantra Systems strongly believes that clients should follow this best practice model unless specific company or legal requirements demand an exception. A single chart of accounts and single primary GAAP regime will enhance the efficiency and accuracy across all finance processing and reporting areas.

  • A shared service center preferably uses the same accounting standards, processes, and values for all businesses and countries it serves.
  • Financial and management reports must have clearly identified standards and account references in order to provide meaningful comparison.
  • Global processes are difficult to match up if accounting entries vary widely depending on country and location
  • The systems configuration and the support organization become exponentially more complex if multiple COA structures need to be supported across the enterprise.

How To Comply With A Country Specific COA

Most countries financial regulations give their business a large degree of freedom with regard to how the accounting values and COA structure is created as long as consistency and audit trail are provided. However, a few important countries demand or strongly recommend specific account numbers to be used in the financial reports with clear trail back to the electronic ERP system itself. These include China, Russia, France, Spain, and other European and Asian countries. All foreign countries have individual variations in GAAP accounting, depreciation standards, etc. The best COA structure design accommodates mapping of corporate to local accounts embedded in each corporate account value. Celantra Systems will propose a variety of options to achieve the dual accounting and reporting model without creating additional overhead for transaction processes and systems support. A separate local sub-account segment can be used which can directly contain the local COA values or give access to a mapping and translation function. R12 dual accounting functionality can be used if continual and on-line dual accounting is needed. An alternate approach is a periodic transformation process that will satisfy local reporting but does not require continual parallel updating. In either case we will ensure that the required audit trail and connection of statutory and corporate accounting entries is available.

Local GAAP Adjustments

Local GAAP adjustments are required in nearly all countries for GAAP and/or tax purposes even if a corporate chart of accounts presentation is accepted. Celantra will propose several options to accommodate these entries, either through a separate adjustment balancing segment or a separate set of books depending on local needs. A separate sets of books may be required if the local and corporate year-end are different or if adjustments are not accepted in the local country. Parties who will be authorized to make the local legal adjustment entries must be identified. For smaller subsidiaries without a finance department, this activity is often performed by a qualified local accounting firm. If a separate set of books is used, we can use R12 Dual Accounting functions with sub-ledger accounting rules for a secondary set of books. In most cases the Oracle consolidation functionality can be implemented as a simple solution to transfer monthly transaction or balances to the Local Statutory set of books.

For China the legal reporting requirements can be burdensome. China requires the use of a specific COA and imposes strict sequencing, accounting and currency controls. Many Oracle customers have implemented the local KingDee system in connection with Oracle EBS and perform all legal reporting through this system. It has pre-configured compliant reporting formats and can interface to Oracle EBS.

For each reporting jurisdiction we will investigate which of the local legal reporting formats need to be configured in Oracle. Alternatively local systems may be available at a very low cost and can be interfaced with Oracle exported data.

Testing, Documentation And Training

Celantra Systems provides pre-formated ERP configurations which are adapted to the requirements of each company. We ensure that all these configurations are extensively tested in collaboration with the key users, finance and tax departments and reviewed by internal and external auditors. We also provide the training and documentation of business processes and technical setups. Your key users and your IT group will be able to maintain the configurations and make adjustments as business or tax requirements change.