Objective:

In this fusion financials training article we will understand the need of Primary and Secondary Ledger Mapping and what is the purpose of doing this in Fusion Accounting Hub. Let us have a look on what are different types of ledger are there in Oracle Fusion Applications-

Primary Ledger:

This is a main record keeping ledger and a required component in our configuration. Every accounting configuration is uniquely identified by its primary ledger. The primary ledger is closely associated with the subledger transactions and provides context and accounting for them.

Primary Ledger is a main record keeping ledger and-

• Records transactional balances by using a chart of accounts along with calendar, currency, and accounting rules implemented in an accounting method.

• Used to book journals in order to record the impact of subledger transactions.
  
  

Secondary Ledger:

Secondary Ledger is optional ledger linked to a primary ledger for the purpose of tracking alternative accounting or to represents the primary ledger’s accounting data in another accounting representation. A secondary ledger can differs from the primary ledger in one or more of the following ways-

• Chart of accounts

• Accounting calendar/Period type combination

• Currency

• Subledger accounting method

• Ledger processing options

Secondary ledger is always associated with primary ledger and there can be multiple of such ledgers attached to main primary ledger in an organization.

If a company has separate subsidiaries in multiple countries, we may need to enable reporting for each country's legal authorities by creating multiple primary ledgers representing each country with the local currency, chart of accounts, calendar, and accounting method. In such cases Local and corporate compliance can be achieved through an optional secondary ledger, providing an alternate accounting method, or in some cases, a different chart of accounts.

Reporting Currency:                                                                        

It is an Optional, additional currency representation of a primary or secondary ledger. A reporting currency can differ from its source ledger in its currency and some processing options, but shares the same chart of accounts, accounting calendar, and accounting method with its related ledger.

Why do we need ledger Mapping:

If the primary and secondary ledgers use different charts of accounts, the chart of accounts mapping is required to instruct the system how to propagate journals from the main transactional chart of accounts to the target chart of accounts.

If the primary and secondary ledgers use different accounting calendars, the accounting date is used to determine the corresponding non adjusting period in the secondary ledger. The date mapping table also provides the correlation between dates and non-adjusting periods for each accounting calendar.

Chart of Account mapping option helps to correlate source chart of account to target chart of account for creating journal entries. One can also define account rules as a part of chart of account mapping which further helps to map complete account combinations in multiple chart of accounts.

If the primary ledger and secondary ledger use different ledger currencies, currency conversion rules are required to instruct the system on how to convert the transactions, journals, or balances from the source representation to the secondary ledger.  

There are four types of Secondary Ledgers.

Balance Level Secondary Ledgers:

In this scenario, GL Consolidation is used to transfer the balances from the primary to the secondary Ledger. The balance level secondary ledger maintains primary ledger account balances in another accounting representation. This type of secondary ledger requires the use of GL Consolidation to transfer primary ledger balances to this secondary ledger. Balance level secondary ledgers are useful if no adjustments are to be done in primary ledger.

There is no drill-down to journal entries or subledgers with this type of secondary ledger, therefore, there is no transparency in underlying transactions. Moreover  balances exist at reporting period dates only, which means that this ledger is not continuously updated, but updated on a continual basis only when the balances are populated using GL Consolidation. Balance level produces relatively small volume of balance data. This method provides an inexpensive solution to an organization.

Journal Level Secondary Ledgers:

This type is maintained using the General Ledger Posting Program only. Every time we post a journal in the primary ledger, the same journal is automatically replicated and maintained in the secondary ledger, depending on the journal conversion rules specified for the secondary ledger. The journal level secondary ledger maintains journal entries and balances in an additional accounting representation. This type of secondary ledger is generated using the General Ledger Posting program. Every time we post a journal in the primary ledger, the same journal can be automatically replicated and maintained in the secondary ledger for those journal sources and categories that are set up for this behavior.

Unlike balance only secondary ledgers, journal level secondary ledgers allow adjustments. In fact, we can have this secondary ledger duplicate adjustments made to the primary ledger (except on a different accounting basis), providing limited transparency and drill-down.

Journal level secondary ledgers are a powerful tool when a different accounting basis is needed but with journal entry (JE) drill-down. It produces large volumes of journal entry and balances data. This arrangement requires additional performance and memory cost.

Subledger Level Secondary Ledgers:

These secondary ledgers are maintained using both Subledger Accounting and the General Ledger Posting program. The final full accounting representation is the subledger level secondary ledger – the most transparent of the secondary ledgers. The subledger level secondary ledger uses both subledger accounting and the General Ledger Posting program to create the necessary journals in both the primary, secondary, and subsidiary ledgers simultaneously. Subledger accounting creates the journal entries from subledger transactions that integrate with it. General Ledger Posting creates the journal entries for all other transactions that don’t integrate with subledger accounting, including manual journal entries.

The subledger level secondary ledger includes the functionality of the balance level and the JE level secondary ledgers, but then adds the subledger level. The subledger level is one of the most powerful secondary ledgers, allowing every entry made to the respective primary ledger subledger to be duplicated in a different accounting representation in a secondary ledger subledger. It is virtually a full drill-down and allows a company to “live” in two different accounting bases. This method also produces large volumes of journal entry and balances data. This arrangement requires additional performance and memory cost.

Adjustments Only Secondary Ledger:

In this type adjustments can be manually entered into the secondary ledger, or automated using Subledger Accounting. Balance, journal and subledger level secondary ledgers are complete accounting representations with increasing levels of drill-down. Alternatively, the adjustments only secondary ledger is a very special type of secondary ledger that is an incomplete accounting representation and instead only reflects adjustments. The adjustments can be manual adjustments or automated adjustments from subledger accounting. This type of ledger must share the same chart of accounts, accounting calendar/period type combination and currency as the associated primary ledger. To obtain a complete secondary accounting representation that includes both the transactional data and the adjustments, use ledger sets to combine the adjustments-only secondary ledger with the primary ledger when running reports.

Adjustments only secondary ledgers are a very useful type of secondary ledger that allows entries to be made discretely and to be provided to management and/or auditors as a separate ledger, giving way to a very high level of transparency. It can act, in essence, as a new control level by which entries can be made by staff-level accountants, approved by line-level accounting supervisors, but then accumulated in the adjustments only secondary ledger for final high-level management approval in aggregate. To obtain a full secondary accounting representation, use ledger sets to combine the adjustments only ledger with the primary ledger for report generation.

The adjustment only secondary ledger is particularly relevant when discussing audit and period-end adjustments. It produces the smallest amount of data and therefore least costly amongst all.

Inference:

Recent changes in financial reporting requirements have transformed the way companies account for key accounting transaction and balance types through reporting regulations. With the help of secondary ledgers in Oracle Fusion Applications, companies are able to meet their different reporting needs along with minimum spreadsheet maintenance. If there is a single global chart of accounts and a single global calendar and a single Fusion instance, companies can leverage a single source of truth that includes transparency into all transactions from the primary ledger to the secondary ledgers as well as full drill-down capability to the subledgers. The result is consistency of reported information across business units and reduced effort for management reporting, maintenance and reconciliation.

Anjan Mukerji

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