Multi-Org Simplification R12

Multi-National SIG User Presentation Webinar January 29, 2015

Prepared by Board of the MN-SIG and : Hans Kolbe, Celantra Systems, Board Chair Jacques Bouchet, Oracle, Board Member Sangeeta Sameer, GE, Board Member Hans Kramer, Cummins, Associate Board Member Bill Grimes, Ciena, Associate Board Member

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1. Introduction - MN-SIG Chair Hans Kolbe, Celantra Systems - Mission of the MN-SIG - Multi-Org Challenges and Confusion, Terminology

2. R12 Direction and Options Oracle (Jacques Bouchet, Oracle) 3. GE User Presentation - Multi-Org, Challenges and Evaluation

(Sangeeta Sameer) 4. Cummins User Presentation Decision Process On the road to

Multi-Org simplification (Hans Kramer) 5. Ciena User Presentation Questions, Challenges on Ledgers and

Op Units (Bill Grimes) 6. Celantra Systems - Available Solutions, Configurations, Add-On

Utilities 5. Questions - Answers

Agenda

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Multi-National SIG Mission of Multi-National SIG

Cross-Module and Cross-Geographies Processes and Issues specifically

facing global or multi-country Oracle applications users

Organize exchange of ideas and experiences

Take active role in OAUG Enhancement process with Oracle Corporation

Synchronize with other SIGs and GEOs

Issues of the Multi-National SIG Application Upgrade Strategy - R12,

Fusion Apps, Co-Existence Options for multi-nationals

Legal Entity, Operating Unit, Multi-Org Access (Shared Services, Compliance, Localizations)

Inter-Company (multi-tier, trading, accounting, pricing, )

Global Project Management and Support

Global Chart of Accounts Secondary Ledgers

Multi-language, multi-byte (MLS & NLS), Time Zones

Tax and Legal Compliance Challenges (coordinate solutions in different regions)

Global Single Instance

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Hans Kolbe, Celantra Systems Chair Thomas Simkiss, BizTech Corp. Enhancement Liaison Michelle Zaharoff, Agilent Vice Chair Sangeeta Sameer, General Electric Membership Liaison Dan Chaffer, Qualcomm Kevin Elshaw, State Street Bank of Boston Alex Fiteni, FILLC, E-Business Tax Lead Markus Hentschel, Bearing Point Jacques Bouchet, Oracle Global Strategy, Oracle Liaison, Mrunal Potdar, Facebook Maryanne DiGravio, Terex Adrian Jones, Specsaver Associate member

We are looking for new board members and invite you to join our board !

Board Members:

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International Multi-Org Configurations

Simplification Options & Challenges

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Drivers and Goals for Oracle Multi-Org Simplification

Reduce IT implementation time, configuration, testing, and complexity of support

Model the legal structure independently of operational structure and accounting structure

Reduce time to integrate acquisitions and roll-out new modules and functionality

Ensure global processes by reducing number of configurations and synchronizations challenges

Simplify and speed up monthly closing

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Silo Model (Ledger and OU) 1 Ledger-1 Legal Entity-1 Operating Unit

Secondary PrimLaerdyger Ledger

Secondary PrimLaerdyger Ledger

Secondary PrimaLryedger Ledger

Secondary PrimaLryedger Ledger

Secondary L PrimLaerdyger

Ledger

L E

OU

L E

OU

L E

OU

L E

OU

L E

OU

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Secondary

Ledger Ledger Secondary

Secondary Ledger Primary

Ledger

L E

OU

L E

OU

L E

OU

L E

OU

L E

OU

Partial Silo Model (OU) 1 Ledger-n Legal Entities-n Operating Units

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Cross Legal Entity Operating Unit (CLEO) 1 Ledger many Legal Entities - 1 Operating Unit

Secondary Ledger Secondary

PrimaryLedger Ledger

L E

L E

L E

OU

L E

L E

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Countries, Currencies, Legal Entities Words we use / Terminology is important

Country = Currency: Not always. Yes a single country normally has its unique local statutory currency, except for EURO countries.

Functional Currency - Local = Corporate: Not always. Local Statutory currency most often equals the corporate functional currency, except where corporate currency is the predominant transaction currency (FASB 52).

Legal Entities - Oracle LE = Real Legal entity: Not always. We may differentiate between a branch versus a subsidiary. The branch is not a standalone company, but merely a registration of a foreign company with limited authority and limited compliance obligations. A subsidiary on the other hand is a standalone regular company. Both are legal structures, and the Oracle LE can represent both types of structures.

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Key Assumptions and Challenges Multi-Org Simplification must serve the business: Operational and business

drivers overrule any of these configurations. If business need separate processes and management structures, they should be separated into separated Operating Units and/or ledgers. We are discussing the what are the Oracle technical or external legal constraints? And how do we deal with them?

Drivers / Challenges need to be addressed Accounting Defaults E-Bus-Tax VAT, Sales Tax Integration Sequencing in Sub-Ledgers & GL journals drives separate ledgers (not just OUs). External Document Print Programs User Access and Risks of User Error (Defaulting and Security Rules) Shipment & Project based Intercompany IT interfaces and Programs may need to be adjusted Local and Functional currency Country Localizations where needed and used Business Processes mapping / may need adjustments

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Jacques Bouchet-Oracle Director Global Strategy

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LE Support in EBS 12 Architecture Standard Functions

EBS 11.i Country context given by profile option per Responsibility Change country = change Responsibility Multiple transaction currencies (MRC) (duplicates transactions)

EBS 12 Country context for transactions given by Operating Unit (OU); Change country = assign OU for each transaction in Sub-ledgers Only one functional currency for transaction reporting = primary ledger currency Multiple currencies for Accounting Entries only

R12 includes new functionality to use LE to drive LE & country compliance , especially in new modules such as EB-Tax , Payment, Cash Management. Op Unit is merely a default.

Challenges with Multi-Country Op Unit Country Localization & Currency Features

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Country Localization feature support in EBS 12 Architecture

Country context for transactions Drives Global Descriptive Flexfield behavior (additional fields given by localizations) Drives some country specific features (i.e. Withholding) Drives some localization features packaging (often country per Op Unit or Responsibility)

Country statutory currency for reports Needs to be Primary Ledger currency since no more MRC at transaction level

Oracle standard sub-ledger reports only available in primary functional currency, Secondary functional currency needs reporting extension / customization Applies to VAT report and accounting Turnover report / AR Invoice register Withholding tax calculation and reports

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Considerations for Multi-Org Structure Decisions

Balance cost benefit of setting up More sophisticated structures (multiple Ledgers & OUs) with less customization cost Simpler structures (common Ledger, common OU) with customization cost

Decision points does a country need: Sequential Numbering per Legal Entity

Transaction level Accounting Entry (Journal) level

Local Chart of Account (Germany, France, Mexico) for accounting electronic filing and audit Electronic Fiscal Audit file per LE at Transaction level VAT reporting at transaction level (EB-Tax reports by LE available) Withholding tax processing

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Sangeeta Sameer-General Electric

IT Leader

Introduction PGS (Power Generation Services) operates in

more than 100 countries around the world

Started Release 11i implementation in 2004, with Italy go-live in 2006, followed by 5 more countries in 2007

Shared Operating Unit Concept introduced to Speed up country deployments

Last set of countries rolled out in 2012

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73 Countries Implemented 2010

Indonesia

Turkey Greece

United States Saudi Arabia

Qatar UAE

Kuwait

2008

Austria Switzerland Czech Rep Denmark

Luxembourg Norway

Netherlands

2009

Japan Singapore

Taiwan Belgium Hungary

Israel Latvia

Romania Sweden Poland Croatia Finland Portugal Cyprus Korea

Malaysia Thailand

China Hong Kong

Brunei Australia

New Zealand Vietnam

2006

Italy

2007

UK Ireland Spain

France Germany

2011 2012

India Pakistan Canada

Bahamas Brazil

Dominican Republic Ecuador Panama Morocco

Egypt Ghana

Iraq Lebanon Tunisia

Argentina Bahrain

Chile Colombia Algeria

Jamaica Mexico Nigeria Oman Peru

Trinidad & Tobago Venezuela

Virgin Islands South Africa

Design change in 2008 Implementation Speed changed

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Shared OU - Why we deviated from Country/LE pure design to include cross-country OUs in 11i? From single ledger per country & separate OU per LE to a hybrid model that included single ledger and single OU across countries and LEs

Time & Money Cost benefit of individual implementation/set up of country solution Focus on low volume/low complex countries delayed more complex country roll outs In Europe 20 countries made up ~3% of region volume! (common theme globally)

Maintenance & Support Significant maintenance required for multi Operating Units/Set Of Books

Multiple modules and GLs to close every month Testing of multiple Operating Units

User Experience Shared Service Users had to switch responsibility when working across countries

Country/LE pure implementations for low complex/low volume countries did not make economical sense

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Implications of shared OU in 11i

What we needed to address . - - - - - - -

Trial Balance in local currency if different from Functional currency Accounting in daily rates Oracle Localization reports Local Chart of Accounts These countries were not put in Shared OU VAT @ daily rate on invoices customized for this Sabrix required customization to handle multiple countries from single OU Invoice printing program more complex (language, rates)

What was not impacted

All GE Management reporting in appropriate currencies Ability to report Permanent Establishment (PE) and non PE for GEII LE by country Visibility to originating currency of all transactions Key tax documents remained inherently compliant (invoices) All Cognos reports including the custom Stat and Tax reports built

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Complexity Score > 500

Decision Criteria for Shared vs. Pure OU Permanent

establishment Sales volume

significant

COUNTRY SPECIFIC

NO NO SHARED

OPERATING UNIT

COUNTRY NO

Luxembourg

Switzerland

Denmark ia

Norway

Turkmenistan

Poland

Belgium

Romania

Finland

C

YES YES YES

Count OU Dedicated/ Shared

# ountrie

s Latv 1 OU_IFS_IT Dedicated 1 2 OU_PS_ES Dedicated 1 3 OU_PS_GB Dedicated 1 4 OU_PS_IE Dedicated 1 5 OU_PS_DE Dedicated 1 6 OU_PS_FR Dedicated 1 7 OU_PS_AT Dedicated 1 8 OU_PS_JP Dedicated 1 9 OU_GETAS_TR Dedicated 1 10 OU_PS_US Dedicated 1 11 OU_PS_BH_GEWLL Dedicated 1 12 OU_PS_DZ_GEIOA Dedicated 1 13 OU_PS_LA_GEISA Dedicated 1 14 OU_PS_NG_GEIONL Dedicated 1 15 OU_PS_OM_GEILLC Dedicated 1 16 OU_PS_VE_TMCA Dedicated 1 17 OU_PS_ZA_GESA Dedicated 1 18 OU_PS_IN Dedicated 1 19 OU_PS_IN_GEPSIL Dedicated 1 20 OU_PS_PK Dedicated 1 21 OU_PS_EC_ENSYS Dedicated 1 22 OU_ESHQ_LA_U_GEII Dedicated 1 23 OU_PS_CA_GECII Dedicated 1 24 OU_PS_AE_GEEFZE Dedicated 1 25 OU_PS_LA_U_GEIOC Dedicated 1 26 OU_PS_EURP_U Shared 14 27 OU_PS_EURP_E Shared 5 28 OU_PS_ASIA_U Shared 9 29 OU_PS_ASIA_U_GEIOC

_ U Shared 3

30 OU_PS_ME_U Shared 13 31 OU_PS_LA_U_GEII Shared 12 23

R12 Multi-org Scenarios at GE

Silo Model PGS reasons

CLEO model Appliances reasons

Single Ledger, Single OU ease of Closing Periods

Operations like sourcing can be oblivious selecting the right Legal Entity/OU

Easier Master Data Management, no need to create multiple records if Suppliers and Customer cross Legal Entities

Use SLA to drive accounting per LE needs Sub Ledger transactions will be tied to

Balancing segment which in turn is linked to LE so you have individual transaction linked to LE.

Use features like Data Security, Security rules, GRC to secure/restrict data

Ease of acquisition/re-organization as you have to change SLA & other rules instead of creating another OU

Reduced implementation timelines because of reduced setups, data load and testing time

Need to override default legal entity context using SLA or other setups, e.g. multiple transaction types in AR

Risk that a legal entity will have access to Suppliers and Customers where no contractual relationship exists

Complex data segregation rules required to ensure that cross legal transactions cannot be booked in GL

Ability to isolate closing issues to a specific OU

Cannot use standard Oracle Intercompany to generate AR and AP transactions

MOAC and Ledger Sets solve usability issues in R12

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Hans Kramer, Cummins Supply Chain Capabilities - Design

Enhancement Leader

Introduction to Cummins

To be filled by Hans Kramer or Mike

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27

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Bill Grimes-Ciena Senior Director-Accounting

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Introduction to Ciena Ciena is a network specialist focused on communications networking solutions that enable converged, next-generation architectures, optimized to create and deliver the broad array of high-bandwidth services relied upon by business and consumer end users. Ciena provides equipment, software and services that support the transport, switching, aggregation, service delivery and management of voice, video and data traffic on communications networks. Ciena has been using Oracle for over 15 years, started with 10.xx, upgraded to 11.5.6, re-implemented into 11.5.10 and now plan to upgrade to 12.4. November 2009, prior to acquisition of the optical networking and Carrier Ethernet assets of Nortel, Ciena had the following configurations in 11i 3 SOBs 28 LEs 2 LEs that sold product

March 19, 2010 acquisition completed and Ciena had the following configurations in 11i: 16 SOBs 48 LEs 17 LEs that sold product

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Impact of the acquisition

Due to the limited time Ciena was forced to make Oracle configuration decisions with limited information. Our attempt was to group the new legal entities into 3 categories. 1. Easy - Sales and Marketing entities (limited or no direct sale of product), 2. Medium - Drop Ship entities (sale od product to customers utilizing drop

shipments from another Ciena Entity), and 3. Hard - Complete Build out (direct sale of products to customers).

By grouping our entities it allowed Ciena to begin the build out of Oracle utilizing templates and limited meetings regarding structure. Ciena determined easy build outs could be done by simply adding a new LE and OU to an existing SOBs. Medium build outs would require a new SOBs along with new LE and OU but would have limited need for inventory setup. Hard build outs would required all of the above and a more complicated build out of the inventory modules.

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Implications of this strategy long term

Need to resolve issues with creating STAT financials, currently using dual entry, is there a better solution? Fixed assets has been particularly difficult?

How do we resolve issues with creating local compliant invoices, historically issues with language, number sequencing, folio?

How do we create reconciliation reports between our STAT and GAAP financials?

Is there a way to create VAT and other tax reports directly from Oracle? How do we solve FX issues translation vs re-measurement? How do we maintain a system, that allows Ciena to apply patches,

customizations have made this difficult?.

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Ledger Structure R12

All legal entities within a ledger must, at a minimum, share: Currency Chart of accounts Calendar Accounting Convention

There are other situations that may require a separate ledger such as document sequencing and localizations. Based on these requirements Ciena combined its legal entities into logical Ledgers based on currency and the need for document sequencing. As a result we are recommending 35 Ledgers in R12 which is an increase of 16 as compared to 11i. Going forward we recommend the local currency of a legal entity determine the ledger currency.

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Primary and Secondary Ledgers

Ciena determined the primary ledger should be used for US GAAP and secondary ledger will be used for statutory reporting. This decision was made for two main reasons: 1. Statutory audits, in general, are annual while our US GAAP financials are

reviewed and reported on a quarterly basis

2. The timing requirements for close are more stringent for SEC reporting than for STAT reporting. Example many times we request extensions for STAT but this is never done for US GAAP.

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Operating Unit Structure r12

Based on Cienas experience/growth over the previous 4 years we realized Ciena needed at least one full inventory org in every country it had a legal entity. This was due to the sale of product, need for spares depots and the ability for customers to return goods locally. Similar to what Ciena had done previously we grouped our legal entities into three main groupings. One of three groupings was used: 1. Complete build out of Operating Unit including inventory - Used for any entity

that would sell inventory, hold spares, or the first legal entity opened in a country 2. Financial build out of Operating Unit - Used only if another entity, within this country,

already has an inventory or spares; and No need for legal entity to sell product or hold spares 3. General Ledger build out Used only for holding companies that have very limited or

no financial transactions

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Operating Unit Structure continued

Ciena then needed to decide whether to create a separate operating unit for each legal entity or share an operating unit. To answer this question we did a simple Pros and Cons. While there where many pros and cons the team was simply more comfortable with the one to one relationship. With new features (MOAC and ledger sets) Ciena believed the cons could be overcome if setup properly and setting up a one to one relationship this would allow the most flexibility.

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Secondary

Ledger Ledger Secondary

Secondary Ledger Primary

Ledger

L E

OU

L E

OU

L E

OU

L E

OU

L E

OU

Partial Silo Model (OU) 1 Ledger-n Legal Entities-n Operating Units

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Hans Kolbe, Celantra Systems Partner

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Some Answers to the Challenges Solutions to enable Cross-LE-Op Units

Introduction to Celantra Systems

Global Implementations and Process Alignment: Plan, Design, and Execute

Celantra Systems provides innovative solutions to todays most vexing issues in multi-national ERP configurations.

Celantra Compliance Rule Engine and Compliance Sequencing Utility Celantra has released a number of automated compliance tools, including a new Intercompany

Utility, based on the Celantra Compliance Rule Engine. Celantra Sequencing Utilities supports Oracle clients with international operations. We ensure

gapless date sequenced numbering for VAT and statutory journal reporting. Automated audit trails and reporting are provided.

info@celntrasystems.com www.celantrasystems.com

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- Configurations - Partner Solutions / Bolt-On Utilities - User Extensions

Solutions to enable Cross-LE-Op Units

Additional Solutions available. More detail to be requested

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Configurations EB-Tax Configurations for Multiple LEs & Countries within single OU

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Configurations Legal Entity Ownership and Accounting Defaults - Sample Accounting / Legal Ownership Identification:

Legal/ Finance / Tax Requirement Requirements not negotiable needed for external documents, financial, tax reporting.

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External Solutions - Sequencing Statutory Sequencing Utility Gapless By Legal Entity or VAT Registration Separate by LEs within single ledger Separate by LEs Within single Op Unit Multiple Sequences within LE (VAT Registration) Separate Invoice& Credit Memo Separate DOM, EU, NON-EU (Italian Requirements) Comply with multiple calendars (local versus corporate) Comply with multiple LEs on single journal Statutory Journal Reporting w. Sub-Ledger Detail (FEC) Available from secondary or consolidation ledger From Corporate to Local Chart of Accounts From Corporate to Local Calendar Accommodate non-Oracle systems detail into single report/extract

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External Solutions - IC

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47

48

49

50

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Challenges Raised by this panel to be answered Raised by Topic Solution Area Solution Available Jacques Bouchet Sequential Numbering per Legal Entity Defined by Ledger Celantra Sequencing Utility

Jacques Bouchet Transaction level Defined by Ledger; Manual Override by Op. Unit Celantra Sequencing Utility

Jacques Bouchet Accounting Entry (Journal) level Defined by Ledger; no overrides Celantra Sequencing Utility

Jacques Bouchet Local Chart of Account (Germany, France, Mexico) for accounting electronic filing and audit Secondary Ledger/ Primary Ledger Detail Jrnl Extract Utility / Partner Products

Jacques Bouchet Electronic Fiscal Audit file per LE at Transaction level Secondary Ledger/ Primary Ledger Detail Jrnl Extract Utility / Partner Products

Jacques Bouchet VAT reporting at transaction level (EB-Tax reports by LE available) E-Bus Tax Standard Configuration

Jacques Bouchet Withholding tax processing AP Functionality Standard Configuration, unless localization

Sangeeta Trial Balance in local currency if different from Functional currency Defined by Ledger Reporting Currency ledger / secondary ledger

Sangeeta Accounting in daily rates Defined by Ledger need to override corporate FX Rates; in most countries corporate rate is accepted Sangeeta Oracle Localization reports Operating Unit / Country Review Localization functionality / separate Op Unit if needed

Sangeeta Local Chart of Accounts These countries were not put in Shared OU Defined by Ledger Secondary COA available

Sangeeta VAT@ daily rate on invoices customized for this Not related to Ledger or Op Unit; need to override corporate FX Rates; in most countries corporate rate is accepted

Sangeeta Invoice printing program more complex (language, rates) Document Printing / currency rates Printing Program needs to update parameters

Sangeeta Data Segregation and User Access Data Separation / Access Configurations of Data Set Access, Defaulting Rules & Form Personalization

Sangeeta Unwanted IC transactions Data Separation / Access Configurations of Data Set Access, Defaulting Rules & Form Personalization Sangeeta STD Oracle IC does not work IC Intercompany Utility

Sangeeta LE Default / Account Defaulting Accounting Configurations of Data Set Access, Defaulting Rules & Form Personalization

Hans Kramer Accounting & Legal Ownership Accounting Configurations of Data Set Access, Defaulting Rules & Form Personalization

Hans Kramer Data Segregation and User Access Data Separation / Access Configurations of Data Set Access, Defaulting Rules & Form Personalization Hans Kramer Intercompany IC Intercompany Utility Bill Grimes STAT Books Secondary Ledger/ Primary Ledger Secondary COA available; Adjustment periods, etc. Bill Grimes Invoice Numbers / Sequencing Defined by Ledger Celantra Sequencing Utility Bill Grimes Language Not Dependent on Ledger / Op Unit Standard Functionality Bill Grimes VAT Calculation and Reports E-Bus Tax By LE, not Operating Unit Bill Grimes FX Issues By Ledger Reporting Currency ledger / secondary ledger

Bill Grimes Patch Application Apps Footprint avoid country specific solutions; use standard Oracle; get bolt-on that are independent from Oracle table structure.

Thank you Questions and Suggestions, please

Contact:

Hans Kolbe hanskolbe@celantrasystems.com

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Slide Number 1Slide Number 2Slide Number 3Board Members:Slide Number 5Slide Number 6Slide Number 7Partial Silo Model (OU)1 Ledger-n Legal Entities-n Operating UnitsSlide Number 9Slide Number 10Key Assumptions and ChallengesSlide Number 12Slide Number 13Slide Number 14LE Support in EBS 12 Architecture Standard FunctionsSlide Number 16Considerations for Multi-Org Structure DecisionsSlide Number 18IntroductionSlide Number 20Shared OU - Why we deviated from Country/LE pure design to include cross-country OUs in 11i?Implications of shared OU in 11iSlide Number 23Slide Number 24Slide Number 25Introduction to CumminsSlide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31Introduction to CienaImpact of the acquisitionImplications of this strategy long termLedger Structure R12Primary and Secondary LedgersOperating Unit Structure r12Operating Unit Structure continuedPartial Silo Model (OU)1 Ledger-n Legal Entities-n Operating UnitsSlide Number 40Introduction to Celantra SystemsSlide Number 42ConfigurationsConfigurationsExternal Solutions - SequencingExternal Solutions - ICSlide Number 47Slide Number 48Slide Number 49Slide Number 50Slide Number 51Slide Number 52