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IOGW40

Joint Venture Accounting

THE BEST-RUN BUSINESSES RUN SAP


SAP AG 2007 eBook - Joint Venture Accounting

JVA Workshop IOGW40


Unit 1

Basics
1.1 Introduction & Accounting Principles
1.2 Master Data
1.3 Integration

Unit 2

Day-to-Day Processes
2.1 Data Entry
2.2 Operated Accounting

Unit 3

Periodic Processes
3.1 Cutback
3.2 Month End Processing
3.3 Joint Venture Billing

Unit 4

Joint Venture Configuration (in IMG)


4.1 Company Code Configuration
4.2 Master Data Configuration
4.3 Processing Configuration
4.4 JV Billing Configuration

SAP AG 2007 eBook - Joint Venture Accounting

This online learning course consists of four units. Each unit is divided into several separate
lessons so you can work with one lesson for a longer time if necessary. However, we
recommend that you complete each unit in the defined sequence in order to understand the
solution better.
After you have completed the e-books in all four units, you should have a good
understanding of joint venture accounting concepts, be able to set up and manage basic joint
venture contracts using the SAP JVA solution, and have good knowledge of the breadth and
capabilities of the SAP JVA functions.

Unit 1.2 Objectives

By the end of the second lesson of


unit 1 you will be able to:
z Define the master data used in SAP JVA
z Explain the relationship between the different
JVA objects
z Describe how JVA captures all expenditures
and other transactions by using JVA objects
and cost objects

SAP AG 2007 eBook - Joint Venture Accounting

By the end of the second lesson of unit 1, you will be able to describe the JVA master data and
explain the relationship between the different JVA objects.

JVA 1.2

The second lesson of


unit 1 describes the
master data used in
JVA.

Master Data

SAP AG 2007 eBook - Joint Venture Accounting

The second lesson of unit 1 describes the master data used in JVA.

Joint Operating Agreement (JOA)

JOA

This formal contractual agreement

Specifies conditions for joint activities


Defines partner shares (working interests)
Describes rules for sharing profit and loss
Specifies penalties

SAP AG 2007 eBook - Joint Venture Accounting

The joint operating agreement is a formal contractual agreement that specifies the conditions
for joint activities, defines partner shares, describes rules for sharing profit and loss, and
specifies penalties for unpaid or hesitated cash calls.

Joint Venture Definition

Joint Venture

The joint venture object defines the joint activities:

Defines role of each company in venture


Assigns partner shares and validity
Specifies reporting requirements
Defines taxation rules
Defines accounting procedure

SAP AG 2007 eBook - Joint Venture Accounting

The joint venture object defines the joint activities. It defines the role of each company in
the venture and assigns partner shares and validity. It specifies reporting requirements and
defines taxation rules and accounting procedure.
The venture is the master data object used in SAP JVA to capture expenditures and
revenues. The venture references the joint operating agreement that governs the accounting
activities related to that venture. The venture links related SAP objects, such as cost centers,
projects, orders and profit centers to the joint operating agreement.

Equity Group

Equity group
defines
operating shares

The equity group defines partner shares and roles:

Single operating partner and share


One or more non-operating partners and shares

SAP AG 2007 eBook - Joint Venture Accounting

The equity group defines joint venture partners and their shares. It defines the single
operating partner and one or more non-operating partners and their shares or participation. It
reflects each partners contractual interest.
Equity groups are defined in the joint operating agreement and assigned to the venture.

Joint Venture Partner

Joint venture partner defines the entity participating


in a joint venture:
z Can participate in one or more ventures
simultaneously
z Linked to customer accounts receivable (A/R)
sub-account for non-operating roles
z Linked to vendor accounts payable (A/P) subaccount for operating roles

Partner

SAP AG 2007 eBook - Joint Venture Accounting

A joint venture partner is an entity participating in a joint venture. A joint venture partner can
participate in one or more ventures simultaneously. Joint venture partner objects are linked to
the customer accounts receivable sub-account for non-operating roles and to the vendor
accounts payable sub-account for operating roles.

Joint Venture Partner: A/R and A/P


JV Partner

Customer

Vendor

Customer record required for all partners


Vendor record required for all partners
Link customer and vendor using Account
control fields

SAP AG 2007 eBook - Joint Venture Accounting

A customer and vendor record is required for all partners.


A joint venture partner that has assumed the role of operator for the joint venture uses the
A/R accounts to track the partners liabilities and incoming payments from the other joint
venture partners.
Non-operating joint venture partners use their A/P accounts to manage their joint venture
liabilities and incoming cash calls by operator.

Inter-company Partners
SAP Company GBU1
Partner
JV5001
JV5101
JVGBU2

Inter-Co Code

GBU2

Partner Name
Caledonian Oil
Troll Oil
SAP Company GBU2

Customers
JV5001
JV5101
SAP Company GBU2

JVGBU2
Partner
JVGBU1

Inter-Co Code
GBU1

Partner Name
SAP Company GBU1

Customers

Vendors

JVGBU1

JVGBU1

SAP AG 2007 eBook - Joint Venture Accounting

Sometimes a partner in an equity group is associated with the operator and set up as an SAP
company code. In this case, the partner is known as an inter-company partner. The company
code reference is entered in the joint venture partner master.
You should create a customer account and a vendor account for each inter-company partner
in the usual way. A vendor account is optional.
When an inter-company partner is added to a venture, the JVA system prompts you to enter
in the venture master the number of the venture and equity group in the partner company.
Joint venture processes, such as cash-calling and cutback, use the inter-company
information to post non-operating partner share documents to the partner company.
These functions are also used for the Partner Oriented Cutback model but using the same
company code.

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Master Data Structure

JOA

Venture 1

Venture 2

Venture 3

Equity Group A

Equity Group A

Equity Group B

Equity Group C

Equity Group E

Equity Group D
Operator
Operator
Partner 1
Partner 1
Partner 2
Partner 2
Partner 3
SAP AG 2007 eBook - Joint Venture Accounting

This diagram shows the master data structure of Joint Venture Accounting. Within SAP JVA, the
highest element of the master data structure is the joint operating agreement or JOA, which
drives the joint venture accounting processes related to the venture.

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JOA Assignments
JOA

Equity Group A
Venture 1

DATE

Equity Group B

Venture 2

DATE

Equity Group C

Equity Group D
Venture 3

DATE

Equity Group E

SAP AG 2007 eBook - Joint Venture Accounting

Within a joint operating agreement, the venture and its related cost objects are tied to an equity
group at a specified time. This allows effective date allocation of joint venture expenditures to
non-operating partners.

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Equity Type

Equity Type

Equity type defines activity in a joint venture:

Represents time-independent aspect of


venture and equity group
Provides link between venture activity and
equity group

SAP AG 2007 eBook - Joint Venture Accounting

SAP JVA manages the different stages by using equity types, even if corresponding time
frames are overlapping. The equity type links the venture and the equity group contained in
the joint operating agreement.
The equity type defines actual or logical activity in a joint venture. The equity type represents
the time-independent aspect of the venture and equity group and links the venture activity
and equity group.

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Assignment of Equity Group to Equity Type

Venture 2

March

Equity Type 1

April

Equity Group A

Equity Type 2

Equity Type 3

May

Equity Group C

Equity Group A

Equity Group A

Equity Group D

SAP AG 2007 eBook - Joint Venture Accounting

The joint operating agreement has different development stages, such as engineering and
design, construction, and production. These stages are represented by equity type 1, equity
type 2 and equity type 3 as shown on the screen. Different partners participate within the
equity groups at each stage.
SAP JVA manages the different stages by using equity types, even if corresponding time
frames are overlapping. The equity type links the venture and the equity group contained in
the joint operating agreement. This relationship between joint operating agreement, venture
and equity type defines ownership and changes of ownership throughout the life of the
property.

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Assignment of Equity Group to Partners

Company A

Venture 1

Equity Group A

60%

Operator

40%

Partner 1

Customer A

Equity Group B

Customer B
40%

Operator

40%

Partner 1

20%

Partner 2

SAP AG 2007 eBook - Joint Venture Accounting

This exampe shows you a assignment of Equity Groups to partners. 2 Equity Groups are
assigned to Venture 1. Equity Group A contains 2 shareholders. The operator holds 60% and
partner 1 holds 40% which is represented by partner master data customer A. In Equity Group B
Partner 2 which holds 20% joined additional into the Joint Venture. As a result operators share of
60% decreased to 40%. Partner 1 share of 40% remains constant.

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How SAP JVA Captures Expenditures


Cost Object
Plant
Cost center
Company Code

Valuation
Type

WBS Element

Order

JOA

Network

Joint Venture

Equity Group

Date

Equity Type

Customer Account

Partner

Partner
Equity Share

Recovery
Indicator

Vendor Account
G/L Account

SAP AG 2007 eBook - Joint Venture Accounting

This data model shows how SAP JVA captures all expenditures and other transactions by using
cost objects, such as cost centers, projects, orders, and profit centers. These objects contain
specific joint venture information. These details define the venture, equity group, and recovery
indicator assignments to be used when posting transactions related to the cost objects. Joint
venture documents are created in the accounting interface in real time and are stored in
separate joint venture database tables for use in other JVA processes, such as cutback and
billing.

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JOA Class

A JOA Class is used to group JOAs.

Company Code
JOA Class

Joint Oper. Agreement


01
02
CP

JOA Class

Operated JOAs

JOA 1

JOA 2

Corporate JOAs
Non-Operated JOAs

JOA 8

JOA 5

JOA 3

Operated
Non-operated
Corporate

JOA 4

JOA 6

JOA 9

JOA 7

SAP AG 2007 eBook - Joint Venture Accounting

Joint operating agreements or JOAs are grouped in classes, which can be defined by the
user, for example, 01 for operated JOA, 02 for non-operated JOA, and CP for corporate JOA.
Each JOA class has a number range that can require an internal or external number.
The JOA class must exist before a joint operating agreement can be created within the class.
This is a customizing function. The JOA class cannot be changed after the JOA has been
created.

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Maintain a JOA

You cannot change the


equity group if JVA
documents exist.

You can assign an


alternate address to
each area.

The applicable venture type


is determined automatically.

SAP AG 2007 eBook - Joint Venture Accounting

Each equity group may be used in operated, non-operated and corporate ventures,
depending on the operated and non-operated share.
Double-click equity group to enter partner shares as shown on the screen.

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Joint Venture Class

Joint Venture (JV) class is used to group joint ventures.

Company Code
JV Class

Joint Venture
01
02
CP

JV Class

Operated
Non-operated
Corporate

Operated Ventures
Corporate Ventures

JV 1

JV 2

JV 3
JV 4

Non-Operated Ventures

JV 8

JV 5
JV 6

JV 9

JV 7

SAP AG 2007 eBook - Joint Venture Accounting

Like JOAs, joint ventures are grouped in classes that can be defined by the user, for
example, 01 for operated ventures, 02 for non-operated ventures, and CP for corporate
ventures.
Each joint venture class has a number range, which can require an internal or external
number.
The joint venture class must exist before a venture can be created within the class. This is a
customizing function. The venture class cannot be changed after the venture has been
created.

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Venture Type

SAP JVA uses the following venture types:


z

Operated not taxed

Operated taxed

Non-operated, on-billed

Non-operated

Corporate

SAP AG 2007 eBook - Joint Venture Accounting

An operated not taxed venture is operated by the company using JVA. You cannot add a
tax to this type of venture.
An operated taxed venture is operated by the company running JVA. You can assign a tax
code to this type of venture. The JVA process cutback calculates tax to be charged to the
venture partners.
In a non-operated, on-billed venture, the company running JVA sells part of its nonoperated share of the venture to third parties. The company running JVA distributes portions
of the billings it receives from the venture operator to the partners in its non-operating share.
In effect, the company running JVA acts as an operator toward these other partners.
In a non-operated venture, the company running JVA holds a non-operated share in the
venture, and is billed by the operator for its share of venture expenses.
In a corporate venture, the company running JVA holds 100% of the interest. Expenses that
are booked in the JVA company without JVA information are assigned to the corporate
venture and equity group.

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Recovery Indicator

Recovery
Indicator

The recovery indicator identifies category of a


joint venture transaction:

Indicates whether a particular revenue or


expense is shared by venture partners
Is used to select data for reporting to venture
partners
Is used to distinguish between joint and own
revenues and expenditures

SAP AG 2007 eBook - Joint Venture Accounting

Recovery indicators include BI for billable, NB for non-billable, CP for corporate, and CB for
cutback.

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How the Recovery Indicator is Used

1.

Basis for sharing


partner costs
(cutback)

Material Consumed

Billable Balances
100

BI - Billable

20

NB - Non-Billable

10

AD - Adjustments

33-

CB - Cutback

CUTBACK
30%

JV Billing
Expenditure

33

110

Cutback posting
Gross Exp.

2.

Basis for
operational
reporting
(operator
oriented)

Material Consumed

100

BI - Billable

20

NB - Non-Billable

10

AD - Adjustments

33-

CB - Cutback

Venture (Gross)
Reporting

130
Net Exp.

Own (Net)
Reporting

97

SAP AG 2007 eBook - Joint Venture Accounting

The recovery indicator divides general ledger account balances into subclasses, such as
billable and non-billable adjustments. The billable or non-billable indicator is used to determine
which expenditures should be billed to venture partners. The recovery indicator is also the basis
for gross and net operational reporting and can be used in SAP CO processing, such as
allocations.

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Unit 1.2 Summary

You are now able to:


z Define the master data used in SAP JVA
z Explain the relationship between the
different JVA objects
z Describe how SAP JVA captures all
expenditures and other transactions by
using JVA objects and cost objects

SAP AG 2007 eBook - Joint Venture Accounting

You are now able to:


Define the master data used in SAP JVA
Explain the relationship between the different JVA objects
Describe how SAP JVA captures all expenditures and other transactions by using JVA
objects and cost objects

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