Primary Ledger, Secondary Ledger and Reporting Currency - Oracle

Companies account for themselves in primary ledgers, and, if necessary, secondary ledgers and reporting currencies. Your transactions from your subledgers are posted to your primary ledgers and possibly, secondary ledgers or reporting currencies. 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. Your subsidiary's primary and secondary ledgers can both be maintained in your local currency, and you can convert your local currency to your parent's ledger currency to report your consolidated financial results using reporting currencies or translation.

Primary Ledgers

A primary ledger is the main record-keeping ledger. Like any other ledger, a primary ledger records transactional balances by using a chart of accounts with a consistent calendar and currency, and accounting rules implemented in an accounting method. The primary ledger is closely associated with the subledger transactions and provides context and accounting for them.

To determine the number of primary ledgers, your enterprise structure analysis must begin with your financial, legal, and management reporting requirements. For example, if your company has separate subsidiaries in several countries worldwide, enable reporting for each country's legal authorities by creating multiple primary ledgers that represent each country with the local currency, chart of accounts, calendar, and accounting method. Use reporting currencies linked to your country specific primary ledgers to report to your parent company from your foreign subsidiaries. Other considerations, such as corporate year end, ownership percentages, and local government regulations and taxation, also affect the number of primary ledgers required.

Secondary Ledgers

A secondary ledger is an optional ledger linked to a primary ledger for the purpose of tracking alternative accounting. A secondary ledger can differ from its primary ledger by using a different accounting method, chart of accounts, accounting calendar, currency, or processing options. All or some of the journal entries processed in the primary ledger are transferred to the secondary ledger, based on your configuration options. The transfers are completed based on the conversion level selected. There are four conversion levels:

• Balance: Only Oracle Fusion General Ledger balances are transferred to the secondary ledger.
• Journal: General Ledger journal posting process transfers the journal entries to the secondary ledger.
• Subledger: Oracle Fusion Subledger Accounting creates subledger journals to subledger level secondary ledgers as well as reporting currencies.
• Adjustments Only: Incomplete accounting representation that only holds adjustments. The adjustments can be manual or detailed adjustments from Subledger Accounting. This type of ledger must share the same chart of accounts, accounting calendar, and period type combination, and currency as the associated primary ledger.

Note

A full accounting representation of your primary ledger is maintained in any subledger level secondary ledger.

Secondary ledgers provide functional benefits, but produce large volumes of additional journal entry and balance data, resulting in additional performance and memory costs. When adding a secondary ledger, consider your needs for secondary ledgers or reporting currencies, and select the least costly data conversion level that meets your requirements. For secondary ledgers, the least costly level is the adjustment data conversion level because it produces the smallest amount of additional data. The balance data conversion level is also relatively inexpensive, depending upon how often the balances are transferred from the primary to the secondary ledger. The journal and subledger data conversion levels are much more expensive, requiring duplication of most general ledger and subledger journal entries, as well as general ledger balances.

For example, you maintain a secondary ledger for your International Financial Reporting Standards (IFRS) accounting requirements, while your primary ledger uses US Generally Accepted Accounting Principles (GAAP). You decided to select the subledger level for your IFRS secondary ledger. However, since most of the accounting is identical between US GAAP and IFRS, a better solution is to use the adjustment only level for your secondary ledger. The subledger level secondary ledger requires duplication of most subledger journal entries, general ledger journal entries, and general ledger balances. With the adjustment only level, your secondary ledger contains only the adjustment journal entries and balances necessary to convert your US GAAP accounting to the IFRS accounting, which uses a fraction of the resources that are required by full subledger level secondary ledger.

Following are scenarios that may require different combinations of primary and secondary ledgers:

• The primary and secondary ledgers use different charts of accounts to meet varying accounting standards or methods. A chart of accounts mapping is required to instruct the application how to propagate balances from the source (primary) chart of accounts to the target (secondary) chart of accounts.
• The primary and secondary ledgers use different accounting calendars to comply with separate industry and corporate standards.

Note

Use the same currency for primary and secondary ledgers to avoid difficult reconciliations, if you have the resources to support the extra posting time and data storage. Use reporting currencies or translations to generate the different currency views needed to comply with internal reporting needs and consolidations.

Reporting Currencies

Reporting currencies maintain and report accounting transactions in additional currencies. Each primary and secondary ledger is defined with a ledger currency that is used to record your business transactions and accounting data for that ledger. It is advisable to maintain the ledger in the currency in which the majority of its transactions are denominated. For example, create, record, and close a transaction in the same currency to save processing and reconciliation time. Compliance, such as paying local transaction taxes, is also easier using a local currency. Many countries require that your accounting records be kept in their national currency.

If you need to maintain and report accounting records in different currencies, you do this by defining one or more reporting currencies for the ledger. There are three conversion levels for reporting currencies:

• Balance: Only General Ledger balances are converted into the reporting currency using translation.
• Journal: General Ledger journal entries are converted to the reporting currency during posting.
• Subledger: Subledger Accounting creates subledger reporting currency journals along with primary ledger journals.

Note

A full accounting representation of your primary ledger is maintained in any subledger level reporting currency. Secondary ledgers cannot use subledger level reporting currencies.
Of the three data conversion levels available, the balance data conversion level is typically the least expensive, requiring duplication of only the balance level information. The journal and subledger data conversion levels are more expensive, requiring duplication of most general ledger and subledger journal entries, as well as general ledger balances.

Do not use journal or subledger level reporting currencies if your organization has only an infrequent need to translate your financial statements to your parent company's currency for consolidation purposes. Standard translation functionality meets this need. Consider using journal or subledger level reporting currencies when any of the following conditions exist.

• You operate in a country whose unstable currency makes it unsuitable for managing your business. As a consequence, you need to manage your business in a more stable currency while retaining the ability to report in the unstable local currency.
• You operate in a country that is part of the European Economic and Monetary Union (EMU), and you choose to account and report in both the European Union currency and your National Currency Unit (NCU).

Note

The second option is rare since most companies have moved beyond the initial conversion to the EMU currency. However, future decisions could add other countries to the EMU, and then, this option would again be used during the conversion stage.


Primary Ledger
- Main, record-keeping ledger
- Defined by 4C's:

• Chart of accounts
• Accounting calendar
• Primary currency
• Subledger Accounting Method (SLA)

Secondary Ledgers 

- Optional, additional accounting representations of your primary ledger
- The Secondary Ledgers are used for supplementary purposes and can be used for global companies to comply with various legal requirements.
- Can differ in one or more of the following from the primary ledger

• Chart of accounts
• Accounting calendar
• Primary currency
• Subledger Accounting Method (SLA)

By assigning two different subledger accounting methods to each ledger, you can use Subledger Accounting (SLA) rules to simultaneously acccount for the same legal entity transaction in both ledgers to meet both fiscal and corporate requirements.

 Generally, when to use Primary Leger and when to use Secondary Ledger?
- If you only need multiple currencies to support your reporting requirements, use reporting currencies with a primary ledger
- If you need to account for your data using different calendars, charts of accounts, accounting methods(SLA) in addition to currency, use a secondary ledger