Understanding Period-End Accruals in Oracle Fusion

 

Demystifying Period-End Accruals in Oracle Fusion

 

In any financial system, ensuring expenses are recognized in the correct accounting period is critical to maintaining accurate financial reporting. This is where period-end accruals come into play.

In Oracle Fusion, Period-End Accruals are used to account for goods or services that have been received but not yet invoiced by the supplier at the end of an accounting period. This ensures that expenses are recorded in the correct period, even if the supplier invoice is processed later.

 

How It Works?

When a purchase order (PO) is raised and goods are received, the system records the receipt transaction. However, if the supplier invoice has not yet been entered or matched, Oracle Fusion automatically creates an accrual entry during the period-end process.

This accrual temporarily recognizes the expense and liability for received items until the actual invoice arrives.

When the supplier invoice is eventually created and matched to the receipt, the accrual is reversed — ensuring there is no double counting of expenses.

 

Why It Matters?

• Ensures financial statements reflect true expenses of the period.
• Supports compliance with accrual-based accounting standards.
• Automates the matching and reconciliation process, reducing manual errors.

 

Process Overview:

The Create Un-invoiced Receipt Accruals process creates pairs of debit and credit accounting entries to accrue for purchase order receipts that are:

• Designated as not to accrue at receipt
• Receipt hasn’t been matched with an invoice in accounts payable

 

 

Here are the steps involved in the process-

 

1.      Create PO with Accrue on Receipt as N

This is applicable only for Expense Destination Type POs.

2.      Receive the PO.

3.      Invoice the PO for partial quantity OR do not create the invoice for any quantity - so that Qty Received > Qty Invoiced.

4.      Run following ESS jobs to transfer transaction data to Receipt Accounting application

a.      Transfer Transactions from Receiving to Costing

b.      Transfer Costs to Cost Management  -> This program transfers Invoice accounting data from Payables to Receipt Accounting application

5.      Run the ESS Job -  Create Uninvoiced Receipt Accruals with below parameter

·       Bill to Business Unit - Respective Bill to BU as per the PO

·       Accrual Run Mode - Select Report or Accounting

Report Mode is used to view the Period End Accrual Amount any time before the End of Period.

Accounting Mode to be used only for the Final Run at the End of Period but before to that ensure the Payables and Period is Closed.

·       Accounting Period - Respective Period

·       Period End Accrual Cutoff and Accounting Date - Last Date of the Period

·       Include Purchase Order Status - 'All'

 

 

6.      Run the Job - Uninvoiced Receipt Accrual Report -> To View the Un-Invoiced PO Details

 

 

7.      Run Create Accounting job for Subledger Application as Receipt Accounting

The accounting date for the distribution is same as the accrual cut-off date entered while creating un-invoiced receipt accruals.

8.      Close the Current GL Period.

9.      If the Accrual Reversal is not set to Automatic in the Subledger Options for Receipt Accounting, then Run the Job - Create Accrual Reversal Accounting to generate the Reversal Entries.

This completes the cycle for period end accrual process for one period. Repeat the same for the next period.

 

·      The receipt accounting distributions are staged in the Receipt Accounting subledger and posted to General Ledger only after you run the Create Accounting process.

·       Each time you run the Create Uninvoiced Receipt Accruals process, data is created for reporting and then you can review it by running the Uninvoiced Receipt Accrual Report.

 

Few Important Points:

• Ensure all receiving transactions for goods and services you received during the period are interfaced to Receipt Accounting.

• Enter and match all invoices you received during the period for your receipts and accrual entries.

• By default, the Create Uninvoiced Receipt Accruals process only considers purchase orders that are open or in closed status for receiving to compute period end accrual amounts.

• If you run the Create Uninvoiced Receipt Accruals process multiple times, ensure that each run of the process is with the same period end accrual cutoff and accounting date.

• The list of values for accounting period doesn't require the accounts payable period to be closed.
• However, it’s strongly recommended that the corresponding accounts payable period is closed before running the process in the Accounting mode.

• Optionally you can create a cost accounting profile option with the name CST_ENABLE_AP_PERIOD_STATUS_VALIDATION, to enforce the practice of allowing period end accrual to be booked only after the accounts payable period is closed.

• Run the Uninvoiced Receipt Accruals Report after running the Create Uninvoiced Receipt Accruals process to analyze your uninvoiced receipts.
• The report shows the  data based on the selection criteria with which the Create Uninvoiced Receipt Accruals process was run, thus ensures you know exactly what you accrue and for what amount.

• The Create Uninvoiced Receipt Accruals process can be run as many items as you need.
• After you run the process in the Accounting run mode, the subsequent runs of the job can only be in the Accounting mode, and the job can't be run in the Report mode for the respective period.
• Use appropriate Accrual cut-off date to avoid mismatch in the periods in which accrual is booked between the ledgers.
• In case of Multiple Ledger Scenario with different period types like Calendar months for Primary Ledger and 4-4-5 type for the Secondary Ledger, there is always a possibility that the period end date will be different for both the ledgers
• In such cases, use the last date of the period which is common between ledgers as cut-off date.
• Final Close PO to avoid generating the Period End Accrual Entries which would be no more Invoiced in future.
• Final Closing old POs on a regular basis helps to improve the process performance.
• You can control defaulting of accrue at receipt flag based on setup at the BU level in Manage Common Options for Payables and Procurement.
• If ”Expense Accruals” is set to “Period end”, All expense PO schedules will have the accrue on receipt flag un-checked. This option cannot be overridden
• If ”Expense Accruals” is set to “At Receipt”, All expense PO schedules will have the accrue on receipt flag checked by default. Buyers can override this flag at the PO schedule level.

 

 

Best Practice:

·     It’s recommended to run the Period-End Accrual Process in Procurement or Payables before closing the accounting period.

·     Regular reconciliation and cleanup of aged accruals help maintain accurate reporting and prevent overstated liabilities.

·        Create Job sets to ensure all transactions from source systems  (Receiving, PO, Invoices) are interfaced.

·       Review the un-invoiced receipt accruals report on a regular basis during the period to identify discrepancies in estimates and avoid any last-minute surprises.

·     Review Subledger period end validation exceptions to ensure there are no unposted or incomplete accrual or accrual reversal journals.

·       Use ledger options to restrict GL period close if there are any unposted accrual or accrual reversal journals in the system.

·       The period end accrual event created by receipt accounting is set to Auto reverse journals.

·       Do not use the GL reversal feature for reversing Uninvoiced receipt accruals journals to avoid double accounting.