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Description
The cutback program selects all billable costs made to a joint venture,calculates the partner shares of these costs as indicated in the equitygroup, and creates postings against these partners with the calculatedshares.
A recovery indicator is assigned to each expenseline when it is posted. A flag, which was assigned to the recoveryindicator when it was set up, determines whether the posting isbillable.
The following types of cutback postings are possible:
- Cutback to a working interest partner
- Direct charge to a working interest partner
- Cutback to a suspended partner
- Direct charge to a suspended partner
- Cutback to a net profit interest partner
- Cutback to a carried interest partner
- Cutback against assets
- Cutback to an intercompany partner
- Value added tax for a venture
- Service tax for a venture
Examples of all the different types of cutback postings and theconfiguration options required to make these postings are providedbelow.
You can run cuback in 'Testmode' to ensure that the requiredconfigurion is complete and also to check the documents cutback wouldcreate.
If you run cutback not in 'Testmode', you can check the success of thecutback run in the Process history.Precondition
If you use equity group or project suspense, you must run theproject/equity group suspense program before themonth end run of cutback.
Running this program before an intermediate cutback run is notneccessary, although it is recommended to do so to avoid uneccessarypostings.Output
Detailed information of all postings cutback will create are displayed,and if any errors occur during execution, a list of error messages willalso be displayed.
If cutback is run not in testmode, the document numbers of the postingscreated are also displayed. Authority
To be able to execute an intermdiate run of cutback, you must have'execute' authority for the process 'CUTBACK1'.
To be able to execute a month end run of cutback, you must have'execute' authority for the process 'CUTBACK2'.
Details see authorization object J_JVA_PRC.Example
The following provides an example of each different type of cutbackposting, as well as the configuration that is required to achieve thedesired results for each.
All examples use equity group E1 in venture V1 with the followingpartners:
Operator OP with 60%,
Partner P1 with 30%,
Partner P2 with 10%.
The examples also assume that the following billable costs have beenposted with the recovery indicator BI for equity group E1 and ventureV1 in the period of our cutback run:
to account 400000, cost center CC1 1000 USD,
to account 401000, cost center CC2 5000 USD.
For each type of posting, a document type must be defined based on theJVA function used. These document types can bedefined in customizing under 'Processes - Posting - Rules'.
Posting keys, billing indicators, andrecovery indicators that will be assigned toposting lines must be defined for the different cutback functionitem types in customizing under 'Processes -Posting - Rules - Posting rule details'.1. Cutback to a Working Interest Partner for a working interestpartner.
The following function item types are used:
'CU' for the partner line,
'EX' for the expenditure offset.
Given proper configuration of the objects described above (postingkeys, billing indicators, etc.) as well as of the cutback function itemtypes, a typical cutback posting for this example would look like:
PK Account Cost ctr BI RI Amount (Item type)
01 P1 4 1800 (CU)
01 P2 4 600 (CU)
50 400000 CC1 CB 400- (EX)
50 401000 CC2 CB 2000- (EX)2. Direct Charge to a Working Interest Partner
The function 'CUTB' is used to execute the transaction cutbackfor a direct charge to a working interest partner.
The following function item types are used:
'CD' for the partner line,
'EX' for the expenditure offset.
Assuming the expense posted to cost center CC1 is a direct charge topartner P1, the cutback posting for this example would look like:
PK Account Cost ctr BI RI Amount (Item type)
01 P1 4 1500 (CU)
01 P2 4 500 (CU)
01 P1 7 1000 (CD)
50 400000 CC1 CB 1000- (EX)
50 401000 CC2 CB 2000- (EX)3. Cutback to a Suspended Partner
The function 'CUTB' is used to execute the transaction cutbackfor a suspended partner.
The following function item types are used:
'CS' for the partner line,
'EX' for the expenditure offset.
For lines posted to suspended partners a special G/Lindicator is required.
Assuming in the example partner P1 is suspended, the cutback postingfor this example would look like:
PK Account Cost ctr BI RI Amount (Item type)
0AJ P1 11 1800 (CS)
01 P2 4 600 (CU)
50 400000 CC1 CB 400- (EX)
50 401000 CC2 CB 2000- (EX)4. Direct Charge to a Suspended Partner
The function 'CUTB' is used to execute the transaction cutbackfor a direct charge to a suspended partner.
The following function item types are used:
'CT' for the partner line,
'EX' for the expenditure offset.
For lines posted to suspended partners a special G/Lindicator is required.
Assuming in the example partner P1 is suspended and the expense isposted to cost center CC1 as a direct charge to partner P1, the cutbackposting for this example would look like:
PK Account Cost ctr BI RI Amount (Item type)
0AJ P1 11 1500 (CS)
01 P2 4 500 (CU)
0AJ P1 12 1000 (CT)
50 400000 CC1 CB 1000- (EX)
50 401000 CC2 CB 2000- (EX)5. Cutback to a Net Profit Interest Partner
The function that is used is 'CUTB'.
The function 'CUTB' is used to execute the transaction cutbackfor a net profit interest partner.
The following function item types are used:
'CN' for the partner line,
'CO' for the partner offset.
For cutback postings to net profit interest partners, an extra postingin addition to the regular cutback posting will be created. If the flag'CI/NPI postings in FI' is selected in the JVA company globalparameters, the additional posting is made either in FI or in thespecial purpose ledger only.
Assuming in the example partner P1 is a net profit interest partner,the cutback posting for this example would look like:
PK Account Cost ctr BI RI Amount (Item type)
01 P2 4 600 (CU)
50 400000 CC1 CB 100- (EX)
50 401000 CC2 CB 500- (EX)
PK Account Cost ctr BI RI Amount (Item type)
01 P1 14 1800 (CN)
11 P1 17 1800- (CO)6. Cutback to a Carried Interest Partner
The function 'CUTB' is used to execute the transaction cutbackfor a carried interest partner.
The following function item types are used:
'Px' for the partner line (with penalty category),
'CC' for the partner line (without penalty category),
'CO' for the partner offset.
The 'x' in the function item type 'Px' will be replaced by the CIpenalty category that is assigned to the cost object of thecorresponding expense line. Penalty categories can be defined in the JVcost object types in JVA configuration under 'Master - Cost objecttypes'.
If no penalty category is found, the function item type 'CC' is used.
For cutback postings to carried interest partners, an extra posting inaddition to the regular cutback posting is created. If the flag'CI/NPI postings in FI' is selected in the JVA company globalparameters, the additional posting is made either in FI or in thespecial purpose ledger only.
Assuming in the example partner P1 is a carried interest partner, costcenter CC1 is assigned to penalty category '1', and cost center CC2 isnot assigned to a penalty category, the cutback postings for thisexample would look like:
PK Account Cost ctr BI RI Amount (Item type)
01 P2 4 600 (CU)
50 400000 CC1 CB 100- (EX)
50 401000 CC2 CB 500- (EX)
PK Account Cost ctr BI RI Amount (Item type)
01 P1 15 300 (P1)
01 P1 16 1500 (CC)
11 P1 17 1800- (CO)7. Cutback to Assets
The function 'CUTB' is used to execute the transaction cutbackfor an asset.
The following function item type is used:
'AM' for the asset line.
Cutback handles expenses posted to assets in two steps. First, cutbackposts the expense offset to a cutback account that has been defined inJVA configuration under 'Processing - Cutback control -Accounts'. Second, the cutback account is cleared to the originalasset.
This example assumes additional expenses to
asset A1-1 5000 USD,
asset A1-2 10000 USD.
Both assets are assigned to the reconciliation account 20000, which ismapped to the cutback account 699020. The cutback postings for thisexample would look like:
PK Account Cost ctr BI RI Amount (Item type)
01 P1 4 6300 (CU)
01 P2 4 2100 (CU)
50 400000 CC1 CB 400- (EX)
50 401000 CC2 CB 2000- (EX)
50 699020 CB 6000- (EX)
PK Account Cost ctr BI RI Amount (Item type)
40 699020 CB 6000 (EX)
75 A1-1 CB 2000- (AM)
75 A1-2 CB 4000- (AM)8. Cutback to an Intercompany Partner
The function 'CUTI' is used to execute the transaction cutbackfor an intercompany partner.
The following function item types are used:
'VE' for the partner line,
'EX' for the expenditure offset.
If a partner is maintained in the system as an intercompany partner,cutback will automatically create a vendor posting that corresponds tothe cutback posting in the affiliated company's system.
This example assumes that partner P1 is an intercompany partner. Italso assumes that all accounts and cost objects in the affiliatedcompany are assigned names that are identical to the names of thecorresponding accounts and cost objects in the company running cutback.The correspondence between accounts and cost objects is defined in theJV processing under 'Master data - Intercompany mapping'. Thecutback postings for this example would look like:
PK Account Cost ctr BI RI Amount (Item type)
01 P1 4 1800 (CU)
01 P2 4 600 (CU)
50 400000 CC1 CB 400- (EX)
50 401000 CC2 CB 2000- (EX)
PK Account Cost ctr BI RI Amount (Item type)
31 OP 1800- (VE)
40 400000 CC1 CB 300 (EX)
40 401000 CC2 CB 1500 (EX)
The second posting takes place in the affiliated company.9. Value Added Tax for a Venture
The function 'TAXC' is used to post value added tax for aventure resulting from execution of the transaction cutback.
The following function item types are used:
'CU' for the partner line,
'CD' for the partner line (direct charge),
'EX' for the expenditure offset.
Before tax postings can be processed through cutback, an account mustbe defined for the automatic posting transaction JV1 in JVcustomizing under 'Processing - Automatic postings - Other JVpostings'.
If tax postings are to be processed as value added tax postings, theflag 'Tax on exp.detail' must be turned off in the JVA globalcompany parameters.
When this flag is turned off, a value added tax will be posted for allventures based on the output tax defined on the venture.
This example assumes that cutback created the posting described inexample 2 (i.e. the expense to cost center CC1 was a direct charge topartner P1). In addition, it is assumed that an output tax code A1 of10% has been defined for venture V1 and that account 699992 is assignedto the automatic posting transaction JV1. Under these assumptions,cutback would create the following additional postings:
PK Account Tax Cost ctr BI RI Amount (Item type)
01 P1 24 150 (CU)
40 699992 A0 CB 1500 (EX)
50 699992 A1 CB 1500- (EX)
50 Tax A1 150-
PK Account Tax Cost ctr BI RI Amount (Item type)
01 P1 24 100 (CD)
40 699992 A0 CB 1000 (EX)
50 699992 A1 CB 1000- (EX)
50 Tax A1 100-
PK Account Tax Cost ctr BI RI Amount (Item type)
01 P2 24 50 (CU)
40 699992 A0 CB 500 (EX)
50 699992 A1 CB 500- (EX)
50 Tax A1 50-10. Service Tax for a Venture use of different functions and functionitem types.
Before tax postings can be processed as service tax postings, the flag'Tax on exp.detail' must be turned on in the JVA global companyparameters.
If this flag is turned on, a service tax will be posted for allventures based on the output tax defined on the venture.
The example assumes that cutback created the posting described inexample 2 (i.e. the expense to cost center CC1 was a direct charge topartner P1). In addition, it is assumed that an output tax code A1 of10% is defined on venture V1.10.1. Tax Expenditure Posting
The function 'TAXE' is used to post the tax expenditureresulting from execution of the transaction cutback.
The following function item type is used:
'TX' for the expense lines.
Accounts must be defined for both automatic posting transactionsJV1 and JVA in JV customizing under 'Processing -Automatic postings - Other JV postings'.
In the first step of posting taxes through cutback, the service tax isposted as a billable expenditure to the tax expense account assigned toautomatic posting transaction JVA.
This example assumes that account 699992 is assigned to the automaticposting transaction JV1 and account 699993 is assigned to JVA. Giventhese assumptions, cutback would create the following additionalpostings:
PK Account Tax Cost ctr BI RI Amount (Item type)
40 699993 CC2 500 (TX)
40 699992 A0 CC2 5000 (TX)
50 699992 A1 CC2 5000- (TX)
50 Tax A1 500-
PK Account Tax Cost ctr BI RI Amount (Item type)
40 699993 CC1 100 (TX)
40 699992 A0 CC1 1000 (TX)
50 699992 A1 CC1 1000- (TX)
50 Tax A1 100-10.2. Partner Tax Posting
The function 'TAXC' is used to post the tax resulting fromexecution of the transaction cutback to the partner.
The following function item types are used:
'CU' for the partner lines,
'CD' for the partner line (direct charge),
'EX' for the expenditure offset.
This posting uses the account for the automatic posting transactionsJVA.
In the second stepof posting tax through cutback, the tax is billed tothe partners and offset posting is made to the tax expenditure account.For this example, the postings would look like:
PK Account Tax Cost ctr BI RI Amount (Item type)
01 P1 24 150 (CU)
01 P2 CB 50 (EX)
50 699993 CC2 CB 200- (EX)
PK Account Tax Cost ctr BI RI Amount (Item type)
01 P1 24 500 (CD)
50 699993 CC1 CB 500- (EX)10.3. Operator Offset Posting
The function that is used is 'TAXC'.
The function 'TAXE' is used to post the tax offset resultingfrom execution of the transaction cutback.
The following function item type is used:
'TO' for the expense lines.
The accounts for the automatic posting transactions JV1 andJVA are also used.
The operator does not pay service taxes for the venture, the third stepof tax processing through cutback is executed. In the last step ofposting taxes through cutback, the tax is corrected and the tax expenseaccount is cleared. For this example, the posting would look like:
PK Account Tax Cost ctr BI RI Amount (Item type)
50 699993 CC2 CB 30- (TO)
50 699992 A0 CC2 CB 300- (TO)
40 699993 A1 CC2 CB 300 (TO)
40 Tax A1 30
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