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SAP JVA
Manage your financial Joint Venture processes
© SAP 2007 / Page 17
In the oil and gas industry, certain ventures are considered high risk,
demanding extensive capital investment and a long payback period. To
minimize risks, companies develop partnerships called joint ventures.
A joint venture consists of an operating partner (operator) and one or more
non-operating partners, who combine monetary or personnel resources to
share a project’s expenses and revenues.
The operator manages the venture, arranges venture activities, and
maintains accounting records. The operator remits venture expenses,
collects revenues, and distributes these to the partners, according to their
ownership shares.
This process is known as Joint Venture Accounting (JVA).
What is Joint Venture Accounting?
© SAP 2007 / Page 18
Companies can share:
Risk
Investment
Resources
Operating Partner
Plan future activities of venture
Manage day-to-day activities of venture
Maintain accounting records for venture
Calculate partner shares of venture
expenditure and revenue
Report venture activity (P&L) to
partners
Non-Operating PartnerMaintain accounting records for their own
share of the venture
Settle accounts with the operating partner,
according to the conditions of the venture
Joint
Venture
2
Joint
Venture
3
Joint
Venture
1
Entity A
Entity B
Entity C
What is Joint Venture Accounting?
© SAP 2007 / Page 19
SAP designed JVA especially for joint venture operations.
SAP JVA captures all expenditures and other joint venture transactions by
using functions from Financial Accounting (SAP FI), Controlling (SAP CO),
Asset Management (SAP AM), Materials Management (SAP MM), Plant
Maintenance (SAP PM), and Project System (SAP PS).
By working closely with customers and implementation partners, SAP
ensures that JVA facilitates efficient management of joint ventures.
What is SAP JVA?
© SAP 2007 / Page 20
SAP JVA is fully integrated with:
Financial Accounting (SAP FI)
Controlling (SAP CO)
Asset Management (SAP AM)
Materials Management (SAP MM)
Production Planning (SAP PP)
Plant Maintenance (SAP PM)
Project System (SAP PS)
allowing you to capture all joint venture transactions by using
standard SAP functions.
The result is a streamlined workflow and reductions in errors.
Why SAP JVA?
© SAP 2007 / Page 21
Detailed joint venture data capture in real time
Cash calls to/from partners
Partner billing for venture expenses and revenues
Overhead calculation, based on the Joint Operating Agreement
Allocations of billable and non-billable costs
Multi-currency processing
Farm-in/Farm-out and Equity Changes
SAP JVA Features and Benefits
© SAP 2007 / Page 22
Joint Venture Data Capture
Captures and codes all transactions, including vendor invoices, inventory movements and allocations, with an option to produce balanced venture books
Cash Calls
Request cash payments from partners for future venture operations
Partner Billing
Calculates partner shares for venture expenses and revenues
Monitors partner cash calls and receivables
Produces a partner bill containing all relevant information
Overhead
Calculates different types of overhead, as agreed in the JOA
SAP JVA Functions
© SAP 2007 / Page 23
Allocations
Distributes billable and non-billable costs (such as facility, payroll, and related expenses) to cost centers or projects throughout the allocation cycle.
Multi-Currency Processing
Supports the multi-currency needs of typical venture activities
Cutback
Cutback allocates all operating costs, carried by the operator during the accounting period, to the non-operating partners, according to their equity shares. This process typically occurs at the end of the accounting period after all transactions are posted.
Suspense Processing
Suspense processing allows you to continue regular processing in the event of a dispute or some other unscheduled disruption.
SAP JVA Functions
© SAP 2007 / Page 24
Equity Adjustment
Equity adjustment covers several business processes that require the creation of new equity groups and different handling for historical cost. SAP JVA equity adjustment capabilities provide functions that cover farm-in, farm-out, and re-determination, facilitating prior-period and pre-cutback equity changes.
Joint Venture Billing
Joint venture billing allows you to invoice partners for expenditures and revenues, and to issue cash calls. You can send different levels of supporting information with the invoice.
Partner Netting
Partner netting allows you to calculate the sum of a partner’s open expenses and
cash calls within the venture to a single residual entry of outstanding expenses.
You can then post that entry to the partner’s accounts receivable account for
billing.
SAP JVA Functions
© SAP 2007 / Page 25
Asset and Material Transfer
Asset and material transfer capabilities allow you transfer assets and materials
to joint venture properties at the current replacement price, rather than at
historical cost.
Controlling
Controlling enables you to process assessments, distributions, and allocations.
In SAP JVA, you can allocate various costs among multiple cost objects for
distribution to the ventures.
Net Profit and Carried Interest Profit Partners
Net profit and carried interest profit partners allow you to allocate payments and
a net profit interest to a non-operating partner, and to set up a carried interest
arrangement, if necessary.
SAP JVA Functions
© SAP 2007 / Page 26
Non-Operated Ventures
Non-operated venture processing facilitates integrated handling of incoming,
non-operated invoices with SAP accounts payable functions. You can record
these invoices online. In addition, cash call features are available for non-
operated ventures at the venture and project level.
Inter-Company Functions
Inter-company functions allow you to book inter-company entries on the books
of the operating partner and any of its affiliated businesses. By identifying
these relationships, through inter-company mappings of accounts and other
relevant objects, SAP JVA automates processing of inter-company joint venture
transactions.
Balanced Books By Venture
Balanced books by venture allows you to produce balanced financial
statements on a venture by venture basis. If a document without balancing-
entries-by-venture is posted to the joint venture ledger, the data capture
process creates an inter-venture booking, to balance the document by venture.
SAP JVA Functions
© SAP 2007 / Page 27
Bank Account Switching
Bank account switching is common practice outside North America. Large
ventures are funded from one or more dedicated venture bank accounts.
Depending on the venture, SAP JVA determines the bank account from which
an invoice is paid. SAP JVA also produces correspondence, notifying the bank
to make all required transactions for the movement of cash between accounts.
In addition, bank account switching produces all required settlement
documents, and can calculate all applicable interest.
Audit Support
Audit support allows you to give non-operating partners detailed accounting
transaction records in an electronic format to assist transaction audits. These
records are based on operator-defined selection criteria and can be restricted at
multiple levels. JADE requirements are also supported.
Multi Company Code
Range of company codes per selection & Output enhancements
SAP JVA Functions
© SAP 2007 / Page 28
A JOA is a contract between venture partners that specifies the following:
Operator of well, property, project
Partners and working interests
Associated ventures
Allowable overheads and their treatment
Non-consent penalty percentages
Definitions
Interests
Joint Operating Agreement (JOA)
© SAP 2007 / Page 29
EG3
C75 % 25%
Venture A
EG4
EG1
33 1/3
EQTYPE 1
Engineering
Design
EG6
B
25%
A25 %
C
25 %
D
EG2
25%
BA
50 %
D
25 %
EG5
EQTYPE 2
Construction
EQTYPE 3
Production
B
A
33 1/3
C
33 1/333 1/3
B
A
33 1/3
C
33 1/333 1/3
25%
BA
50 %
C
25 %
25 %
A
2002
2003
2004
Ventures associate
Equity Types and Equity
Groups to define a specific
joint operation or purpose
SAP JVA Business Objects: Venture, ET, EG
2002 – 2004 2005 - 2007 2007….2027..Joint Venture Life Cycle
© SAP 2007 / Page 30
Operated (no tax)
Operated by the company managing SAP JVA
You cannot assign a tax code to this type of venture
Operated (with tax)
Operated by the company managing SAP JVA
You can assign a tax code to this type of venture
Non-Operated
The company managing SAP JVA holds a non-operated venture share
This company is billed by the operator for its share of venture expenses
Non-Operated On-Billing
The company managing SAP JVA sells part of its non-operated share of the venture to third parties
Corporate Venture
The company managing SAP JVA holds a 100% interest
SAP JVA Business Objects: Five Venture Types
© SAP 2007 / Page 31
.
A
EG3
C
75 % 25%
Venture A
EG1
33 1/3
EG2
25%
BA
50 %
D
25 %
Valid
EQTYPE 2
Construction
B
A
33 1/3
C
33 1/333 1/3
33 1/3
3
EG4
EG5
B
A
C
33 1/333 1/
25%
BA
50 %
D
25 %
EG6
B
25%
A25 %
C25 %
D
25 %
A
EG3
C
75 % 25%
Venture A
EG1
33 1/3
EQTYPE 1
EngineeringDesign
EG2
25%
BA
50 %
D
25 %
Valid
EQTYPE 2
Construction
EQTYPE 3
Production
B
A
33 1/3
C
33 1/333 1/3
3
EG5
B
A
33 1/3
C
33 1/333 1/
EG4
25%
BA
50 %
C
25 %
EG6
B
25%
A25 %
C25 %
D
25 %
New Processing Plant
A
A
Cost centre
Project
Construction Project
EQTYPE 3
Production
EQTYPE 1
Engineering / Design
Joint Venture Integration with Cost Objects
© SAP 2007 / Page 32
Cost Center
PM Order
Internal Order
Project Prod Order
VentureAssetPlant
1 2
Joint Venture Integration with Cost Objects
© SAP 2007 / Page 33
Cost Object
Production
Order
Network
Order
Plant
Maintenance
Order
Project Cost centre Internal Order
Joint Venture
Equity Type
Recovery Indicator
JV Object Type
JIB/JIBE Class
JIB/JIBE Subclass A
Joint Venture Coding for Cost Objects
© SAP 2007 / Page 34
Identifies category of a joint venture transaction
Indicates whether a particular expense is shared by venture partners
Used to select data for reporting to venture partners
Used to distinguish between joint and own expenditures
Default (Corporate)
Cost Object
G/L Account & Cost
Element
Document Type
User Entry
MMCOFI
Recovery indicator assignment & determination:
Recovery Indicator
© SAP 2007 / Page 35
Accounting
Interface
Special
Ledger
Interface
AM
MMFI
PS
COSD
HR
PM
Accounting Document
Itm Account Cost Obj. Amount
1 Vendor -117.50
2 Cost 1 CC-1 60.00
3 Cost 2 CC-2 40.00
4 Tax 17.50
JV Interface
Joint Venture Document
Itm Account Cost Obj. AmountVenture EqG RI
1 Vendor CC-1 - 70.50JVI001 A01 BI
1 Vendor CC-2 - 47.00JVI002 A01 BI
2 Cost 1 CC-1 60.00JVI001 A01 BI
3 Cost 2 CC-2 40.00JVI002 A01 BI
4 Tax CC-1 10.50JVI001 A01 BI
4 Tax CC-2 7.00JVI002 A01 BI
JV DATA
JVT01
BILLING
JVT02
CUSTOM
DATABASEFI DATA
GLT0
PP
Joint Venture Integration and Interface
© SAP 2007 / Page 36
Post Vendor Invoice
Accounting Doc
The expenses are assigned to the JV partners via the cost object assigned to the expense line items
JV Document
Cost Centre Assignment
Joint Venture Vendor Invoice Posting
- Example
© SAP 2007 / Page 37
Asset Master
Vendor Invoice
JVA derives venture coding for an asset using the cost
centre entered on the asset master record
Asset Document
JV Document
Joint Venture Asset Posting - Example
© SAP 2007 / Page 38
Goods ReceiptMM Assignments
JVA derives venture coding for material movements from a special stock cost object that is
assigned to a plant and a valuation type (which is optional) associated with the plant.
Accounting Doc
Material Document
JV Document
JV Document
Joint Venture Material Posting - Example
© SAP 2007 / Page 39
Foreign Currency Valuation
Cost Transfers
Cost Allocation & Settlement
Overhead Calculations (PCO)
Equity Adjustments
Cutback
Joint Venture Close
Partner Netting Final Settlement
Corporate Close
Billing
Periodic Processes
© SAP 2007 / Page 40
Cost allocations are based on R/3 CO functions with JVA required enhancements,
including:
Substitution of the recovery indicator (recovery indicator manipulation)
Allocation of secondary costs
Re-run of settlement
Cost Object B
Materials
Mail & Carriage
Telecoms
Entertaining
12Hotels
8Travelling
Repairs & Servicing
Vehicles
Light & Heating
Rent & Rates
Staff Salaries
80External Labour
40Internal Labour
140Total
Distribution (through original cost element)Internal CO only
Cost Object B
140Assessment A
Materials
Mail & Carriage
Telecoms
Entertaining
Hotels
Travelling
Repairs & Servicing
Vehicles
Light & Heating
Rent & Rates
Staff Salaries
External Labour
Internal Labour
140Total
Allocation (via secondary cost element)Internal CO only
Cost Object A
- 350Assessment A
Materials
Mail & Carriage
Telecoms
Entertaining
30Hotels
20Travelling
Repairs & Servicing
Vehicles
Light & Heating
Rent & Rates
Staff Salaries
200External Labour
100Internal Labour
0Total40%
Unallocated Costs
40%
Assessments & Distributions
© SAP 2007 / Page 41
Farm-In / Farm-Out
A partner joins or leaves a venture
Redetermination
Partner shares are adjusted to reflect changes in business conditions, such as
reserves
Funding Currency Change
A funding currency is added or removed from a venture
Current and prior period equity adjustments handled
30%
27%
43%
Operator Partner A
Partner B
Equity Changes & Adjustments
© SAP 2007 / Page 42
Suspense functionality supported for:
Partner Suspense
Equity Group Suspense
Project/WBS Element Suspense
Specific costs are not charged to a venture but instead posted to suspense
accounts for the duration (year & period) a project remains in suspense
Selection
GBU1Company Code
Venture JV0001 JV9999to
Project Suspense
Posting
2002Fiscal Year
12Period
31.12.2002Posting Date
Options
Test run
Set project in suspense Post Costs
Accounting Document
Itm Account Cost Obj. Amount1 O'head Admin - 50.00
2 O'head CC-1 50.00
Joint Venture Document
Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB
2 O'Head CC-1 50.00JVI001 A01 BI
Joint Venture Document
Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB
2 O'Head CC-1 50.00JVI001 A01 BI
3 O'Head CC-1 0JVI001 A01 BS
JVA Project Suspense
Suspense Processing
© SAP 2007 / Page 43
Stepped Rate Rule
1%
2%
5%
GBP 10 000
GBP 0
GBP 250 000
International – Parent company overhead
US/Canada – Well related allocations
OverheadCost
GBP 10 000 GBP 500
GBP 140 000 GBP 2 800
Overheads
© SAP 2007 / Page 44
Cutback
Venture A
EG2
Company Code
50 % Partner B
25 %
Partner D
25 %
AR / AP
Partner D
25
ET1
AR / AP
Partner B
25
Gross
Net
The cutback process
allocates JV partner’s
expenses or revenues
according to their
working interest ownership.
Operating
Exp / Rev
50
Operating
Exp / Rev
100
RI = Bill
Cost Object
Venture A
Cutback Processing
© SAP 2007 / Page 45
Equivalent to down payments or pre payments
Can be issued for future months (Reclassification)
Request and cash receipts carried forward to billing process
Integrated with Accounts Receivable and Accounts Payable
Venture JV0001 EqG A01 FCurr NOK
Partner FCurr Amt Lcurr Amt
JVGBU1 600.00 46.74
JV5001 300.00 23.37
JV5101 100.00 7.79
Partner Shares
Cash Call Request:
FIDocument
Cash Call
Gross to venture/project
Net to venture/project/partner
Accounts
Rec.- Cash
Calls
Partner A
600
Accounts
Rec.- Cash
Calls
Partner B
300
Accounts
Rec.- Cash
Calls
Partner C
100
Cash Call Processing
© SAP 2007 / Page 46
JV Billing
Ledger
Billing
Statement
Exp. Suppl
Expenditure Detail
Inv. SupplDetail
Invoice
Internal Allocations
…
Costs
Orders
Payroll
Vendor Invoices
Accounts Receivable
JV Summary
Ledger
Cutback
JV Integration Mgr.
Cash Calls
Paid Cash Calls
Partner Payments
Cutback Invoice
Partner Adjustments
…
JV Billing creates
various customized
billing documents to
send to your JV
partners
JV Integration Mgr.JV Integration Mgr.
Joint Venture Billing
© SAP 2007 / Page 47
CO
To Affiliate:INVOICE
FIDocument
Cash Call
Affiliated Inter-Company Setup
Cutback creates A/P
entries to operator on
the books of the affiliated
partner as configured in
SAP JVA and SAP FI
Gross cash calls create
A/P entries on the books of
the affiliated partner,
as defined in configuring
SAP JVA and SAP FI
Cutback
Intercompany
Processing
Cash Calls
FI
A/P
Inter-Company Ventures
© SAP 2007 / Page 48
Stock help corporate or per venture
Stock prices
Moving average charged to venture and operator
Current replacement price (CRP) invoked to add stock handling fee
Plant or valuation definition
CompanyCompany
Inventory atMovingAverage
Price
CompanyCompany
Proj/Asset atMovingAverage
Price
Joint Venture Billing
CRP
Plant to Cost Center, Order, Project, Asset
Joint Venture Billing
CRP
Material Management Features
© SAP 2007 / Page 49
Gross billable/all by venture/account
Gross billable/all by cost object
Gross billable/partner net by cost object
Gross billable/all by cost object foreign currency
Gross billable/partner net for JIB
Remaining cutback by cost object
Posted suspense overview
Gross non-operated by cost object
Venture/equity group/billing indicator
Partner/billing indicator
Standard JVA Reports:
Billing Reconciliation Extract:
Reconciliation
Ledger 4B and 4D
JVA Billing
BalancesLedger 4A and 4C
JVA Balances
Statement
Exp. Suppl
Expenditure Detail
Inv. SupplDetail
Invoice
JV Partner Auditing
© SAP 2007 / Page 50
Online transaction for incoming invoices for non-operated ventures
Input forms, defined in JVA configuration, control the layout of the input
screens
Input form includes the SAP coding block information (account, cost object,
asset)
Incoming cash calls are handled with the cash call functions
Non-operated venture processing is fully integrated with SAP
accounts payable functions
Invoice
Cash Call
R/3Accounts
Payable
Non-
operating
net share
Non-Operating Ventures
© SAP 2007 / Page 51
Main Features
Balanced books by venture
Venture specific bank accounts v. central disbursement account
Funding currency defined for each venture
Bank reconciliation and switching
Exchange differences for each venture
Cash and Banking
© SAP 2007 / Page 52
“Our routines are undoubtedly more efficient and the accuracy of our accounting has increased since we started using SAP Joint Venture Accounting (JVA). Where previously it could take two days to produce a monthly statement of accounts, it now takes half that time and the data is of a much higher quality.Obviously, this means considerable cost savings for Statoil.”
Kjell-Petter Gilje
Statoil ASA
Statoil ASA is one of the world’s
largest offshore oil and gas
companies, and has substantial
international operations. Statoil
has a presence in 28 countries,
and is one of the world’s largest
net sellers of crude oil. The
company plays a leading role on
the Norwegian continental shelf.
As either producer or operator it
is involved in 20 oil and gas
fields, totalling 150 licences.
Statoil has been a publicly listed
company since 2001.
Statoil saves time and money with SAP‟s Joint Venture
Accounting
www.statoil.com
SA
P fo
r O
il &
G
as
Success Story: Statoil, Norway
© SAP 2007 / Page 53
Integrates with FI, MM, and AM, which streamlines workflow and
greatly reduces errors
SAP JVA is the only SAP solution that allows you to track venture
expenditures on a venture by venture and partner by partner basis.
SAP JVA allows you to view venture information in real time, not just
at period end.
Provides complete drill down capability for reporting all ventures, all
authorization for expenditures (AFEs) tied to JOA, overhead analysis,
cutback, and billing on a venture-by-venture basis.
Ensures full compliance with all standard overhead methods and
calculations (US and international)
Key Benefits of SAP JVA
© SAP 2007 / Page 54
Thank you!
© SAP 2007 / Page 55
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