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Capitalizing Complex Capital Projects Effortlessly with Oracle Project Portfolio Management Cloud Session ID: 11189

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Capitalizing Complex Capital Projects Effortlessly with Oracle Project Portfolio Management Cloud Session ID: 11189 Capitalizing Complex Capital Projects Effortlessly with Oracle Project Portfolio Management Cloud Session ID: 11189 Prepared by: Sumit Wasuja Vijay Dhanapal Deloitte Consulting LLP Remember to complete your evaluation for this session within the app! April 10, 2019 Presenter Sumit Wasuja Photo Manager Deloitte Consulting LLP San Francisco Sumit is an Oracle Cloud and JDE functional Consultant with over 11 years of experiencing designing, implementing and supporting financial processes. • Industries: Oil & Gas, Healthcare, Consumer, Technology, Healthcare • Processes: Record to Report, Procure to Pay, Order to Cash, Project Accounting, & Fixed assets • Oracle Financials Cloud Certified Implementation Specialist Presenter Vijay Dhanapal Photo Manager Deloitte Consulting LLP Houston Vijay is an Oracle Cloud and EBS Financials & PPM Functional Consultant with over 14 years of experience in designing solutions for customer requirements in Account to Report, Order to Cash, Procure to Pay, Acquire to Retire and Project to Close processes • Chartered Accountant from ICAI • PMP® Certified • Oracle PPM/Financials/SCM Cloud Certified Implementation Specialist • Presented Oracle Fusion Financials & PPM Capabilities in Oracle Open Word 2014 • Presented Oracle Financials Consolidated Invoicing solution in Collaborate16 • Presented Oracle Cloud PPM Suite Shared Service Cost Allocation solution in Collaborate17 Agenda • Executive summary • Illustrative case study • Business challenges • AFE Best Practices • Functional Solution • Solution Limitations • Conclusion • Q&A Executive Summary • Executing mega capital project with billions of dollars in spend typically requires Authorization for Expenditures (AFEs) to be structured as delivery teams. • While this approach has some advantages from overall project delivery/execution standpoint, it can cause further complexities such as: – The project structure does not align with the resulting asset to be capitalized such as buildings, plants etc. – The resulting assets will be placed in service at different times requiring partial capitalization of the AFEs – As the projects are structured as functions, all the projects will continue to receive costs and stay open for the duration of the project. • Session objectives: – Discuss best practices for setting up AFE cost code structure – Discuss best practices to streamline project close and asset capitalization – Discuss various project cost allocation strategies and their implications An illustrative case study Cons. Direct CONSTRUCTION 3% of total direct General Services costs AFE budget Area A is 9% of Engineering ENGINEERING total ENG AFE Allocation Power Plant Budget (Asset) OWN 10% of the 16% of Infra AFE Construction constructions Budget 36% of Infra AFE OWN Infra Budget OWNERS COST 7% of total direct OWN Shared costs AFE budget Inherits 5% ENG OWN Engineering allocation 10 Business challenges • Project/AFE structure not aligned to Fixed Assets • AFEs open for a long period of time • Use of spreadsheets to track and estimate asset costs • Accruals/late invoicing require changes to asset cost and depreciation AFE WBS structure – best practices Effective coding structure Ineffective coding structure ( Classic triangle) (Diamond shape) AFEs setup by discipline without defined deliverables (procurement, engineering) AFE levels Issue: AFEs might need to AFE levels stay open for a long time, causing concern for control Task levels and budget Task levels Lower cost code level Contracting set of references delivery package Level 1 deliverables Approach should be to have an AFE refer Issue: Difficult to manage discrete scope of fork for a particular period reclass of cost to assets (i.e. Asset class/ Ownership/time) Functional Solution Oracle Cloud PPM – Capitalizing Complex Project Solution Process Flow Manage Project Definition Manage Project Costs Process Business Business Define Define Define Define Define Define Rate Capitalizable Project Expenditure Transaction Costing Schedules Project Type Templates Types Sources Rules Project Project Administrator Create Capital Define Assets Assign Assets Project Project Creator Project Approve Capital Project Project Project Manager Run Create Periodic Periodic Capture Capital Event Labor Costs Program Transfer Update Asset Capture Place Asset in Event Generate Asset Details New Asset Processing None Details from Material Service Asset Lines to Fixed Method? Fixed Assets Costs Import and Assets Process Is asset Already placed Capitalizable in service? Costs Create Capital Capture Events manually Manual Usage Costs Existing Asset by grouping Project Accountant Project assets and costs Capture Miscellaneou s Costs Post Assets/ Additions in Fixed Assets Asset Accountant Asset Functional Solution (Setup) Capitalization Options • Start from the project type and define project templates • Determine the project organization (hierarchy) • Setup project types • Configure capitalization options – Cost Type: Option to capitalize Raw Cost or Burdened Cost Project Type – Asset Line Grouping Method: Create asset lines by grouping cost transactions at different levels such as by Expenditure Type, Expenditure Category, etc. – Asset Cost Allocation Method: Actual Units, Current Cost, Estimated Cost, Spread Evenly and Client Project Extension – Event Processing Method: Periodic, Manual and None Functional Solution (Transact) • Create project and inherit setup values from project templates created for the specific project type • Define assets and assign them either at the project level or task level Manage Project Budget • Capture cost and flag them as capitalizable using Manage Project transaction controls and other setup options • Capitalize assets when they are ready to be placed in Manage Project Costs service • Create capital events as necessary by grouping eligible Manage Capital assets assets and costs • Generate asset lines by grouping costs based on asset line Monitor Project Performance grouping method and allocate costs to assets appropriately using asset cost allocation methods • Transfer asset/asset line details to Oracle Fixed Assets Cloud and post asset/asset lines/additions Solution Limitations • Additional Design and Development efforts to leverage client extension • PaaS services are required to build custom solution • IaaS services are required if the custom logic requires a custom table to maintain data Conclusion • Oracle Cloud PPM Suites offers wide range of functionalities to structure projects, define the level at which the activities and associated costs can be capitalized. • The approach to determine the WBS structure and asset capitalization varies across industries, size of the project and other factors such as local regulations. • However, it is important to decide the capitalization strategy at the time determining the project organizational hierarchy. [email protected] [email protected] Session ID: 11189 Remember to complete your evaluation for this session within the app!.
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