SAP Joint VentureAccounting (JVA)

? SAP AG 2004

Oil & Gas Solution MapSuppliers &

PartnersCustomers& Channels

Exploration &Appraisal

Development &Production

HydrocarbonSupply & GasTransmission

Refining &Manufacturing

PrimaryDistribution

TerminalManagement

SecondaryDistribution

CommercialSales & Retailing

UpstreamExploration and Appraisal

E&P Contract ManagementLiquid and Gas ProductionAllocation and Settlement

Supply, Transmission & TradingBulk Supply Chain Planning and OptimizationBulk Supply Chain Operations and SchedulingBulk Supply Chain Execution and SettlementBulk Supply Chain Reporting and AnalyticsPhysical Oil and Gas Commodity Trading

Oil and Gas Paper Trading and Risk Management

Refining & ManufacturingRefining Operations

Lubes Manufacturing Operations

Sales Planning and Account Management

Hydrocarbon Products Transportation

Downstream Marketing & RetailingMarketing Planning and Execution

Opportunity to CashCustomer Service

Terminal Management

Service Station Fuel ManagementConvenience Retailing

Enterprise Asset and Service ManagementInvestment Planning, Design & Construction

Sourcing & ProcurementMaintenance Operations and Logistics

Enterprise Management & SupportAnalyticsFinancials

Human Capital ManagementCorporate ServicesOperations Support

? SAP AG 2004

? 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 ormore non-operating partners, who combine monetary or personnel

resources to share a projects expenses and revenues.

? The operator manages the venture, arranges venture activities, andmaintains 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 SAP JVA?

? SAP AG 2004

? SAP designed JVA especially for joint venture operations.

? SAP JVA captures all expenditures and other joint venture transactions byusing 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, SAPensures that JVA facilitates efficient management of joint ventures.

What is SAP JVA?

? SAP AG 2004

? SAP JVA is the only SAP solution that allows you to track ventureexpenditures on a venture by venture and partner by partner basis.

? SAP JVA allows you to view venture information in real time, not justat period end.

? Using proven SAP FI-Special Ledger functionality as its basis, SAPJVA ensures accurate calculations and reporting of venture activities

on a venture-by-venture basis.

Why SAP JVA?

? SAP AG 2004

? 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 AG 2004

? 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 AG 2004

Joint Venture Data Capture

? Captures and codes all transactions, including vendor invoices, inventory movements andallocations, 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 AG 2004

Allocations

? Distributes billable and non-billable costs (such as facility, payroll, and related expenses) tocost centers or projects throughout the allocation cycle

Multi-Currency Processing

? Supports the multi-currency needs of typical venture activities

SAP JVA Functions

? SAP AG 2004

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 occursat 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 orsome other unscheduled disruption.

Equity Adjustment

? Equity adjustment covers several business processes that require the creation of new equitygroups and different handling for historical cost. SAP JVA equity adjustment capabilitiesprovide functions that cover farm-in, farm-out, and re-determination, facilitating prior-periodand pre-cutback equity changes.

Joint Venture Billing

? Joint venture billing allows you to invoice partners for expenditures and revenues, and toissue cash calls. You can send different levels of supporting information with the invoice.

SAP JVA Functions

? SAP AG 2004

Partner Netting

? Partner netting allows you to calculate the sum of a partners open expenses and cash callswithin the venture to a single residual entry of outstanding expenses. You can then post thatentry to the partners accounts receivable account for billing.

Asset and Material Transfer

? Asset and material transfer capabilities allow you transfer assets and materials to jointventure 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 profitinterest to a non-operating partner, and to set up a carried interest arrangement, ifnecessary.

SAP JVA Functions

? SAP AG 2004

Non-Operated Ventures

? Non-operated venture processing facilitates integrated handling of incoming, non-operatedinvoices with SAP accounts payable functions. You can record these invoices online. Inaddition, cash call features are available for non-operated ventures at the venture andproject level.

Inter-Company Functions

? Inter-company functions allow you to book inter-company entries on the books of theoperating partner and any of its affiliated businesses. By identifying these relationships,through inter-company mappings of accounts and other relevant objects, SAP JVAautomates processing of inter-company joint venture transactions.

Balanced Books By Venture

? Balanced books by venture allows you to produce balanced financial statements on aventure by venture basis. If a document without balancing-entries-by-venture is posted tothe joint venture ledger, the data capture process creates an inter-venture booking, tobalance the document by venture.

SAP JVA Functions

? SAP AG 2004

Bank Account Switching

? Bank account switching is common practice outside North America. Large ventures arefunded from one or more dedicated venture bank accounts. Depending on the venture, SAPJVA determines the bank account from which an invoice is paid. SAP JVA also producescorrespondence, notifying the bank to make all required transactions for the movement ofcash between accounts. In addition, bank account switching produces all requiredsettlement documents, and can calculate all applicable interest.

Audit Support

? Audit support allows you to give non-operating partners detailed accounting transactionrecords in an electronic format to assist transaction audits. These records are based onoperator-defined selection criteria and can be restricted at multiple levels. JADErequirements are also supported.

SAP JVA Functions

? SAP AG 2004

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 AG 2004

JVA Business Objects: Venture

EG3

C75 % 25%

Venture A

EG4

EG1

33 1/3

EQTYPE 1Engineering

Design

EG6

B25%

A25 %

C25 %

D

EG2

25%BA

50 %D

25 %

EG5

EQTYPE 2

ConstructionEQTYPE 3

Production

B

A33 1/3

C33 1/3

33 1/3

B

A33 1/3

C33 1/3

33 1/3

25%BA

50 %C

25 %

25 %

A

2002

2003

2004

Ventures associateEquity Types and EquityGroups to define a specificjoint operation or purpose

? SAP AG 2004

? 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 AG 2004

Equity types connect equity groups to joint ventures

January February March April May June July August September October November December

Joint Venture 1Joint Venture 1

Equity Group A

Equity Type: DEV

01012003

Equity Type: PRO

Equity Group B

Equity Group C

2003

08012003

07012003

Equity Definitions

? SAP AG 2004

.

A

EG3

C75 % 25%

Venture A

EG1

33 1/3

EQTYPE 1

EG2

25%BA

50 %D

25 %

Valid

EQTYPE 2

ConstructionEQTYPE 3

Production

B

A33 1/3

C33 1/3

33 1/3

33 1/3

3

EG4

EG5

B

A

C33 1/3

33 1/

25%BA

50 %D

25 %

EG6

B25%

A25 %

C25 %

D25 %

A

EG3

C75 % 25%

Venture A

EG1

33 1/3

EQTYPE 1Engineering

Design

EG2

25%BA

50 %D

25 %

Valid

EQTYPE 2

ConstructionEQTYPE 3

Production

B

A33 1/3

C33 1/3

33 1/3

3

EG5

B

A33 1/3

C33 1/3

33 1/

EG4

25%BA

50 %C

25 %

EG6

B25%

A25 %

C25 %

D25 %

New Processing Plant

Design

Joint Venture Integration with Cost Objects

A

A

Cost centre

Project

Construction Project

? SAP AG 2004

Cost Center

PM Order

Internal Order

Project Prod Order

VentureAsset Plant

1 2

Joint Venture Integration with Cost Objects

? SAP AG 2004

Cost ObjectCost Object

Joint Venture Coding for Cost Object

ProductionOrder

NetworkOrder

PlantMaintenance

Order

Project Cost centre Internal Order

Joint Venture

Equity Type

Recovery Indicator

JV Object Type

JIB/JIBE Class

JIB/JIBE Subclass A

? SAP AG 2004

Recovery Indicator

Identifies category of a joint venture transaction

Indicates whether a particular revenue or expense is shared byventure partners

Used to select data for reporting to venture partners Used to distinguish between joint and own revenues and

expenditures

Recovery indicator assignment & determination:

Default(Corporate)

Cost Object

G/L Account &Cost Element

Document Type

User Entry

MMCOFI

? SAP AG 2004

Joint Venture Integration and Interface

AccountingInterface

SpecialLedger

Interface

AM

MMFI

PS

COSD

HR

PM

Accounting Document

Itm Account Cost Obj. Amount1 Vendor -117.502 Cost 1 CC-1 60.003 Cost 2 CC-2 40.004 Tax 17.50

JV Interface

Joint Venture DocumentJoint Venture DocumentItm Account Cost Obj. AmountVenture EqG RI1 Vendor CC-1 - 70.50JVI001 A01 BI1 Vendor CC-2 - 47.00JVI002 A01 BI2 Cost 1 CC-1 60.00JVI001 A01 BI3 Cost 2 CC-2 40.00JVI002 A01 BI4 Tax CC-1 10.50JVI001 A01 BI4 Tax CC-2 7.00JVI002 A01 BI

JV DATAJVT01

BILLINGJVT02

CUSTOMDATABASE

FI DATAGLT0

PP

? SAP AG 2004

Joint Venture Vendor Invoice Posting - Example

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

? SAP AG 2004

Asset Master

Joint Venture Asset Posting - Example

Vendor Invoice

JVA derives venture coding for an asset using the costcentre entered on the asset master record

Asset Document

JV Document

? SAP AG 2004

Goods Receipt

Joint Venture Material Posting - Example

MM Assignments

JVA derives venture coding for material movements from a special stock cost object that is assigned toa plant and a valuation type (which is optional) associated with the plant.

Accounting Doc

Material Document

JV Document

JV Document

? SAP AG 2004

Periodic Processes

Foreign Currency Valuation

Cost Transfers

Cost Allocation & Settlement

Overhead Calculations (PCO)

Equity Adjustments

Cutback

Joint Venture Close

Partner Netting Final Settlement

Corporate Close

Billing

? SAP AG 2004

Assessments & DistributionsCost 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 & CarriageTelecomsEntertaining

12Hotels8Travelling

Repairs & ServicingVehiclesLight & HeatingRent & Rates

Staff Salaries

80External Labour40Internal Labour

140Total

Distribution (through original cost element)Internal CO only

Cost Object B

140Assessment A

Materials

Mail & CarriageTelecomsEntertainingHotelsTravellingRepairs & ServicingVehiclesLight & HeatingRent & RatesStaff SalariesExternal LabourInternal Labour

140Total

Allocation (via secondary cost element)Internal CO only

Cost Object A

- 350Assessment A

Materials

Mail & CarriageTelecomsEntertaining

30Hotels20Travelling

Repairs & ServicingVehiclesLight & HeatingRent & RatesStaff Salaries

200External Labour100Internal Labour

0Total

40%

Unallocated Costs

40%

? SAP AG 2004

? 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

Equity Changes & Adjustments

? SAP AG 2004

Suspense Processing

? Suspense functionality supported for:? Partner Suspense? Equity Group Suspense? Project/WBS Element Suspense

? Specific costs are not charged to a venture but instead posted tosuspense accounts for the duration (year & period) a project remainsin 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 DocumentAccounting Document

Itm Account Cost Obj. Amount1 O'head Admin - 50.002 O'head CC-1 50.00

Joint Venture DocumentJoint Venture Document

Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB2 O'Head CC-1 50.00JVI001 A01 BI

Joint Venture DocumentJoint Venture Document

Itm Account Cost Obj. AmountVenture EqG RI1 O'Head Admin - 50.00C00001 A01 NB2 O'Head CC-1 50.00JVI001 A01 BI3 O'Head CC-1 0JVI001 A01 BS

JVA Project Suspense

? SAP AG 2004

Overheads

? International Parent company overhead? US/Canada Well related allocations

OverheadCost

Stepped Rate Rule

1%

2%

5%GBP 10 000

GBP 0

GBP 250 000

GBP 10 000 GBP 500

GBP 140 000 GBP 2 800

? SAP AG 2004

Cutback

Venture A

EG2

Company Code50 % Partner B

25 %

Partner D25 %

AR / AP

Partner D25

ET1

AR / AP

Partner B25

Gross

Net

The cutback processallocates JV partners'expenses or revenuesaccording to theirworking interest ownership.

OperatingExp / Rev

50

OperatingExp / Rev

100

Cutback Processing

RI = BillCost Object

Venture A

? SAP AG 2004

Cash Call Processing

? 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

AccountsRec.- Cash

CallsPartner A

600Accounts

Rec.- CashCalls

Partner B300

AccountsRec.- Cash

CallsPartner C

100

? SAP AG 2004

JV BillingLedger

Billing

JV Integration Mgr.

StatementExp. Suppl

ExpenditureDetail

Inv. SupplDetail

Invoice

Joint Venture Billing

InternalAllocations

Costs

Orders

PayrollVendor

Invoices

AccountsReceivable

JV SummaryLedger

Cutback

JV Integration Mgr.Cash Calls

Paid CashCalls

PartnerPayments

CutbackInvoice

PartnerAdjustments

JV Billing createsvarious customizedbilling documents tosend to your JVpartners

JV Integration Mgr.

? SAP AG 2004

COTo Affiliate:

INVOICE

FI

A/P

FIDocument

Cash Call

Affiliated Inter-Company Setup

? Cutback creates A/P entriesto operator on the books ofthe affiliated partner asconfigured in SAP JVA andSAP FI

? Gross cash calls create A/Pentries on the books of theaffiliated partner, asdefined in configuring SAPJVA and SAP FI

Inter-Company Ventures

Cutback

IntercompanyProcessing

Cash Calls

? SAP AG 2004

Enterprise

Business

AssetAssetManagementManagement

PurchasingPurchasing& Supply& Supply

MM

Management

Support

HumanHumanRes. PayrollRes. Payroll

HR ProjectsProjectsPS

BusinessBusinessPlanningPlanning ControllingControlling

Finance &Finance &AccountingAccountingIM FICO

Regulatory Information Data Warehouse Non-RegulatedInformationInformation

ManagementManagement

NetworkProvisioning

ServiceDelivery

RevenueManagementNetwork Provisioning

PSPM

QM

EC

AssetTransfers

GoodsIssues

Cutback

PP JointVenture

Accounting

PartnerBilling

Asset and Material Movements

JVAJVAMMAM

FIAM

? SAP AG 2004

? 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

Joint Venture Billing

CRP

CompanyCompanyInventory at

MovingAverage

Price

CompanyCompanyProj/Asset at

MovingAverage

Price

Joint Venture Billing

CRP

Plant to Cost Center, Order, Project, Asset

Material Management Features

? SAP AG 2004

JV Partner Auditing

? 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 4DJVA BillingBalances

Ledger 4A and 4CJVA Balances

StatementExp. Suppl

ExpenditureDetail

Inv. SupplDetail

Invoice

? SAP AG 2004

? 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

Non-Operating Ventures

InvoiceInvoiceData Entry

Transaction

Cash CallCash CallCas

h Call

Transact

ion

R/3

AccountsPayable

Non-operatingnet share

? SAP AG 2004

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 AG 2004

? Integrates with FI, MM, and AM, which streamlines workflow and greatlyreduces errors

? Supports joint audit data exchange (JADE) reports, online and in real time,reducing audit headcount, time, and expense

? Ensures full compliance with all standard overhead methods andcalculations (US and international)

? Provides complete drill down capability for reporting all ventures, allauthorization for expenditures (AFEs) tied to JOA, overhead analysis,

cutback, and billing

Key Drivers:

Maximize Assets, Minimize Overhead

SAP JVA Business Benefits

? SAP AG 2004

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