Funding revaluation allows you to periodically revalue your project funding, taking into account the effects of currency fluctuations between funding and project functional currency. Companies operating in a multi currency environment, with fixed price contracts, typically require that project funding amounts reflect the fluctuations in the currency exchange rate by:

• Revaluating project funding prior to revenue and invoice processing by:

  • Considering currency fluctuations between funding and functional currency on funding backlog

  • Creating funding adjustment lines in functional currency

• Including foreign exchange gains and losses (FXGL) for paid invoices on project revenue

• Auditing the revaluated funding amounts and components, and reprocess revaluation as needed

Revaluate Funding

Before generating revenue and processing invoices, funding is revalued to determine the total available funding on a project and to ensure that invoices are generated in accordance with the hard limits set. To revaluate funding, you run the following concurrent programs:

• PRC: Revaluate Funding for a Single Project

• PRC: Revaluate Funding for a Range of Projects

Projects are included in the concurrent programs and eligible for revaluation based on the following criteria:

• The project level option Revaluate Funding is enabled

• It is a contract project with baseline funding

• The project has no unreleased draft revenue or invoices

• The project has no unbaseline revaluation adjustment funding lines - applicable only for the PRC: Revaluate Funding for a Range of Projects process.

  Note: The PRC: Revaluate Funding for a Single Project process will delete the unbaseline revaluation adjustment funding lines, and the realized currency gains and losses events, which are created by an earlier run.

Funding Revaluation Components

The Funding Revaluation process includes the following components:

• Backlog

• Paid Invoices

• Unpaid Invoices

• Realized Gains and Losses

To view the detailed components used in the Funding Revaluation process, you run the audit report AUD: Revaluated Funding Audit Report.

Funding Backlog

The Revaluate Funding process first determines the current project funding backlog amount. Project funding backlog is the remaining project funding available to be billed to the customers. The funding backlog subject to revaluation is the total baseline funding amount less invoices issued to customers, both paid and unpaid.

After deriving the funding backlog amount, the Funding Revaluation process calls the Funding Revaluation Factor client extension. The Funding Revaluation Factor client extension allows you to apply a funding revaluation factor to the funding backlog amount. This extension can be used to implement escalation indices defined for a contract. The factor can increase or decrease the funding backlog amount subject to revaluation and is applied to the funding backlog amount in the funding currency. The funding revaluation rate is applied to the funding backlog amount to derive the revaluated backlog amount in project functional and invoice processing currency.

The process then creates a net funding adjustment line with the funding line classification "Revaluation" in the project functional currency. The process adjusts the current value of project funding available for revenue and invoice processing. If you have the option "Baseline Funding Without Budget" enabled, you can automatically create a baseline for the funding adjustments and update the budgets as part of the revaluation process. If this option is not enabled, you must adjust the budgets and create a baseline for the funding adjustments manually after revaluating funding.

To enable funding revaluation for a project you must check the Revaluate Funding check box when you set up your project types and projects.

Include Foreign Exchange Gains And Losses (FXGL)

You can optionally include gains and losses for paid and unpaid project invoices, in the Funding Revaluation process. The process calculates the foreign exchange gain or loss (FXGL) associated with the project and agreement, and adjusts project revenue accordingly. The gain or loss will increase or decrease the revenue for the project but will not affect the unbilled receivables or unearned revenue amounts.

To include the effects of the foreign exchange gains and losses in the project revenue, you must:

• Enable the "Funding Revaluation Includes Gains and Losses" option at the implementation, project type and project level.

• Define event types for the Realized Gains and Realized Losses event classifications in the Billing tab of the Project Types window.

• Setup the function transactions, Realized Gains Account and Realized Losses Account for the AutoAccounting function Revenue and Invoice Account.

When you setup your project or task to include billing adjustments on a standard invoice, the realized gain or loss may be calculated differently than using a credit memo due to the difference in transaction dates. When you use a credit memo, the adjusting transaction is converted using the exchange rates of the original invoice line. When you process adjustments on a standard invoice, the conversion rate of the invoice date is used. The following example describes the difference in realized gain and loss calculations:

Consider the following example of an original Standard Invoice

The following receipt was received and applied:

The realized gain or loss on original invoice is based on the following calculation:

Receipt amount (PFC) - Invoice Amount (PFC) = 435.18 - 431.00 = 4.18 (CAD)

After an adjustment, a standard invoice is generated:

The following receipt is applied to the standard invoice with the adjustment:

Realized gain or loss on original invoice would be calculated as follows:

Receipt amount (PFC) - Invoice Amount (PFC) = 85.13 - 84.28 = -0.85 (CAD)

Effective Realized Gain / Loss = 4.18-0.85 = 3.32 (CAD)

You define the invoicing adjustment option on the billing setup for a project or a top task using the Include Adjustments on Standard Invoice option.

Paid Project Invoices

When cash is applied to invoices, Oracle Receivables calculates and posts the realized gains and losses to the General Ledger currency gain and loss accounts of the operating unit. The Revaluate Funding process includes these gains and losses on paid project invoices to record the effect of the transaction as a realized gain or loss against the project revenue.

Unpaid Project Invoices

Unpaid project invoices consist of all issued project invoices less AR cash receipts. Issued project invoices include all released project invoices whether or not they have been transferred to Oracle Receivables. Though the cash applied in AR may include tax and other components as defined by the cash application rules, the revaluation process considers only the cash applied to the invoice line type "Line."

The paid project invoices are deducted from the total project invoiced to determine the unpaid project invoice amounts. The resulting unpaid project invoice amount is revalued by applying the revaluation rate.

Revaluated Funding in Project Functional Currency (PFC)

The revaluated funding in project functional currency is calculated as follows:

Total Revaluated Funding Amount in PFC = Revaluated Funding Backlog in PFC + Revaluated unpaid project invoice amount in PFC + Cash applied to project invoices in PFC + Realized Gains - Realized Losses.

The net funding adjustment in PFC = Total Revaluated funding amount in PFC - Total baseline funding amount in PFC before revaluation.

Revaluated Funding in Invoice Processing Currency (IPC)

Funding revaluation needs to be performed in the invoice processing currency to revalue the backlog in IPC to control future invoicing. The revaluated funding in invoice processing currency is calculated as follows:

Total Revaluated Funding Amount in IPC = Revaluated Funding backlog in IPC

The net funding adjustment in IPC = Total Revaluated funding amount in IPC - Prior baseline funding adjustment amount in IPC - Funding backlog in IPC before revaluation

To track your revaluation currency gains and losses differently from the unbilled receivable realized gains and loss account, you must set up function transactions called Realized Gains Account and Realized Losses Account for the AutoAccounting function Revenue and Invoice Accounts. Oracle Projects uses AutoAccounting to determine the default realized gains and realized losses accounts.

Reviewing Funding Adjustment Lines

You can view the various revaluation components of the funding adjustment line from the folder in the Funding History window. Navigate to the Project Funding Inquiry window and select an Agreement in the Summary by Agreement region. Click on the Funding History button. You can choose the various revaluation component fields to include in the folder.

Example of Funding Revaluation

Following is an example of how funding revaluation is calculated for a company whose functional currency is different from the funding currency.

In this example the company has the following agreement in place with a customer:

• The functional currency of the operating unit of the company is US Dollars (USD)

• The customer's agreement/funding is provided in British Pounds (GBP)

• Project functional currency (USD) is selected as the invoice processing currency

• Agreement funded on 01-Jan-2001

• Customer requests to be invoiced in GBP

The following table shows the billing transactions that occur during the Jan-2001 period:

Prior to generating revenue on 31-Jan-2001, the project funding in GBP is revalued in project functional currency. The currency exchange rate from GBP to USD on 31-Jan- 2001 is 1.58.

Revaluation to project functional currency on 31-Jan-2001 includes the following three components:

• Unpaid project invoice

• Project funding backlog

• Realized currency gains and losses from cash receipts applied to project invoices

The project funding requiring revaluation is determined as shown by the following table:

The following table details the total project funding amount after revaluation:

The revaluation process generates the funding adjustment line as detailed in the following table:

A new event line is created as shown in the following table:

After generating project revenue and revenue accounting events, the accounting entries for the realized loss are as follows:

Dr. Event Revenue Account 2000

Cr. Realized Losses Account 2000

Dr. Realized Losses Account 2000

Cr. Project Specific Realized Losses 2000

Other Sources

• Implementation Options, Oracle Projects Implementation Guide

• Event Types, Oracle Projects Implementation Guide

• Project Types, Oracle Projects Implementation Guide

• Project Types: Billing Information, Oracle Projects Implementation Guide

• Accounting for Revenue and Invoices, Oracle Projects Implementation Guide