Financial Period Close Process

Overview

This article provides an overview of the Fiscal Period closing process and explains some related aspects of the system.

The Period-end closing process is also the Financial Year-end closing process. From a user's perspective, with one exception (see Reopening a closed Year, below), there is no procedural difference between closing a Period or a whole Fiscal Year; when the last period (Period 12) of the Fiscal Year is closed, the Fiscal Year is closed.

  IMPORTANT  The user who performs this function must be authorized for the Company being closed and all its parents, if any. This authorization is performed on the Financial System User Company page.

Terminology
 

Fiscal Year

The Fiscal Year object contains the definition of each Year's accounting calendar, including:

• Period start and end dates.

• Each Period's closing status. The hierarchy of closing statuses is as follows:

1. Closed to AP postings and Closed to AR postings. These are optional checkboxes. If checked for a Period, they prevent AP and AR transactions from being posted to the Period. Closed to Postings (next) will also prevent this. Closed to AP postings and Closed to AR postings allow the AP and/or the AR to be closed while allowing other postings to continue.

2. Closed to Postings is a checkbox that blocks all postings to the Period from all sources other than Journal Entries, UFX, and Fixed Assets. Closed to Postings is set (and unset) in the Process Initial Closing step (see below).

3. Closed for Adjustments is a checkbox that blocks all postings to the Period, including postings from Journal Entries, UFX, and Fixed Assets. It can only be checked if Closed to Postings has been previously checked. Once it is checked, the Period is closed. Closed for Adjustments is set in the Complete Financial Period Close step (see below). Closed for Adjustments is unset in the Reopen Financial Period step (see below).

Permuted Version of GL Account Year object
 

This object contains all the financial and Budget data used by the Financial Report Writer for consolidated and unconsolidated reports.

Closing Profile object
 

The Closing Profile contains information about the progress of the close:

• The Company's calculated earnings for the current period.

• If the Company is participating in a multicurrency consolidation:

  • The calculated Balance Sheet rate.

  • The calculated P&L rate.

  • The calculated Cumulative Translation Adjustment (CTA).

• Other data that enforces the correct order of closing activities.

One Closing Profile is created for:

• Each Company to be closed.

• Each combination of each Company to be closed and each of its higher-level parents.

Navigation
 

Header Section
 

Fields
 

Company:  This displays the user’s current Financial Company.

Fiscal Year:  This drop-down field displays the Fiscal Years of the Company.

Period:  This drop-down field displays the currently open Fiscal Periods of the selected Fiscal Year.

Process Initial Closing:  When checked, this closes the Period to all postings except Journal Entries, UFX, and Fixed Assets.

Initialize Financial Period Close:  When checked, this creates Closing Profile(s) (GLCLOSE records).

Perform Financial Data Rollup:  When checked, this performs the Financial Report Data Roll-up with the 'Company' as both the Subsidiary Company and the Reporting Company.

Perform Financial Data Rollup to Parent Company:  When checked, this performs the Financial Report Data Roll-up with the 'Company' as the Subsidiary Company and the associated Parent Company as the Reporting Company. And the Roll-up is also run for the Grand Parent Company (if it exists) as the Reporting Company.

Initialize GL Transaction Parent Company Values:  When checked, this performs the Update GL Transaction Consolidated Values function with the 'Company' as the Subsidiary Company and the associated Parent Company as the Reporting Company. And also run for the Grand Parent Company (if it exists) as the Reporting Company.

  NOTE  When the Period is selected and (1) the selected company is standalone, by default, the system will enable and check these checkboxes  'Process Initial Closing', 'Initialize Financial Period Close', 'Perform Financial Data Rollup'. (or) (2) if the selected company has any parent, by default system will enable and check all the following checkboxes 'Process Initial Closing', 'Initialize Financial Period Close', 'Perform Financial Data Rollup', 'Perform Financial Data Rollup to Parent Company', 'Initialize GL Transaction Parent Company Values'.

Complete Financial Period Close:  When checked, the system will show a warning and ask for confirmation to close the period, and if approved, this completes closing the selected Period. If it's Period 12, the Fiscal Year will be closed.

Reopen Financial Period:  When checked, the system will show a warning and ask for confirmation to reopen the period, and if approved, this reopens the selected Period that is closed. When this process is executed for a Period, the Period's 'Closed for Adjustments' flag is unchecked in the Fiscal Year object.

Buttons
 

Show Unposted Transactions:  Click this button to view the unposted 'Journal Entries', 'Accounts Payable Transactions', 'Accounts Receivable Transactions', 'Cash Receipt Transactions', 'AP Payment Transactions' for the selected 'Fiscal Year' and 'Period'. This opens a pop-up with the below tabs to display the unposted transactions:

• Journal Entries tab:  This tab displays the unposted Journal Entries records (GLJH) that belong to the selected 'Company', 'Fiscal Year', and 'Period'.

• Accounts Payable Transactions tab:  This tab displays the unposted Payable Session records (APINVH) that belong to the selected 'Company', 'Fiscal Year', and 'Period'.

• Accounts Receivable Transactions tab:  This tab displays the unposted Receivable Session records (ARINVH) that belong to the selected 'Company', 'Fiscal Year', and 'Period'.

• Cash Receipt Transactions tab:  This tab displays the unposted Cash Receipts records (ARCASHH) that belong to the selected 'Company', 'Fiscal Year', and 'Period'.

• AP Payment Transactions tab:  This tab displays the unposted Payment Selection records (PAYSESSION) that belong to the selected 'Company', 'Fiscal Year', and 'Period'.

• Deposit Transactions tab:  This tab displays the unposted Deposit Entries records (DEPOSIT) that belong to the selected 'Company', 'Fiscal Year', and 'Period'.

UFX Run:  Click this button to open the UFX Run page and run the UFX for the company. After the run, the ‘UFX Posted for Period’ is checked in the corresponding GLCLOSE record.

  NOTE  This button is visible when the flag 'Multi Currency Indicator' is checked on the 'Company' record.

Perform Selected Processes:  Click this button to process the Period Close/reopen based on the values specified in the Header Section.

Closing Profiles Grid (GLCLOSE records)

When the 'Fiscal Year' is selected in the Header Section, the GLCLOSE records associated with that Year and Period (if any) will be displayed with the details for the fields 'Financial Period Close', 'Fiscal Year', 'Reporting Company', 'Currency' (Currency of the Reporting Company), 'Subsidiary Company', 'Currency' (Currency of the Subsidiary Company), 'Subsidiary Company Period', 'Rollup Needed', 'Parent Values on GL Transactions Updated', and 'UFX Posted for Period'.

Processing
 

Period closing steps

Below are the steps for closing a Period:
 

1. Process Initial Closing:  When the user checks this flag, the selected Period's 'Closed to AP Postings' 'Closed to AR Postings' and 'Closed to Postings' flags are checked in the Fiscal Year object. If the Period is already closed to postings and the 'Process Initial Closing' is checked again, the system will show a warning and ask for confirmation to reopen the period and if approved, the Period is reopened to postings. Any Closing Profiles created in a previous Step 2 (Initialize Financial Period Close) are deleted. And the  'Closed to Postings' flag is unchecked in the Fiscal Year object.

2. Initialize Financial Period Close:  When the user checks this flag, this initializes the Closing Profile (see above in Terminology). One Closing Profile is created for the Company being closed, and if that Company has one or more Parent Companies, additional Closing Profiles are created for each higher-level Parent Company.

Override Budget Exchange Rate:  The Budget Exchange Rate can be overridden by setting the field 'Budget Exchange Rate Is Overridden' value to true. When it is set to true, the field 'Override Budget Exchange Rate' is enabled for the user to enter the overridden rate, and the system will automatically update the 'Budget Exchange Rate Overridden On' and 'Budget Exchange Rate Overridden By' values.

The user can optionally set the 'Budget Exchange Rate Equals GL Rate' value to true. Doing this doesn't affect the budget rates, calculated or overridden, as they are displayed. However, the rates used to translate budget records will be the regular GL balance sheet and P & L rates, whether these are calculated or overridden.

  NOTE  The field 'Budget Exchange Rate Is Overridden' is enabled only if the field 'Subsidiary Has Budget Records' is true.

Override Balance Sheet Rate:  The Balance Sheet Rate can be overridden by setting the field 'Balance Sheet Rate Overridden' value to true. When it is set to true, the field 'Balance Sheet Rate As Overridden' is enabled for the user to enter the overridden rate, and the system will automatically populate the 'Balance Sheet Rate Overridden On' and 'Balance Sheet Rate Overridden By' values.

Override P & L Rate:  The P & L Rate can be overridden by setting the field 'P & L Rate Overridden' value to true. When it is set to true, the field 'P & L Rate As Overridden' is enabled for the user to enter the overridden rate, and the system will automatically populate the 'P & L Rate Overridden On' and 'P & L Rate Overridden By' values.

3. Perform Financial Data Rollup & Perform Financial Data Rollup to Parent Company: When the user checks these flags and clicks the Perform Selected Processes button, this will gather all the data required for financial reporting, which includes General Ledger (GL) data, budget data, and data from Adjusting Statement Entries and make it available to the Financial Report Writer. In a consolidated close (in which many Companies' data appears on a single Company's reports), this will require copying data from one Company to another. In a multicurrency consolidated close (in which the Companies being consolidated use more than one Reporting Currency), this will also require currency translation. Additionally, this process calculates each Company's current earnings for the month and, where currency translation occurs, their Cumulative Translation Adjustment (CTA) as well. After the rollup is done, the 'Rollup Needed' checkbox on the GLCLOSE record will be unchecked.

  NOTE  The custom setting 'Exclude_ZerothPeriod_Calculation' determines whether the Period 0 values are included in the Cumulative Translation Adjustment (CTA) calculation. By default, this custom setting value is set to False. When set to True, the Period 0 values are excluded from the Cumulative Translation Adjustment (CTA) calculation.

The Financial Report Data Roll-up process will be run as mentioned in the Three Levels of Complexity section below. If new Journal Entries are posted for the Period being closed or Budgets for the Period are changed after it has been run, the Perform Financial Report Data Roll-up process must be run again by checking the flags 'Perform Financial Data Rollup' & 'Perform Financial Data Rollup to Parent Company'. If the Company being closed is to have its accounts translated into one or more parent Company reporting currencies, the translation step is automatically performed during the Perform Financial Report Data Roll-up process. Users who wish to see the details of the weighted average P & L rate calculation and the Balance Sheet rate retrieval can use Salesforce Reports to examine the glpdexchrate object.
 

4. Initialize GL Transaction Parent Company Values: When the user checks this flag, this will execute the 'Update GL Transaction Consolidated Values' job to update the Subsidiary Company's GL Transactions with certain Parent/Grand Parent Company values. This flag is enabled only when the displayed Reporting Company is the Subsidiary Company's Parent Company.

  IMPORTANT  In an org, only one 'Update GL Transaction Consolidated Values' job can be executed simultaneously. Users can check the System Configuration Financials record to determine whether the 'Update GL Transaction Consolidated Values' process is currently running or not. The record also provides information about the start time and end time of the process in GMT.

If 'GL_Transaction_XL' is False: 

When the Initialize GL Transaction Parent Company Values flag is checked,

• if the Subsidiary Company's Currency and Parent Company's Currency are different, the system will retrieve the Exchange Rate for each GL Account in the Subsidiary Company for this processing period and will update the Parent Company fields ('Credit Amount in Parent Company Currency', 'Debit Amount in Parent Company Currency', and 'Exchange Rate to Parent Company Currency') on the Subsidiary Company's GL Transactions. Also, the GL Transactions in the Subsidiary Company will be rolled up and the GL Transaction Summary records will be created in the Parent Company, and the amount will be calculated in the Parent Company's Currency. Then, the created GL Transaction Summary's will be updated in the field 'Parent Company GL Transaction Summary' on the corresponding Subsidiary Company's GL Transactions.

• if the Subsidiary Company's Currency and the Parent Company's Currency are the same, the Subsidiary Company's GL Transactions will be rolled up and the Parent Company's GL Transaction Summary records will be created. Then, the created GL Transaction Summary's will be updated in the field 'Parent Company GL Transaction Summary' on the corresponding Subsidiary Company's GL Transactions.

  NOTE  When closing the Period 1 with 'Initialize GL Transaction Parent Company Values' flag checked, the system will also update the Exchange Rate on Period 0 GL Transactions from any of the below options:

• Using the Exchange Rate on the GL Transaction belongs to period 12 of the prior year.

• Using the Exchange Rate on the Foreign Exchange Rate Schedule (with Schedule Type 'Month End Spot Rate') for the period 12 of the prior year.

• Using the Exchange Rate on Period 1 when there are no transactions done in the prior year.

  NOTE  When the Initialize GL Transaction Parent Company Values flag is selected (regardless of the 'GL_Transaction_XL' value), the 'Division', 'Project', and 'Dimension(s)' fields in the Parent/Grand Parent Company GL Transaction Summary records will be populated with the corresponding Parent/Grand Parent values of the 'Division', 'Project', and 'Dimension(s)' on the Subsidiary GL Transaction record(s).
 

  NOTE  If there is a variance in the amount (i.e., 0.01) between the Subsidiary and the Parent,

• When the custom setting 'GL_Transaction_XL' is False, the system creates a Rollup Related Adjusting GL Transaction (GLTZN) record of Source 'SUM2TXN' for the variance amount. Then it will be added to the respective Parent Company's GL Transaction Summary record.
• And if the custom setting is True, the system creates an additional GL Transaction Summary record in the Parent Company for the variance amount.

5. Complete Financial Period Close:  When the user checks this flag, the system will show a warning and ask for confirmation to close the period, and if approved, this sets the Period's Closed for Adjustments flag (see above) to true on the Fiscal Year. (This is also known as a Hard Close.) At the Fiscal Year end, it also

• Moves the current Year's earnings to the Prior Years' Retained Earnings GL account.

• Sets the next Fiscal Year's opening balances (see Period 0 below).

Closed Period reopening Steps

To reopen a previously closed Period other than 12, follow the steps below:

• Select the GLCLOSE record for the period you want to reopen from the Closing Profiles grid.

• Check the 'Reopen Financial Period' flag and click the Perform Selected Processes button.

• The system will show a warning and ask for confirmation to reopen the period, and if approved, this reopens the selected Period that is closed. When this process is executed for a Period, the Period's 'Closed for Adjustments' flag is unchecked in the Fiscal Year.

• Before reopening period 12, the 'All Periods Closed to Adjustments' flag on the Fiscal Year year must be unchecked manually.

• Select the GLCLOSE record for the period 12 you want to reopen from the Closing Profiles grid.

• Check the 'Reopen Financial Period' flag and click the Perform Selected Processes button.

• The system will show a warning and ask for confirmation to reopen period 12, and if approved, this reopens the selected Period 12 and its year that is closed. When this process is executed for Period 12, the Period's 'Closed for Adjustments' flag is unchecked in the Fiscal Year.

Three Levels of Complexity

There are three levels or degrees of complexity in closing Periods. The complexity of the operations performed by the closing process depends on (1) whether the Company being closed participates in an inter-company consolidation and (2), if it does, whether the consolidated financial reports require currency translation. Every Company falls into one of these three levels. For the most part, the degree of complexity is hidden from the user who performs the Period Close activities. It is explained here only so users will understand what the closing process is doing.
 

Simplest:

Standalone, non-consolidated Companies. One Company is closed and is not consolidated with any others. In this scenario, there is only one Financial Company in the Rootstock system or multiple Companies that do not consolidate. There are no consolidated Financial Reports because there is no consolidation.

Sample simple Company structure:
 

• Company A is a standalone Company.

• During Company A's Period close, when the user checks the flag 'Perform Financial Data Rollup', the Perform Financial Report Da ta Roll-up process is run only once, with Company A as both Parent and Subsidiary.

Medium complexity Structure:

Consolidated Companies that all share the same Reporting Currency. A Company's financial results will be combined with those of other companies, but all companies participating in the consolidation report their results in the same Currency. Therefore, no Currency translation is performed during the Period Close.
 

Sample medium-complex Company structure:

High-level sequence of closing and reopening
 

Periods must be closed in Year + Period sequence and reopened in the reverse of the order in which they were closed. Examples:

• If Period 3 is open, Period 4 may not be closed.

• If Periods 3 and 4 are closed, Period 3 may only be reopened if Period 4 is reopened first.

• It makes little difference whether the Periods in question cross Fiscal Years:

  • If Period 12 of Year 1 is open, Period 1 of Year 2 may not be closed.

  • If Period 12 of Year 1 and Period 1 of Year 2 are closed, Period 12 of Year 1 may only be reopened if Period 1 of Year 2 is reopened first.
    
      NOTE  However, even if Period 1 of Year 2 is open, Period 12 of Year 1 may not be reopened until the All Periods Closed to Adjustments flag on the Fiscal Year object for the Year being reopened (which was checked automatically when the Year was last closed) is manually unchecked.

Fiscal Year
Foreign Exchange Rate Schedule
GL Historical Rates
Financial System User Company