Taxonomy

Taxonomy is a science of classification based on a predetermined system. The taxonomy classification considers the importance of separating elements of a group into subgroups that are mutually exclusive and unambiguous. In LN, to add additional reporting structure (taxonomies), you can define different taxonomies such as IFRS, GAAP, or a company specific taxonomy.

The taxonomy can be shared across the financial companies in a group company. The Chart of Accounts (COA) can also be shared, if required. However, if a chart of accounts is shared, it is recommended to also share taxonomy.

Sharing the Chart of Account

If the COA is shared across companies, the related accounts must be part of each Taxonomy. Account ID’s must also be defined for each taxonomy. Consequently, a mapping must be defined for every account in the COA.

Note: Even if a COA is shared and the specific ledger account is available for specific companies, you can create a company specific taxonomy.

After the company specific general ledger accounts are mapped to an account ID, there can be instances wherein general ledger accounts are not mapped to IDs. These general ledger accounts are not used in the company, but can cause the failure of the consistency check that is performed by the LN. The taxonomy can only be used if all general ledger accounts are mapped. To handle this situation, you must map all the unused general ledger accounts to a dummy account. In the report, the amount in the dummy account is printed as zero. LN maps all the unmapped general ledger account automatically to the Account ID. This automatic mapping is performed only on ledger account level.

Chart of Accounts not shared

When the COA is not shared or partly shared, you must define the companies for which a taxonomy is created. This is required to check if all the ledger accounts are available in the taxonomy. However, the check is only applicable for companies defined in the Companies per Taxonomy (tfgld1173m000) session.

Taxonomy setup

Defining the taxonomy: You can define taxonomy in the Taxonomies (tfgld1170m000) session. The reporting type for the taxonomy is identified with a Taxonomy name, Version and Description. The Status field indicates if a taxonomy can be used for reporting purposes. You can also set the accounting scheme to Statutory, Complementary or both in the Dual Accounting Indicator field.

Define the Taxonomy Companies: You can define a company for a taxonomy in the Companies per Taxonomy (tfgld1173m000) session. If the All Companies check box is not selected in the Taxonomies (tfgld1170m000) session, you must define at least one company. This company must be a subset of the financial companies for each group of companies.

Define the Accounting Structure: You can define accounting structure for taxonomy in the Taxonomies Accounts (tfgld1171m000) session. You can define the Account ID, Sublevel and Account Type in this session. The sublevel (hierarchy) identifies the position in the parent/child structure. Only taxonomies for which the Sublevel is 0, can be mapped to the general ledger accounts. To print a structured list, a Parent Account must also be defined for each Account ID. You can also use Mapping Details check box to view the account for which the mapping is defined. You must clear this check box to view the unmapped accounts. You can use the View Tree option (Generic Browser Framework) to provide user insight in the Taxonomy. The mapping can also be started from the GBF.

Define the mapping: You can use the Mappings by Taxonomy Account (tfgld1172m000) to map the taxonomy with the general ledger account. The mapping can be performed by defining a range of Company , Ledger Account and To Dimension.

Status of the Taxonomy

The various status of the taxonomy are:

Initial draft

When the taxonomy is defined in the Taxonomies (tfgld1170m000) session, the Status of the taxonomy is set to Draft.

Validate

You can use the Check Taxonomy option in the Taxonomies (tfgld1170m000) session to validate if all the accounts with sublevel 0 are mapped. LN performs these validation checks:

  • All ledger accounts must be available in the new taxonomy. The dimensions are not considered for this check. However, if dimensions are considered, LN logs an error. The accounts for which the Text check box is selected in the Taxonomies (tfgld1170m000) session, are not checked.
  • LN checks if the account type of the taxonomy element matches the account type and debit/credit indicator of the mapped general ledger account. If not, a warning message is displayed. The accounts for which the Text check box is selected in the Taxonomies (tfgld1170m000) session, are not checked.
  • LN checks if the general ledger account is assigned to more than one Taxonomy account ID.
    • If dimensions are not used, and a ledger account is assigned to more than one account ID an error message is displayed. You must resolve the error to set the taxonomy Status to Active.
    • If dimensions are used, the account ID to be used for the ledger account must be based on the dimensions. In this situation, a warning message is displayed. However, this warning can be ignored.

You can also use the Check Validated Taxonomy using History option in the Taxonomies (tfgld1170m000) session to access the Check Validated Taxonomy using History (tfgld1270m100) session. This session allows you to check the taxonomy based on the range defined for the Taxonomy, Version, Fiscal Year, Ledger Account, and so on.

Activate

After the checks, if there are no errors identified and warnings are accepted, the taxonomy Status can be set to Active and taxonomy can be used for reporting.

Checking an Active Taxonomy

You can perform a check for an active taxonomy using the Check Taxonomy option in the Taxonomies (tfgld1170m000) session to check an active taxonomy. If an error occurs due to a missing ledger account, an error message is printed on the report.

Closing a Taxonomy

If a taxonomy is no longer used, because a new taxonomy is created or the current one contained errors, the taxonomy Status can be set to Closed. A closed taxonomy can be archived and/or deleted.

Consistency of an active Taxonomy

Even after a taxonomy is defined and activated, the account structure can be modified. If a new general account is added, this account is not part of a taxonomy and therefore the taxonomy is considered as inconsistent.

  • Using the unassigned account: If the Unassigned Account check box is selected in the Taxonomies Accounts (tfgld1171m000), all the transactions, not mapped to an existing Account ID are grouped. If the reports display an amount for the unassigned account, it indicates that the mapping is not completed. The reason:
    • The general ledger account is added when the taxonomy is already active. The validation is already performed for the active taxonomy, therefore, the general ledger account is not mapped.
    • The mapping is performed using a range of dimensions. New dimensions can be added, therefore, dimension ranges are missed when setting up the Taxonomy mapping.

Archiving

To archive or delete, a taxonomy, the taxonomy Status must be set to Closed.