The Wonderful World of Oracle HFM

Alternate Hierarchies
by Eduardo Abaricia on February 28th, 2017 | 3 minute read

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In an Oracle Hyperion Financial Management (HFM) application, you can always create alternate hierarchies. We have created them for
Entity, Accounts, and any of the custom dimensions. The guideline is always when the consultants leave, the HFM administrator must be
able to efficiently maintain the application and meet the company’s management information and reporting needs. Create alternate
hierarchies if you need them, not because you can.

When creating alternate hierarchies bear in mind that:

1. The base members of the alternate hierarchy and the main hierarchy are one and the same. You are just rearranging the same base
members to meet different management information needs. For example, if any property of a base entity in the alternate hierarchy is
changed, the same base entity in the main hierarchy is also changed.

2. Elimination occurs when the base entities with intercompany balances meet at the first common parent. Since the first common parent will
be different in an alternate hierarchy, the hierarchical level where the elimination occurs will be different but the amounts to be eliminated
remain the same.

3. The main hierarchy must be in place before the alternate hierarchy is created.

Most of the main hierarchies reflect either the legal ownership or the management reporting structure of base entities. Common alternate
hierarchies are used for geographical reporting where base entities are grouped based on their geographical locations, territorial groupings
where entities are grouped based on assigned territorial management responsibility, and regulatory reporting where entities are grouped to
facilitate regulations and loan covenant compliance reporting.

One of our clients required an alternate currency reporting. USD is their default currency but they acquired a group of companies where the
functional currency is GBP. Management reporting requires that they see their numbers both in USD and GBP. Besides, the newly acquired
entities need to continue fulfilling their reporting requirements in GBP. The main entity hierarchy used USD as default currency for all its
parent entities. We created an alternate hierarchy where the parents are in GBP. Considering that intercompany balances are eliminated
using parent currency it is important to consistently use the same currency for all parents within the hierarchy.

We have also created alternate hierarchies for custom dimension. One of our clients have products that belong to a product family which
belong to product segments which belong to divisions. However, product segments are assigned to different managers, thus the need for
alternate hierarchy for product segments.

HFM has a lot of functionalities that can be harnessed to meet management information needs. One of many HFM functionalities is the use
of alternate hierarchy.
Does it take forever to get through the monthly and quarterly close? Do you have
to twiddle with the reports each time to get them ready for review? Does it make
you wish you had a different job? If you answered "yes" to any of these questions,
you are not alone. We've talked with hundreds of finance organizations who consistently
struggle with Hyperion Financial Management (HFM) and their month end close
processes. We've also helped hundreds of finance organizations improve the functions
of consolidation and close, budgeting and planning, and financial analytics.

You may wish you’d spent more time cleaning up your Chart of Accounts (COA) or
streamlining the way you currently do things when your Hyperion Financial
Management (HFM) application was implemented. But don’t quit your job; we have
some tips to make the consolidation, close close and reporting process much easier. If
you haven’t implemented HFM yet, some of these suggestions will be simpler to apply
than if you are going to undergo an upgrade. In either case, you will reap the benefits of
spending some quality time with your Hyperion app to work out the kinks in your
consolidation and reporting process.

Here are six suggestions for enhancing your consolidation reporting experience:

1. Add reporting subtotals to your COA within

HFM.
Most Enterprise Resource Planning (ERP) systems (your General Ledger or Data
Warehouse) tend not to include subtotals in their metadata structure, relying instead on
their reporting tools to pull and subtotal the data for you. You pull the GL trial balance
into HFM and are thrilled to see everything populate in. Now you pull the data down into
a SmartView and find you must insert subtotals in Excel.

The subtotals only live in your SmartView, but you are happy because you get to work
with data that is clean and accurate. Management is happy because they get good
quality data. The process speeds up a bit, and perhaps you must build a few more
reports. This is where things can get a bit tedious. You must now set up report views
for different departments: as in direct expense vs. overhead, which drives customized
report builds, reducing the ability for others to easily use or maintain these reports.

But, why not go into the COA metadata and insert subtotals, so that the system
will automatically calculate them? We recommend you pull both the subtotals and the
lowest level data into a SmartView, or FRS (Financial Reporting Studio), and the
subtotals will be delivered automatically calculated. You can revise reporting much
faster and more accurately if you insert the subtotals you will need into HFM’s Chart of
Accounts.
2. No standard Chart of Accounts within HFM?
Back away from the application! DO NOT allow various COAs into your HFM accounting
application. It looks like it could work: building several different charts of accounts into
your consolidation application, but reconciliation of the data will become a nightmare.
You will need to agree on a common chart of accounts for HFM, and map external
COAs to it. End of story.

3. Instead: Create alternate hierarchies to enable

a roll-up of members from the same shared
hierarchy.
Want to display the same data several different ways? One easy way to accomplish that
is to set up alternate hierarchies within the same roll-up. The shared member alternate
hierarchy refers to non-shared members of previous hierarchies in the metadata outline,
and these shared members can support different formulas. Uses of alternate hierarchies
typically include direct and indirect cost reporting, the capture of a subset of accounts
within a roll-up, or the elimination of several accounts from a roll-up (EG: Roll-up #1: A
+ B + C + D = Total. Alternate Roll-up: A + B + D = Alt Total).

Interested in moving HFM to the cloud? Get a cloud-

readiness assessment to understand the pros and cons
of a financial consolidation cloud service.

4. Want dynamic reporting and the ability to

gather and report the most recent data and
metadata changes?
Of course you do! To accomplish that, you must structure the dimensions to enable
dynamic reporting. For example, if you build EBITDA into your account structure, then
you can quickly and easily see the build-up of accounts on a report or worksheet.
Another example: logically structure your departments with reporting in mind, and
dimension structure will automatically drill down. Then when you open a report that
allows dynamic refresh, the report will include the new dimension member(s) you just
inserted. This makes reporting effective and efficient.
 5. Don’t replicate the consolidation process you
have today in the consolidation application
without a vigorous discussion first.
If you are contemplating a new consolidation system implementation, replicating the
processes you have today without a healthy discussion of what should change, be
added or deleted is a recipe for a headache down the road. Talk to your accounting and
consulting teams, and work up a list of things you’d like to see changed or improved.
Doubtless just implementing a system would help with most of your pain-points, but in
this case, the devil is in the details.

 Look at current reports. Is there anything you’d like to change?

 Look at data you’d like to have in your report but is not there today. Can it be added to the
system without bogging down the whole works?
 Look at reports you wanted to build, but never had the time.
 Look at processes you perform manually and see if the new application can automate some of
them for you.

6. Make sure you have a game plan for

reporting.
Ask these questions: What important information do your business leaders review to
determine where the company should be heading? Determine how the data is
structured today, and line that up with current reporting needs. Ask upper management
what they have today versus what they would like to have.

A game plan should include a road map of “What – Who – How – Where”.

 What – what reports are to be considered “Standard” – reports that you encourage everyone to
have access to. The outline, format and information delivered will always be the same – such as
an Operations P&L.
 Who – who should be able to access these reports? Do you want to allow team members to
create their own reports? Do you want them to help build the reporting library?
 How – how should these reports be built? In FRS (Financial Reporting Studio)? In SmartView?
On the Web?
 Where – where should these reports be stored and accessed? For how long should they be
kept? Who will be responsible for archiving old reports?

There are other aspects to the road map that can be included during discussion, but in
general, these questions tend to center around What, Who, How and Where.

Strafford has extensive experience with Hyperion Financial Management (HFM), both
on-premises and in the Cloud. Our consultants have all held Finance positions, so they
know your pain, and they understand how HFM can make things better. We are ready
to help you with roadmaps, implementation, cloud hosting, training, and knowledge
transfer.