IDEAS ADVANCED JOINT INTEREST BILLING

ELEARNING

TRAINING GUIDE

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Table of Contents
Course Overview ................................................................................. 4
Audience and Prerequisites ............................................................................ 4 Course Objectives ....................................................................................... 4 Agenda .................................................................................................... 4

Lesson One IDEAS JIB FEATURES .............................................................. 5

Multi-currency Feature ................................................................................. 5 Multi-currency Example ............................................................................. 5 JIB Modes ................................................................................................. 5 How to Associate Currencies with a Partner......................................................... 6 Step One: In IDEAS JIB module, access Division of Interest screen ........................... 6 Step Two: View or Select a Partners Billing Currency ......................................... 7 How to Select JIB Modes ................................................................................ 8 Step One: In IDEAS JIB module, access JIB Processing Parameters screen ................... 8 Step Two: View or Select a JIB Mode for an Entity.............................................. 9 Step Three: Define Base and Local Currency .................................................... 10 Three Currency Resolution Example .............................................................. 11

Lesson Two OWNERSHIP CONCEPTS ......................................................... 12

Insiders and Outsiders Concepts ...................................................................... 12 How to Designate an Owner (Partner) as Insider or Outsider ................................. 13 100% Interest ............................................................................................ 13 How to Set Billing Interest to 100% ............................................................... 14 Operator Carried Interest ............................................................................. 14 Intercompany Accounting ............................................................................. 15 Comprehension Exercise: JIB Features and Ownership Concepts ................................ 17 Exercise Answers..................................................................................... 18

Lesson Three JIB ACCOUNTING .............................................................. 19

Net Accounts ............................................................................................ 19 Offset Gross ............................................................................................. 19 Net Accounts Method .................................................................................. 20 Offset Gross Method .................................................................................... 21

Lesson Four CASH CALLS AND REVENUE .................................................... 22

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Cash Call Process ....................................................................................... 22 JIB Cash Call Screen ................................................................................. 23 Payment Processing .................................................................................... 24 JIB Cash Call Payment Screen ..................................................................... 24 JIB Revenue Distribution .............................................................................. 25 How to Set Up an Owner for Revenue Distribution ............................................. 26 Comprehension Exercise: JIB Accounting and Cash Calls ......................................... 28 Exercise Answers..................................................................................... 29

REFERENCE ....................................................................................... 30
JIB Screens and Functions ............................................................................. 30

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Course Overview
This eLearning course is self-paced online training. This course covers the advanced IDEAS Joint Interest Billing (JIB) topics including dual currency, ownership, JIB accounting, cash calls and revenue. Audience and Prerequisites We recommend that you take this class if you are new to IDEAS software. The prerequisite for this course is the IDEAS Joint Interest Concepts eLearning module. Course Objectives When you successfully complete this course, you will have a basic understanding of: IDEAS JIB dual currency and JIB modes Ownership concepts and how they are handled in IDEAS JIB Accounting, including net and offset gross methods, intercompany accounting and insiders Cash calls and revenue Agenda IDEAS JIB Features o Dual currency o JIB modes Ownership o Insider and outsider o Intercompany accounting o 100% owned o Operator carried interest JIB Accounting o Net accounts method and offset gross method o Intercompany accounting o Insiders Cash Calls and Revenue

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Lesson One IDEAS JIB FEATURES

Multi-currency Feature The IDEAS Joint Interest Billing (JIB) module is a dual currency billing system. Partners may be billed either in their designated base currency or their local currency. IDEAS JIB module is multi-currency. JIB processes transactions for all system currencies and resolves these currencies into one of the billing currencies (either the base currency or the partners local currency). Multi-currency Example Transactions occur in three currencies: The base currency is U.S. dollars. The partners billing currency is Columbian pesos. The third currency is Mexican pesos.

All source activities involving Columbian pesos are billed in Columbian pesos. For activities involving Mexican pesos, the Mexican pesos would be converted to U.S. dollars. All other partners would be billed in the total U.S. dollar amount. JIB Modes A JIB mode refers to the billing and journalization options available for Joint Interest Billing. Three billing options are available: Dual Currency Billing Single Currency Billing As Expended Currency Billing

In dual currency billing, all partners are billed in a designated currency, either the base currency or the local currency. The billing currency election is made for each AFE, Bill Code and owner. In single currency billing, all partners are billed in the system base currency.
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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing As Expended currency billing refers to billing in a local currency. Two bills per partner result from expended currency: 1. One bill contains all items which were transacted in local currency, 2. The second bill contains items for all other currencies converted to the base currency.

How to Associate Currencies with a Partner Step One: In IDEAS JIB module, access Division of Interest screen From the Ownership menu, select Ownership Administration.

The Division of Interest screen displays.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Step Two: View or Select a Partners Billing Currency For a specific company, AFE and bill code, view the participant owners (partners) at the bottom of the screen. The Billing Currency field displays the currency that each partner is being billed in (base or local currency).

To select a currency, click the Billing Currency text box in the owners row to view the two currency choices.

Click to select a currency from the drop-down list.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing How to Select JIB Modes Step One: In IDEAS JIB module, access JIB Processing Parameters screen From the Utility menu, select JIB Processing Parameters.

The JIB Processing Parameters screen displays.

In this screen, under Mode, the options shown refer to how it is actually journalized as opposed to how it is billed.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Step Two: View or Select a JIB Mode for an Entity For a specific entity, view the JIB Mode.

Dual Currency Billing JE Billing Currency Journalize the billing currency JE Source and Converted Currencies Journalize the source and converted currencies. The vast majority of IDEAS clients choose this option.

Single Currency Billing Single currency system Convert JIB Journals Do Not Convert JIB Journals Single currency billing is not often used by IDEAS clients. Expended Currency Billing JE Billing and Converted Currencies There is only one option for Expended currency billing.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Step Three: Define Base and Local Currency In the JIB Processing Parameters screen under Options, define what base currency is and what local currency is.

Click the Base Currency tab or the Local Currency to create the definition.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Three Currency Resolution Example In the following example, the local currency is defined as Dinars. There is also data that was converted from US dollars and data converted from Euros (EU). Local Currency Tab

The same applies to the Base Currency. Base Currency Tab

So there are three currencies (Dinars, US dollars, and Euros) but JIB is a dual currency billing system using only base or local currency for billing.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Lesson Two OWNERSHIP CONCEPTS

Ownership Issues Overview Some of the ownership issues that must be addressed in joint interest billing are managing: Insiders versus outsiders Affiliates Fiduciary partners Intercompany accounting 100% interest Operator carried interest

Insiders and Outsiders Concepts Insider A net Journal Entry is prepared for an insiders net share. Insiders do not receive a JIB billing statement. The operator is an insider. An affiliated company is a type of insider, where an owner is associated with another company but is designated to be an insider. A fiduciary partner is a type of insider and behaves the same way in the system as an affiliated company. In IDEAS the partner is set up as a company, designated as an insider, and net journal entries are prepared. As part of this owners partnership agreement, IDEAS agrees to keep their books for in-country reporting and to do all of their local reporting. This partner has no presence in the country where we are operating, so we do this on their behalf.

Outsider An outsider is a third party partner. Outsiders receive a JIB billing statement.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing How to Designate an Owner (Partner) as Insider or Outsider Use the Division of Interest screen to designate an owner as either Insider or Outsider. From the Ownership menu, select Ownership Administration.

The Division of Interest screen displays.

Under Working Interests in the Insider/Outsider field, select either Insider or Outsider from the drop-down list for that owners ID. 100% Interest For a particular company and AFE, the billing interest percent may be set to designate 100% interest. The result is that whenever transactions are processed, and this bill code is used, the transaction is designated to be that companys sole cost (100% their cost), and none of the cost would be allocated to partners.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing How to Set Billing Interest to 100% In the Division of Interest screen, select the company, AFE and bill code. Under Working Interest, for a particular owner, set the Billing Interest Percent field to one (1.0).

Operator Carried Interest Operator carried interest occurs when there are several partners whose ownership totals 100%, but the operator is not a participant. IDEAS manages this so that there is a distribution to the other partners but there is no journal entry created for the operator, because the operator has zero (0) net share.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Intercompany Accounting Intercompany relationships can be viewed in the Cutback Account Administration screen (accessed from the Utility menu).

Under the Distribution tab and then the Intercompany Accounts tab, there is a Related Entity field where intercompany relationships can be viewed or set up. For a particular entity and owner, this screen shows any related entities.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing In the example above, company 025 has a related entity 035. Entity 035 exists within the system and has been set up for JIB. The Base Currency Account and Local Currency Account fields show accounts used by 035. If we were to enter 035 at the Entity field, in the Intercompany Accounts screen we would see entity 025 under Related Entity.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Comprehension Exercise: JIB Features and Ownership Concepts 1. A JIB mode refers to the billing and journalization options available for Joint Interest Billing. True or False?

2. Which of the following billing options are available? Choose all that apply. Dual currency billing Multi-currency billing Single currency billing As expended currency billing 3. An affiliated company is a type of outsider, unlike the operator, who is an insider. True or False? 4. In a case where three or more currencies are used for transactions, IDEAS cannot handle this because it is a dual currency billing system. True or False?

5. Which of the following statements are correct descriptions for Outsiders? Outsiders receive a JIB billing statement. An outsider is a third party partner. A fiduciary partner is a type of outsider but behaves the same way in the system as an affiliated company. An affiliated company has an owner that is associated with another company and therefore is designated to be an outsider.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Exercise Answers 1. A JIB mode refers to the billing and journalization options available for Joint Interest Billing. True or False? True 2. Which of the following billing options are available? Choose all that apply. Dual currency billing Multi-currency billing Single currency billing As expended currency billing 3. An affiliated company is a type of outsider, unlike the operator, who is an insider. True or False? False. An affiliated company is a type of insider.

4. In a case where three or more currencies are used for transactions, IDEAS cannot handle this because it is a dual currency billing system. True or False? False. JIB is a dual currency billing system but it can handle multi-currencies by converting one or more of the currencies so that the billing involves a local currency or a base currency. 5. Which of the following statements are correct descriptions for Outsiders? Outsiders receive a JIB billing statement. An outsider is a third party partner. A fiduciary partner is a type of outsider but behaves the same way in the system as an affiliated company. An affiliated company has an owner that is associated with another company and therefore is designated to be an outsider.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Lesson Three JIB ACCOUNTING

In the IDEAS Joint Interest Billing system there are two accounting method options: Net Accounts Offset Gross

Net Accounts Net Accounts method is most commonly used by IDEAS clients. This method records the operators net share in separate net accounts. JIB calculates the net amount as the operators working interest times the gross cost. This amount is booked into net accounts. Net Accounts method calculation: Gross Cost Operators interest Net Amount Offset Gross Offset Gross method is used very rarely. Very few IDEAS clients use offset gross. The offset amount is calculated by multiplying the non-operators interest times the gross cost. The offset amount is then multiplied by -1. Therefore, the offset amount when combined with the gross amount yields the operators net share. JIB calculates the net amount as the nonoperators working interest times the gross cost (times 1). Offset Gross method calculation: Gross Cost Non-Operators interest Offset Amount $1,000 65% $ (650) $1,000 35% $ 350

The gross is booked into one database segment and the offset amount is booked into a separate database segment as a negative. To see the net, the two values are added together. In other words, because the offset amount has been multiplied by -1 (negative one) to change it to a negative, this is the same as subtracting the offset amount from the gross amount to give the net amount.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing In summary, using the offset gross amount, net amount reports are prepared by adding the offset amount to the gross costs. Net Accounts Method In the following example, the distribution account is where the net share is stored. The Accounts Receivable amount is the amount that goes to partners. The cutback entry is a credit amount that offsets the gross costs. Journal Entry Distribution Accounts (1) Accounts Receivable Cutback Account (2) Debit (for operators net share) Debit (for partners share) Credit (for gross amount)

(1) Distribution Accounts are the detailed expense accounts in which the Operator's net share is recorded (2) The Cutback Account is a contra account which offsets the gross cost in order to prepare net book reports. In this example, the gross and the cutback amounts net out (balance to 0). Example Gross Cost Operator Share Partner Share $1000 80% 20% Credit $800 $200 $1000

Journal Entry: Debit Distribution Accounts Accounts Receivable Cutback

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Offset Gross Method With this method, the journal entry is different because a cutback is not done. Journal Entry Accounts Receivable Distribution Accounts Debit (for partners share) Credit (amount which offsets gross cost to determine net)

Example Gross Cost $1000 Operator Share 80% Partner Share 20% Journal Entry Debit Distribution Accounts Accounts Receivable $200

Credit $200

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

Lesson Four CASH CALLS AND REVENUE

A cash call is a request from the operator to the owners (partners) for advance payment. There is an IDEAS form used to enter the cash call amount. JIB then produces the cash call invoices to send to the owner. When payments are received back from the owner, these are recorded. When the JIB process is run, those payments are applied to the JIB balance. Last, the owner is sent a net JIB invoice that reflects the cash call payment made. Note: It is important to understand that with cash calls, just because a cash call invoice is sent out, this does not automatically offset their JIB balance. They must send in the payment and it must be applied before their balance changes. Cash Call Process 1. Enter Cash Call Amount in JIB. 2. Send Cash Call Invoice to Owner. 3. Record Owner Payment. 4. Apply Payment against JIB balance. 5. Send Net JIB invoice to Owner.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing JIB Cash Call Screen The Cash Call screen is used to set up a cash call by entering data for that owner such as the AFE, bill code, cash call amount and invoice date.

Based on the bill code, the owner allocations are determined according to who the owners are and what their allocated interest percents are. The Allocated Interest field shows the amount the operator is requesting from the partners. An interest amount is not shown for the operator, because an operator would not send a cash call to itself.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Payment Processing The IDEAS JIB module provides the following features for processing the revenues received from a cash call: Automatic Payment distribution On Account Balances

JIB automatically calculates the payment distribution. If the cash call is overpaid, the overage is not applied to that JIB, but is carried forward to a subsequent JIB. JIB Cash Call Payment Screen The Cash Call Payment screen handles data entry of payments received for an owner and shows payments, allocations and balances. In the example below there is only one AFE, however, if there were multiple AFEs and multiple cash calls sent, JIB allocates the payments to the AFEs. This is a feature that automates the allocation of cash call payments, however, you can override the automatically assigned allocations.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing JIB Revenue Distribution The following diagram shows an example of set up for revenue distribution. This statement shows that the owner has a credit, with the total due shown as a negative, so the operator owes the owner that amount ($189,500.00). IDEAS then automatically generated an invoice in Accounts Payable (AP) for the amount the operator owes this owner. The operator will then send the owner a JIB statement and a check for the revenue distribution. 1.1.1.1 Revenue Distribution Diagram

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing How to Set Up an Owner for Revenue Distribution From the Joint Interest Billing module Ownership menu, select Ownership Administration.

In the Ownership Administration screen, select the Revenue Distribution check box for that owner.

Enter the AP Vendor ID for the owner. Note: Previously you must set up a vendor ID in Accounts Payable.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Additionally, you must complete some accounting information for the Cash Call Account and Revenue Distribution Account fields in the JIB Cutback Account Administration screen.

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Comprehension Exercise: JIB Accounting and Cash Calls Complete the blank cells in the following table, using the table in the Reference section as a guide.
SCREEN /FIELD FUNCTION
View or select billing currency for an owner for a particular AFE and bill code. JIB Processing Parameters View or select a JIB mode for an entity. Define what Base currency is and what Local currency is. Designate an owner as either Insider or Outsider. Set the billing interest percent to one (1.0) resulting in 100% interest. The result is that when a transaction occurs for this particular company, AFE and billing code, none of the cost is allocated to partners. Cash Call Enter payment amounts for cash calls and view allocations or override automatic allocations. Ownership Administration

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing Exercise Answers

SCREEN /FIELD
Division of Interest

FUNCTION
View or select billing currency for an owner for a particular AFE and bill code. View or select a JIB mode for an entity. Define what Base currency is and what Local currency is. Designate an owner as either Insider or Outsider. Set the billing interest percent to one (1.0) resulting in 100% interest. The result is that when a transaction occurs for this particular company, AFE and billing code, none of the cost is allocated to partners. Set up a cash call for a particular company, currency, period, AFE and bill code. Enter payment amounts for cash calls and view allocations or override automatic allocations. Set up an owner for revenue distribution.

JIB Processing Parameters JIB Processing Parameters Division of Interest Division of Interest

Cash Call Cash Call Payment Ownership Administration

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IDEAS ELEARNING TRAINING GUIDE Advanced Joint Interest Billing

REFERENCE
JIB Screens and Functions The following table summarizes the functionality of the JIB programs (screens) discussed in this training guide.

1.1.1.2 IDEAS JIB Screens and Functions Table

SCREEN /FIELD
Division of Interest

FIELD
Billing Currency

FUNCTION
View or select billing currency for an owner for a particular AFE and bill code. View or select a JIB mode for an entity. Define what Base currency is and what Local currency is. View definitions for local and base currency and all currencies converted and resolved by JIB. Designate an owner as either Insider or Outsider. Set the billing interest percent to one (1.0) resulting in 100% interest. The result is that when a transaction occurs for this particular company, AFE and billing code, none of the cost is allocated to partners. View or set up Intercompany relationships.

JIB Processing Parameters JIB Processing Parameters JIB Processing Parameters

Mode Options Base Currency tab Local Currency tab

Division of Interest Division of Interest

Insider/Outsider Billing Interest Percent

Cutback Account Administration Cash Call Cash Call Payment Ownership Administration

Distribution tab > Intercompany Accounts tab > Related Entity field

Set up a cash call for a particular company, currency, period, AFE and bill code. Cash Call Payment fields Revenue Distribution Vendor ID Enter payment amounts for cash calls and view allocations or override automatic allocations. Set up an owner for revenue distribution.

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