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.