comprehensive guide to parallel accounting
TRANSCRIPT
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© 2009 Wellesley Information Services. All rights reserved.
A Comprehensive Guide for Using SAP General Ledger for Parallel Accounting
Aylin KorkmazAccenture
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Parallel Accounting — An Overview
• Many organizations are required to report financial results based on multiple accounting regulations
European-listed companies must report their consolidated financial results according to International Financial ReportingStandards (IFRS)
Canadian, Indian, and Korean listed companies will also be required to report consolidated financial results based on IFRS (conversion dates of 2011) with the United States not far behind (2014)
Companies also listed in the United States or belonging to a US group of companies are required to report according to US Generally Accepted Accounting Principles (US GAAP)
• Parallel accounting is the separation of postings and reporting of financial results based on these various regulations
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Typical Challenges with Parallel Accounting
• Some typical challenges facing organizations when reporting using multiple accounting regulations may include:
Globalization of capital markets and new legislation in many countries Complex calculations required to translate financial statements from one reporting standard to anotherCollection of financial data at source (i.e., ERP systems) for reporting based on other accounting standardsFaster close requirements for organizations create additional risk for errors occurring when developing parallel reporting
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Methods for Parallel Accounting Prior to SAP ERP
• Previous SAP ERP releases provided the following methods to support parallel accounting
Additional company code (also available with SAP ERP)Difference postings made to an additional company codeSAP does not recommend using this approach unless it has already been implemented
Parallel accounts (also available with SAP ERP)Parallel ledgers in Special Purpose Ledger (FI-SL)
Obsolete with SAP ERP
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Parallel Accounting Methods in SAP ERP
• Parallel financial reporting in the general ledger with SAP ERP Financials enables you to meet a number of local and international reporting requirements with two powerful Parallel Accounting methods
Parallel AccountsEnables Parallel Accounting by creating additional general ledger accounts
Parallel LedgersEnables Parallel Accounting by keeping Parallel Ledgers simultaneously in SAP General Ledger according to different accounting regulations
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Method #1 — Parallel Accounts Method
• Postings are made to both common and separate accounts to meet regulatory requirements
• Financial statements are produced based on the various combinations of accounts
Local GAAP Reporting
IFRS Reporting US-GAAP Reporting
US-GAAP onlyAccounts
General Ledger
Common Accounts
IFRS Accounts
Local GAAP Accounts
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Method #2 — Parallel Ledgers Method
• The ledgers are kept in parallel for all group and local postings• All ledgers are updated according to the designated accounting
standards
Local GAAP Reporting
US-GAAP Reporting
IFRS Reporting
Leading Ledger (e.g., IFRS)
Local GAAP Ledger
US GAAP Ledger
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Method #2 — Parallel Ledgers Method (cont.)
• Each ledger represents one of the accounting standardsE.g., the main general ledger represents IFRS (International Financial Reporting Standards), a second represents US GAAP, and a third represents the local accounting standard
• The system posts to all ledgers, unless otherwise specified by the configuration or special posting transactions
Therefore, accounting standard-specific postings are only made to a specific ledger
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Parallel Ledger Method — Leading and Non-Leading Ledgers• Leading ledger
There is only one Leading ledger per client, called 0L by default in SAP ERPLeading ledger reflects the accounting standard that is most commonly used by the organization
• Non-leading ledgersAll other ledgers referred to as non-leading ledgersCompany codes are specifically assignedDifferent fiscal year variant can be assigned
• Leading and non-leading ledgers are defined in customizing
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Set Up Your Ledgers Correctly
• You can define only one leading ledger (0L). Ledger 0L should beset up as your leading valuation.
E.g., US companies should set up 0L as US GAAP ledger, whereas European companies should use 0L for their IFRS valuation
• Local accounting: Normally one ledger is enough for all countries. Don’t create a separate ledger for each country.
Non-leading ledgers are activated for each company code
• Parallel ledgers can increase the data volume in tables, so onlyactivate non-leading ledgers for companies where they are required. (SAP Note 820495 — Data Volume and Parallel Ledgers)
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Define Ledgers for SAP General Ledger Accounting
Only one ledger can be marked as Leading
The GL Ledger Totals Table
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Define Currencies of the Leading Ledger
Currencies used within the Leading Ledger are defined per company code
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Defining and Activating Non-Leading Ledgers
Non-Leading Ledgers can have up to three currenciesOnly currencies defined for the Leading Ledger can be used
An alternative fiscal year variant and posting variant can be assigned to a Non-Leading LedgerLeading Ledger variants are used if these are left blank
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Assign Scenarios and Customer Fields to Ledgers
Assign scenarios to the Leading Ledger to populate the respective dimensions. For example, by assigning scenario FIN_SEGM, segment and partner segment dimensions for Leading Ledger 0L are updated.
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Assign Scenarios and Customer Fields to Ledgers (cont.)
Only assign scenarios to Non-Leading Ledgers for those dimensions you need the system to populateFor example, if segment and profit center dimensions are not relevant for local accounting, do not assign profit center and segmentation scenarios to ledger N1
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Activate Cost of Sales Accounting
By activating Cost of Sales Accounting, the functional areas are derived and updated in the ledgers assigned to the FIN_UKV scenarioYou need to make further settings to derive functional area in postings – e.g., assign functional areas, define substitution rules, etc.
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One ledger in a Ledger Group has to be the Representative Ledger. The representative ledger of a Ledger Group controls the posting period.If the posting period of the Representative Ledger is open, you can post to all ledgers in the Ledger Group, regardless of the status of their posting period.
Define Ledger Groups and Representative Ledger
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Parallel Ledger Method — Posting Example
Scenarios were assigned to the Leading Ledger (0L)
• Vendor invoice posted with transaction FB60
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Parallel Ledger Method — Posting Example (cont.)
Scenarios were not assigned to ledger N1
Scenarios were assigned to the Leading Ledger (0L)
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Parallel Ledger Method — Posting Example (cont.)
• GL posting with transaction FB50LYou can post to all ledgers in the specified ledger group
If you do not enter your Ledger Group in special transactions FB50L and FB01L, all ledgers are updated, as with transactions FB50 and FB01
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Parallel Ledger Method — Posting Example (cont.)
• GL posting with transaction FB50L (cont.)
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FI-ARFI-AP…SDMMPPPM…
All
Ledg
ers
Upd
ated
Sim
ulta
neou
sly
SAP General Ledger
Leading Ledger (0L)
Non-Leading Ledger
Non-Leading Ledger
Other Non-Leading Ledgers
Postings via new transactions FB01L and FB50LForeign currency Valuation Program FAGL_FC_VALUATION
FI-AA depreciation areas
Onl
y Sp
ecifi
ed L
edge
rs a
re U
pdat
ed
IFRS, US GAAP, Local GAAP Reports are based on the corresponding ledger
Integration and Value Flow with the Ledger Method
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Foreign Currency Valuation with Parallel Ledgers
• SAP General Ledger uses FAGL_FC_VALUATION (Transaction FAGL_FC_VAL) program for currency valuation
• The new currency valuation program posts to respective ledgers only
Accounting principles connect valuation areas with their respective ledgers
Valuation areas are defined and assigned to valuation methodsValuation areas are assigned to accounting principles
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Foreign Currency Valuation with Parallel Ledgers (cont.)
• The SAP General Ledger no longer uses the old program SAPF100After activating the SAP General Ledger, an error message will appear if you try to use SAPF100 for foreign currency valuation and translation
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Key Configuration Steps
• Define accounting principles• Assign accounting principles to ledger groups • Define valuation method• Define valuation area and assign to the valuation method• Assign accounting principles to valuation area
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Define Accounting Principles
• Accounting principles represent accounting standards in SAP ERPThey play an important role in connecting standard-specific postings to the relevant ledger
I.e., currency valuation, asset postings, and manual accruals
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Assign Accounting Principles to Ledger Groups
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Define Valuation Method
• Valuation methods are defined for the open items They are used to group together the balance and individual valuation specifications
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Define Valuation Area and Assign to the Valuation Method
• Valuation areas are used to report different valuation approaches and post to different accounts
With this configuration step, you assign the valuation area to the valuation method
In the classic G/L, you select valuation method in the selection screen of the currency valuation program
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Assign Accounting Principles to Valuation Area
• You can use valuation areas to meet the different valuation requirements of the accounting standards
Valuation areas are assigned to accounting principles
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Parallel Valuation in Asset Accounting
• You can set up Asset Accounting to work with parallel ledgers, such as accounting standards
E.g., IFRS, US GAAP, and local GAAP• Valuation differences in various standards are due to multiple, diverse
Asset Accounting requirements, usually in the areas of asset acquisitions, depreciation, and retirement
Depreciation areas are used to provide visibility of these valuation differencesYou assign each depreciation area to a ledger group
For each depreciation area, specify the depreciation terms, useful life, and other parametersThe system then determines depreciation value for each depreciation area, using the rules specifiedThe system posts depreciation and the Acquisition and ProductionCost (APC) values separately for each depreciation area to the assigned ledgers
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Parallel Valuation in Asset Accounting (cont.)
• Assign a ledger group to each posting depreciation areaYou need to define a delta depreciation area to post differencesbetween the main valuation and Parallel Valuation
I.e., the IFRS and Local GAAP valuation
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Parallel Valuation in Asset Accounting (cont.)
• To make setup of the depreciation area easier, SAP introduced Parallel Valuation wizard
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Parallel Valuation in Asset Accounting (cont.)
• Detailed instructions are provided for each step
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Parallel Valuation in Asset Accounting (cont.)
• Specify the depreciation terms, useful life, and other parameters for each depreciation area
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Parallel Valuation in Asset Accounting (cont.)
• Detailed instructions are provided for each step
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Parallel Valuation in Asset Accounting (cont.)
• Overview of the settings
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Assessing the Options
• Review what your organization currently has in placeHave you already implemented the parallel account method?
Refer for SAP Note 779251 – SAP General Ledger: Parallel accounting
• SAP does not recommend one option over the other, but rather leaves it to each organization to decide which option best fits its needs
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Parallel Accounts Option
• ProsSeparate accounts maintained
Separate retained earnings accounts for each accounting principleSeparate range of accounts can be established to clearly identify the parallel accounting area
Financial statement versionsSeparate structure defined for each accounting principle
PostingsPostings are made in a single ledger within the specific range of accounts
Method is well-known to SAP usersCommon solution in the past to parallel accounting needs
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Parallel Accounts Option (cont.)
• ConsNumber of G/L accounts
Greatly increases the number of accounts in the chartFiscal year variants
Different fiscal year variants across the organization may be difficult to implement using the account option
Additional validationsValidations may be required to ensure no incorrect cross-over postings occur (e.g., US GAAP posting into an IFRS account)
Standard reportsTypically includes all accounts (unless specifically excluded) and may require additional effort to develop specific accounting principle reports
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Parallel Ledgers Option
• ProsG/L accounts
Fewer G/L accounts requiredSame G/L accounts are shared across all ledgers
Fiscal year variantCompany codes with different fiscal year variants assigned to a separate ledger, facilitating consolidated reporting
Posting period variantPostings to ledgers can be separately controlled by assigning a separate posting period variant for the ledger
Carry forwardNo need to maintain separate retained earnings accounts
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Parallel Ledgers Option (cont.)
• Pros (cont.)Currency valuations and translations
Automated postings updated to appropriate ledgers based on the assignment to relevant accounting principles
Adjustment and value postingsAdjustment and value postings, such as reclassification, are automatically posted to the appropriate ledgers
Standard reportsStandard reports are executed by ledger
• ConsThe data volume increases dramatically as a result of maintaining parallel ledgers
Refer to SAP Note 820495
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What We’ll Cover …
• Parallel accounting overview• Methods available in SAP ERP• Parallel ledger method
Configuration of ledgers and accounting principlesPosting examples using parallel ledgersForeign currency valuation with parallel ledgersParallel Valuation in Asset Accounting
• Assessing the options• Wrap-up
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Resources
• SAP Service Marketplace – http://service.sap.com *SAP Note 779251 – mySAP ERP New general ledger: Parallel accountingSAP Note 820495 – NewGL: Data volume, performance and parallel ledgers
• Financials Expert, www.FinancialsExpertOnline.comAylin Korkmaz, “Streamline Your Parallel Accounting with the New G/L Ledger Solution,” (Financials Expert, April 2006).
• SAP Press Book, Financial Reporting with SAP, Aylin Korkmaz• http://help.sap.com/saphelp_erp2005/helpdata/en/2d/830e405c538f
5ce10000000a155106/frameset.htm
* Requires login credentials to the SAP Service Marketplace
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7 Key Points to Take Home
• SAP ERP offers two methods to support parallel accounting:Parallel AccountsParallel Ledgers
• SAP considers both methods equally appropriate and allows organizations to make the determination as to which option best suits them
• With the Parallel Ledger solution, the Leading Ledger reflects the accounting standard that is most commonly used in an organization
• With the Parallel Ledger solution, the system posts to all ledgers, unless otherwise specified by the configuration or special posting transactions
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7 Key Points to Take Home (cont.)
• Parallel ledgers can increase the data volume in tables, so onlyactivate non-leading ledgers for companies where they are required
• A new currency valuation program is available that facilitates posting to different accounting principles, based on configuration settings
• FI-AA can be configured using a new wizard tool so as to take advantage of the parallel ledgers option
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