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A Comprehensive Guide for Using SAP General Ledger for Parallel Accounting
Aylin Korkmaz Accenture
2009 Wellesley Information Services. All rights reserved.

What Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel Valuation in Asset Accounting Assessing the options Wrap-up

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 Reporting Standards (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 another Collection of financial data at source (i.e., ERP systems) for reporting based on other accounting standards Faster close requirements for organizations create additional risk for errors occurring when developing parallel reporting

What Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel Valuation in Asset Accounting Assessing the options Wrap-up

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 code SAP 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

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 Accounts Enables Parallel Accounting by creating additional general ledger accounts Parallel Ledgers Enables Parallel Accounting by keeping Parallel Ledgers simultaneously in SAP General Ledger according to different accounting regulations

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 General Ledger Common Accounts

IFRS Accounts

US-GAAP only Accounts

Local GAAP Accounts

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
IFRS Reporting
Leading Ledger (e.g., IFRS)

Local GAAP Ledger

Local GAAP Reporting

US-GAAP Reporting
US GAAP Ledger

Method #2 Parallel Ledgers Method (cont.)

Each ledger represents one of the accounting standards E.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 Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel 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 ERP Leading ledger reflects the accounting standard that is most commonly used by the organization Non-leading ledgers All other ledgers referred to as non-leading ledgers Company codes are specifically assigned Different 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 be set 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. Dont 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 only activate 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

The GL Ledger Totals Table

Only one ledger can be marked as Leading

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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

An alternative fiscal year variant and posting variant can be assigned to a NonLeading Ledger Leading Ledger variants are used if these are left blank

Non-Leading Ledgers can have up to three currencies Only currencies defined for the Leading Ledger can be used

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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 populate For 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 scenario You need to make further settings to derive functional area in postings e.g., assign functional areas, define substitution rules, etc.

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Define Ledger Groups and Representative Ledger

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.

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What Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel Valuation in Asset Accounting Assessing the options Wrap-up

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Parallel Ledger Method Posting Example

Vendor invoice posted with transaction FB60

Scenarios were assigned to the Leading Ledger (0L)

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Parallel Ledger Method Posting Example (cont.)

Scenarios were assigned to the Leading Ledger (0L)

Scenarios were not assigned to ledger N1

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Parallel Ledger Method Posting Example (cont.)

GL posting with transaction FB50L You 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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Integration and Value Flow with the Ledger Method

All Ledgers Updated Simultaneously
SAP General Ledger
Leading Ledger (0L) Non-Leading Ledger Non-Leading Ledger

Only Specified Ledgers are Updated

FI-AR FI-AP SD MM PP PM

Postings via new transactions FB01L and FB50L Foreign currency Valuation Program FAGL_FC_VALU ATION FI-AA depreciation areas

Other Non-Leading Ledgers

IFRS, US GAAP, Local GAAP Reports are based on the corresponding ledger

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What Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel 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 methods Valuation 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 SAPF100 After 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 ERP They 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 Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel 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 differences You assign each depreciation area to a ledger group For each depreciation area, specify the depreciation terms, useful life, and other parameters The system then determines depreciation value for each depreciation area, using the rules specified The system posts depreciation and the Acquisition and Production Cost (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 area You need to define a delta depreciation area to post differences between 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 Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel Valuation in Asset Accounting Assessing the options Wrap-up

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Assessing the Options

Review what your organization currently has in place Have 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

Pros Separate accounts maintained Separate retained earnings accounts for each accounting principle Separate range of accounts can be established to clearly identify the parallel accounting area Financial statement versions Separate structure defined for each accounting principle Postings Postings are made in a single ledger within the specific range of accounts Method is well-known to SAP users Common solution in the past to parallel accounting needs
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Parallel Accounts Option (cont.)

Cons Number of G/L accounts Greatly increases the number of accounts in the chart Fiscal year variants Different fiscal year variants across the organization may be difficult to implement using the account option Additional validations Validations may be required to ensure no incorrect cross-over postings occur (e.g., US GAAP posting into an IFRS account) Standard reports Typically includes all accounts (unless specifically excluded) and may require additional effort to develop specific accounting principle reports
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Parallel Ledgers Option

Pros G/L accounts Fewer G/L accounts required Same G/L accounts are shared across all ledgers Fiscal year variant Company codes with different fiscal year variants assigned to a separate ledger, facilitating consolidated reporting Posting period variant Postings to ledgers can be separately controlled by assigning a separate posting period variant for the ledger Carry forward No 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 postings Adjustment and value postings, such as reclassification, are automatically posted to the appropriate ledgers Standard reports Standard reports are executed by ledger Cons The data volume increases dramatically as a result of maintaining parallel ledgers Refer to SAP Note 820495
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What Well Cover

Parallel accounting overview Methods available in SAP ERP Parallel ledger method Configuration of ledgers and accounting principles Posting examples using parallel ledgers Foreign currency valuation with parallel ledgers Parallel 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 accounting SAP Note 820495 NewGL: Data volume, performance and parallel ledgers Financials Expert, www.FinancialsExpertOnline.com Aylin 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 Accounts Parallel 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 only activate 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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Your Turn!

How to contact me: Aylin Korkmaz Aylin.korkmaz@accenture.com

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Disclaimer
SAP, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver, Duet, PartnerEdge, and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product and service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor controlled by SAP.

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