All the examples and screenshots used in this blog are hypothetical and for illustrative purposes only. They should not serve as guidance in preparing financial statements or submitting financial data to any government entity.
ECC – ERP Central Component
ERP – Enterprise Resource Planning
GL – General Ledger
ECCS – Enterprise Controlling Consolidation System
SEM – Strategic Enterprise Management
BCS – Business Consolidation System
OLAP – On-Line Analytical Processing
XML – eXtensible Markup Language
XBRL – eXtensible Business Reporting Language
SEC – Securities and Exchange Commission
FASB – Financial Accounting Standards Board
I would like to write a brief proof of concept blog showing how the standard SAP software – ECC can be used to deliver well formatted financial statements as required by one government entity – SEC. There are many other possible solutions to this particular business problem and there are many other configurations possible, but this particular one presents the simplest one in my mind for the best way to present financial results to the public.
XBRL (wikipedia reference) started its life over 10 years ago and it’s an officially mandated format in the US. It’s featured in websites of both SEC (@ http://www.sec.gov) and FASB (@ http://www.fasb.org). For any business entity going and remaining public or quoted in the US stock exchanges it is a de facto rule. Its technical origins lie in XML.
First things first or it all starts with a journal entry or at least one debit and one credit which add up to 0. It’s true for one entry and also true for any trial balance which serves as foundation to any financial report. Many business events and transactions created by business partners must take place before one such credit or debit is recorded, but the underlying concept hasn’t changed since the XVth century Venice.
Starting with the traditional or some might say boring ECC, an accounting journal entry is made as shown in the FB03 Display transaction. It happens during the last month of 2011 and will become part of 2011 annual report. Debit is to account 100000 and credit to account 30000. Nothing new so far. Your SAP system has millions of them.
After accounting as completed its close activities we pull a trial balance which again is the standard F.01 transaction (behind which is the report/program RFBILA00). The most important selection value is “1” which points to “Extract to consolidation”.
After necessary configuration is performed, a dialog box with ECCS_FILE and the checked flag for “Receiver is SEM-BCS” sends the trial balance to a flat ASCII file in the operating system directory. At this point, the financial records are ready to leave the ECC and get ready for the interface with SEM-BCS.
A report showing our GL account balances as mapped to the preconsolidation ledger along with the output file provides an interim status of the integrated financial reporting. The file needs to be transformed before being loaded into the SEM-BCS which is the OLAP equivalent of ECCS, but the underlying account and balance information cannot change to maintain the integrity of the financial reporting process and satisfy the internal controls and external auditing requirements.
After the necessary changes, the BCS file can be uploaded. This is part of the flexible upload task which in turn is a step in the group financial close process of consolidated entity comprised of multiple legal entities of various percentage ownership stakes where the most critical balances or totals are investments, goodwill, equity, non-controlling interests, and intercompany relationships. This is example is the simplest one possible, but in reality includes hundreds of items and steps which are automated by ECC/BCS or some other combination of technology and interfaces.
After the load into the BCS, another intermediate check is performed within the reporting cube showing the balances of the two accounts which now are called Financial Statement Items. Here they are the exact equivalents (1:1) of the General Ledger accounts, but in reality they would differ and would be reflected along the N:1 relationship.
The end users can obviously navigate the reporting cube in a browser of their choice. Here the amounts are presented via Firefox browser.
Now comes the most interesting mapping tool of the BCS – XBRL taxonomy. The taxonomy file is guaranteed to change every year as both FASB and SEC keep fine tuning the financial reporting requirements. As soon as the file is released by the government, mapping and testing can begin. Again, the simplest mapping possible is illustrated here, but the same process is true for all the other relationships.
After mapping (assignment) has been completed, the last step of processing within the ECC is generating an instance which in turn creates an XML file. The XML format is the superset of XBRL and its basic definition has not changed since 1998. The file can be read by any browser and together with the XSD file and some other files creates the XBRL standard. This is the last step where SAP code is involved with processing financial information which has originated the the GL or any subledger systems feeding it.
As an example only, a trial version of the Altova software shows a grid display of the XML/XBRL file with all the necessary values as required by the SEC.
We have gone from a GL journal entry to the published financial statements using the minimum steps required and leveraging the existing SAP production installations. This virtual financial reporting value chain takes a lot of manpower and even more hours to accomplish today, but this example shows a clear opporunity to streamline and make it a more efficient process thus creating added value for all.
Have a happy closing of the 2011 financial year about to begin as soon as 2011 is over.