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Automating the Last Mile of Finance #3
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Streamlining Compliance with U.S. GAAP
 
According to the Gartner© IT Glossary definition of Corporate Performance Management (CPM) Suites, a financial consolidation application “enables organizations to reconcile, consolidate, summarize and aggregate financial data based on different accounting standards and federal regulations. These applications are a fundamental part of CPM because they create the audited, enterprise-level view of financial information that must be shared with other CPM applications to analyze variance from targets.” For statutory and financial reporting, “CPM applications require specialized reporting tools that can format output as structured financial statements, and they may also need to support specific generally accepted accounting principles (GAAP) presentation rules, such as U.S. GAAP or International Financial Reporting Standards. They also include visualization techniques that are specifically designed to support the analysis of variance from budgets or targets, such as hyperbolic trees.”
  
In this article we would like to share Lab Preview screenshots of our forthcoming SAP® Business Planning and Consolidation for SAP NetWeaver, starter kit for U.S. GAAP – powered by SAP HANA™.
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SAP® Business Planning and Consolidation helps you meet legal and management consolidation and reporting requirements. Instant access to harmonized charts of accounts can shave weeks off consolidation processes and help ensure compliance. You can generate clear, transparent financial statements and reports relating to profit and loss, cash flows, and balance sheets. Automate the intercompany elimination process. Gain transparency into corporate transactions. Manage multiple currencies with conversions, allocations, and eliminations. Perform daily consolidation tasks, and identify which entities to consolidate at what percentages. The application automatically calculates totals, checks syntax, controls data accuracy, and allows for the posting of multiple journal entries, saving time and reducing errors. On top of the application we are developing a starter kit for U.S. GAAP including pre-configured chart of accounts, reports, controls, business rules and financial statements to help you streamline compliance with regulatory requirements. You will be able to download the starter kit from SAP® Help Portal or through SAP® Service Market Place.
 
   
SAP® starter kit for U.S. GAAP – value proposition and benefits
The starter kit is pre-configured with input forms, rules, control reports, audit-trail and financial statements for performing,validating and publishing a statutory consolidation in accordance with U.S. GAAP. The starter kit is currently being developed and tested based on extensive product expertise derived from assisting hundreds of customers to deploy and configure this application over many years. Comprehensive business rules enable you to produce consistent consolidated data. The starter kit will be made available to our customers at no additional charge, and SAP will upgrade the starter kit according to the changes in the U.S. GAAP regulation in order to reduce your project costs, accelerate your time-to-value and make sure you benefit for SAP business process knowledge and product best practices during your implementation and also after you are live with SAP providing regular updates of the pre-configuration.
 
Pre-defined business process flows
 
In our previous article, “From systems of record to systems of engagement”, we explained how SAP® ERP/EPM Connector was automating data load from the ERP. In the starter kit for U.S. GAAP a set of business process flows has been pre-defined to help users perform their consolidation with SAP® Business Planning and Consolidation, from the Import Data process up to the Submit Data step (see screenshot below).
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Once all entities have completed, validated and submitted their data, the financial consolidation is ready to start, and users will be guided through our pre-defined consolidation business process flow (see screenshot below).USBlog03_BPF_cons_Labpreview.png
Chart of accounts based on the latest US GAAP taxonomy
 
The starter kit provides a predefined chart of accounts based on the latest U.S. GAAP financial reporting taxonomy as published by the Financial Accounting Standards Board. The chart of accounts is compliant with the eXtensible Business Reporting Language (XBRL) technology and has been designed to be enhanced with customer specific accounts. Accounts are created with dimension properties to define their behavior throughout the configuration: for instance analysis by flow, currency translation and position in the account hierarchy. Enhancing the chart of accounts by duplication template accounts allows you to assign the appropriate attributes automatically to new accounts. This implementation principle has been used for data entry and analysis reports as well as consolidation rules to ensure a dynamic configuration facilitating the integration of new accounts.

 

Pre-defined data load reports and controls help validate the information and prepare cash-flows

 

The starter kit’s Business Process Flow (BPF) for data entry and the organization of the different input forms into subfolders guide the end-user through a step-by-step approach for entering, controlling data and prepare cash-flows. The starter kit for U.S. GAAP includes:

  • Closing balances reports with assets, equity and liabilities and profit and loss,
  • Period movements with breakdown by flow and display of account/flow pair not open for data entry
  • Intercompany details including data entry in single account forms and an overview report for control.USBlog03_balance_Labpreview.png

In order to ensure data is consistent, a complete set of pre-configured validation controls has been developed. Controls have been configured in the starter kit to validate the consistency of data entered/imported into the input forms. After data entry validation has been completed, data is submitted to the approver. The final approval of data will change the status of the reporting to “Approved” and no user will be able to modify input data.

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Complete set of pre-built business rules automate the financial consolidation process in compliance with U.S. GAAP regulation

Our U.S. GAAP starter kit contains a set of pre-defined business rules to help automate the financial consolidation process. The pre-configured consolidation engine will handle full consolidation and equity methods, and automate mergers and acquisitions (M&A’s) events such as acquisitions, loss of control, equity transactions or step acquisitions. Foreign subsidiary closing balances of Balance Sheet accounts are converted using the closing rate, except for equity and consolidated investments kept at their historical value. Currency translation reserves are calculated automatically. Income and expenses are converted using the average rate for the period.The Statement of Cash Flows is based on Balance Sheet variations which are converted at the average rate for the period.

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As you can see in the above screenshot, the US GAAP starter kit will include a set of elimination and adjustment rules for automatically calculating consolidated data using input data from each entity, such as the elimination of intercompany reciprocal operations, elimination of internal dividends, goodwill booking, elimination of investments in subsidiaries, calculation of the currency translation adjustments and calculation of non-controlling interests. This set of rules is designed to be easily enhanced in order to meet your specific accounting policies.

 

Once your consolidation process is completed, a Business Process Flow with all financial statements and accounting reports can be used by the office of finance business end users for analysis and review. In the Report Library Business Process Flow are listed all reports delivered in the starter kit for the legal consolidation, including publishable financial statements, analysis reports for key financial statements, general ledgers and ledgers and overview and control reports. In the Control reports group of tasks are listed control reports that enable the end-user to validate the consolidated data. The data consistency dashboard that you can see below is one of the validation reports that are configured in the starter kit. It gives an at a glance overview of the consolidation process with main balance and intercompany elimination controls. Other detailed reports will allow the consolidation manager to check miscellaneous consistencies such as opening carry-over, flow balances and balance sheet net income versus profit and loss net income.

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Pre-configured financial statements according to SEC requirements

 

The starter kit includes pre-configured key financial statements for 10-Q form as defined by the Securities and Exchange Commission (see screenshots below).

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Automated calculation of consolidated cash-flows

 

One of SAP key innovations in the consolidation software area is the automation of cash-flow calculation both at individual/entity level and from a group/consolidated perspective. For our US GAAP starter kit we leverage the expertise and best practices previously used in our starter kit for international financial reporting standards (IFRS) statement of cash-flows. The below clip shows how the cash-flows computing has been developed in SAP® Business Planning and Consolidation, starter kit for IFRS and this is exactly what will be made available for SAP® Business Planning and Consolidation, starter kit for U.S. GAAP.

 

Below is a screenshot of the U.S. GAAP starter kit statement of cash-flows to be released to customers in the coming weeks:

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Perfect synchronization between financial consolidation and disclosure management

 

To secure and accelerate the “last mile of finance” process, SAP® Business Planning and Consolidation starter kit for U.S. GAAP has been developed from day-1 in the objective to also be fully synchronized with SAP® Disclosure Management, our application software for disclosure and eXtensible Business Reporting Language (XBRL).

 

One of the key requirements within IT is to ensure smooth data workflow and guarantee data consistency across applications. This is particularly true for the last mile of finance as the disclosure management application is being used at the end of the data-chain and consumes data from other sources of information within the company — consolidation applications, ERP systems, data warehouses, and a range of other information source applications. SAP Disclosure Management, starter kit for U.S. GAAP has been designed to streamline data workflow and maximize data consistency when used in combination with transactional and consolidation systems, in particular with SAP® Business Planning and Consolidation.

The starter kit embeds best-practices to automatically extract data from SAP® Business Planning and Consolidation starter kit for U.S. GAAP, transforming and merging this data, and delivering it to integrated data structures for analytic purposes. The starter kit leverages both the “integrated” and “bolt-on” data synchronization approaches to automate and secure connectivity and access to the consolidation system. Therefore no manual data replication between applications is needed and data workflow is simplified. Moreover, the starter kit contains a set of pre-defined validation gates to ensure data consistency within the SAP Disclosure Management application itself: pre-defined controls for the data repository, validation dashboard consistency check of Microsoft Office and XBRL data.

 

We’ll get into more detail on the forthcoming release of SAP® Disclosure Management starter kit for U.S. GAAP (including screen shots) in the coming weeks.

 

What’s Next

 

In our next blog we’ll pursue the exploration of the assets included in SAP Financial Close and Disclosure Management rapid-deployment solution for U.S. GAAP and SEC with a special focus on mobility. We’ll explain how SAP® BusinessObjects™ Mobile BI financial close app can help during the last meters of the “last mile”. Stay tuned.

 

 

Sincerely,

Elizabeth Milne, SAP EPM solution marketing elizabeth.milne@sap.com

Kristina Henn, SAP rapid deployment solutions kristina.henn@sap.com

Stephane Neufcourt, SAP EPM solution management stephane.neufcourt@sap.com

 

 

Sources

Corporate Performance Management (CPM) Suites in Gartner© IT Glossary

http://www.gartner.com/it-glossary/cpm-suites/

SAP Business Planning and Consolidation
http://www54.sap.com/solutions/analytics/enterprise-performance-management/software/planning-consolidation/index.html

SAP Help Portal
http://help.sap.com/bopac

SAP Service Market Place
https://websmp106.sap-ag.de/~SAPIDP/002006825000000234912001E

From systems of record to systems of engagement
http://scn.sap.com/blogs/financialclose.starterkits/2013/03/13/automating-the-last-mile-of-finance-from-systems-of-record-to-systems-of-engagement

Financial Accounting Standards Board, FASB XBRL
http://www.fasb.org/jsp/FASB/Page/SectionPage&cid=1176160582432

SAP Disclosure Management

http://www54.sap.com/solutions/analytics/enterprise-performance-management/software/disclosure-management/index.html

Legal Disclaimer

The information in this presentation is confidential and proprietary to SAP and may not be disclosed without the permission of SAP. This presentation is not subject to your license agreement or any other service or subscription agreement with SAP. SAP has no obligation to pursue any course of business outlined in this document or any related presentation, or to develop or release any functionality mentioned therein. This document, or any related presentation and SAP’s strategy and possible future developments, products and or platforms directions and functionality are all subject to change and may be changed by SAP at any time for any reason without notice. The information in this document is not a commitment, promise or legal obligation to deliver any material, code or functionality. This document is provided without a warranty of any kind, either express or implied, including but not limited to, the implied warranties of merchantability, fitness for a particular purpose, or non-infringement. This document is for informational purposes and may not be incorporated into a contract. SAP assumes no responsibility for errors or omissions in this document, except if such damages were caused by SAP´s willful misconduct or gross negligence. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates, and they should not be relied upon in making purchasing decisions. 

No part of the starter kits may be reproduced or transmitted in any form or for any purpose without the express permission of SAP AG. The information contained herein may be changed without prior notice. Some software products marketed by SAP AG and its distributors contain proprietary software components of other software vendors. The information in starter kits is proprietary to SAP. No part of starter kits’ content may be reproduced, copied, or transmitted in any form or for any purpose without the express prior permission of SAP AG. Starter kits are not subject to your license agreement or any other agreement with SAP. Starter kits contain only intended content, and pre-customized elements of SAP® products and are not intended to be binding upon SAP to any particular course of business, product strategy, and/or development. Please note that starter kits are subject to change and may be changed by SAP at any time without notice. SAP assumes no responsibility for errors or omissions in the starter kits. SAP does not warrant the accuracy or completeness of the information, text, pre-configured elements, or other items contained within the starter kits. SAP DOES NOT PROVIDE LEGAL, FINANCIAL OR ACCOUNTING ADVISE OR SERVICES. SAP WILL NOT BE RESPONSIBLE FOR ANY NONCOMPLIANCE OR ADVERSE RESULTS AS A RESULT OF YOUR USE OR RELIANCE ON THE STARTER KITS. STARTER KITS ARE PROVIDED WITHOUT A WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT. SAP SHALL HAVE NO LIABILITY FOR DAMAGES OF ANY KIND INCLUDING WITHOUT LIMITATION DIRECT, SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES THAT MAY RESULT FROM THE USE OF THE STARTER KITS. THIS LIMITATION SHALL NOT APPLY IN CASES OF INTENT OR GROSS NEGLIGENCE. The statutory liability for personal injury and defective products (under German law) is not affected. SAP has no control over the use of pre-customized elements contained in the starter kits and does not endorse your use of the starter kits nor provide any warranty whatsoever relating to third-party use of the starter kits.

 

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