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Author's profile photo Ihsen ABROUG

PARALLEL LEDGERS VALUATION IN S/4 HANA NEW ASSETS ACOUNTING

Using the parallel ledger, companies can set parallel valuation in different accounting principles

Typically, a local company that belongs to a group needs to follow both local and group accounting principles

In Assets accounting, we can set Parallel ledger  accounting using depreciations areas

We need to define depreciation area per involved accounting principles,

In our scenario company FR01 a local branch of an international group, company FR01 needs to report financial statements in group accounting principles IFRS and in local GAAP accounting principles.

We defined the Leading ledger ‘0L’ for IFRS and non leading ledger ‘2L’ for LG accounting principles.

Let’s see the major customizing steps and a process flow to demonstrate the power of the ledger approach in parallel valuation in assets accounting.

1. Define settings for ledgers

We assigned accounting principles to corresponding ledgers for the company ‘FR01’.

  • 0L Ledger:

  • 2L Ledger:

 

2. Define Depreciations areas

In our example we created the following 2 depreciation areas:

  • Depreciation area 1 for IFRS accounting principles (0L Ledger group)

 

  • Depreciation area 12 for LG accounting principles (2L Ledger group)

Both areas 1 and 12 posts in real time

Important note:

In New Assts accounting, the delta depreciation area is no longer needed, the system posts in real time to both ledgers.

 

3. Assign GL Accounts

In this step we need to assign GL accounts for both depreciations areas, 1 and 12

We used the same accounts for both areas as we are using separate ledgers for both areas

The following screen shots applies for area 1, area 12 have the same accounts assignments

 

4. Define technical clearing account for integrated assets aquisition:

Below the SAP definition of the integrated aquisition postings available in SAP HELP

You can find this definition also when clicking on the glasses in front of the main customizing neud

“For an integrated asset acquisition posting, the system divides the business transaction into an operational part and a valuating part:

  • For the operational part (vendor invoice), the system posts a document valid for all accounting principles against the technical clearing account for integrated asset acquisitions. From a technical perspective, the system generates a ledger-group-independent document.
  • For each valuating part (asset posting with capitalization of the asset), the system generates a separate document that is valid only for the given accounting principle. This document is also posted against the technical clearing account for integrated asset acquisitions. From a technical perspective, the system generates ledger-group-specific documents for each accounting principle.”

 

5. Specify alternative document type for the valuation part of the posting

The derived document type is for the valuation posting created at the same moment of vendor invoice when posting Asset aquisition

 

6. Determine Depreciations Areas in Asset Class

Select Asset class 3000

–> Deactivate all depreaciations areas except 01 and 12 areas

–> Set the usefull life 2 years for depreciation area 01 and 4 years for depreciation area 12

 

7. Business Scenario for Parallel Ledger Valuation

The company FR01 needs to maintain accounting and reporting for Assets in both group and local accounting principles,

In this scénario will process the following flow and track accounting posting and reporting in both acct principles

Create an asset, Post acquisition,  Run depreciation, post retirement

7.1 Create asset

Create asset for Fixture and fitting (class 3000) with straight line depreciation method for depreciation area 1 and depreciations area 12

  • In Class 3000 for Area 1, the useful life is 2 years
  • In Class 3000 for Area 12, the useful life is 4 year

Transaction: AS01

 

7.2 Asset Aquisition

Asset acquisition for 2400 Euros

Transaction: F-90

  • Operational part (vendor invoice)

  • Valuating part (asset posting with capitalization of the asset)

 

7.3 Asset Depreciation Run

Transaction: AFAB

Posting for the first 5 periods of 2020.

Asset explorer for IFRS (0L)

–> Posted depreciation value 500,00 Euos for ledger “0L” for 5 periods (100,00 Euros per period).

Depreciation FI document posted to Ledger 0L:

 

Asset explorer for Local GAAP (2L)

–> Posted depreciation value 250,00 Euros for ledger “2L” for 5 periods (50,00 Euros per period).

Depreciation FI document posted to Ledger 2L:

 

7.4 Asset Retirement

Asset retirement for a sale value of 2000 Euros

Transaction: ABAON

 

Posting to IFRS acct principles (Ledger 0L)

–> 100 Euros gain for 0L ledger

 

Posting to LG acct principles (Ledger 2L)

–> 150 Euros Loss for ledger 2L

 

–> In IFRS Depreciation area we have a gain of 100 Euros and in the LG depreciation area we have 150 Euros loss

Using the parallel ledgers 0L and 2L, we are able to run parallel valuation according to different accounting principles

 

Please feel free to comment

 

Best Regards

Ihsen ABROUG

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      14 Comments
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      Author's profile photo Abdullah Galal
      Abdullah Galal

      Awesome blog with a great level of details, will refer anyone asking about parallel ledgers with FA to here.

      Thanks a lot for your efforts, I know how much effort that takes.

      This blog will be here after 10 years and people will still learn from it , please keep posting

      Author's profile photo Ihsen ABROUG
      Ihsen ABROUG
      Blog Post Author

      Thank you Abdullah

      Regards

      Ihsen

      Author's profile photo TALHA KHAN
      TALHA KHAN

      Very informative and detailed explanation.

      Excellent Blog.

      Author's profile photo Georgios Agagiotis
      Georgios Agagiotis

      Great work. Many Thanks.

      Author's profile photo Durga sai ram Naraharisetty
      Durga sai ram Naraharisetty

      Excellent and very much helpful

      Author's profile photo VENKATESH BHANDARI
      VENKATESH BHANDARI

      Nicely articulated..one can understand better on parallel ledgers.  Great effort.  Thanks

      Author's profile photo Kishore Kamarthapu
      Kishore Kamarthapu

      Good Information Ihsen  ABROUG.

       

      Author's profile photo Jagadeesh Gundachary
      Jagadeesh Gundachary

      Very Well explained, Great work.

      Author's profile photo kotesh rao
      kotesh rao

      Very good blog and detailed explanation.

       

      Thanks for sharing & I wish you keep posted nice blogs.

      Author's profile photo Raja Sekhar Andey
      Raja Sekhar Andey

      Simple and clear explanation.

      But It would be ideal to have local GAAP as leading ledger (L0) since all the reporting should be done at Local GAAP.

      Author's profile photo Monika Patel
      Monika Patel

      Thanks for such a detailed blog. Requesting to please clarify one doubt : Which version of S/4HANA was ref. in the blog ? Accounting-Principle what is the difference between assigning it to each-Comp-Code, within-the-ledger ?

      Reason for asking above question :

      In S/4HANA On-premise 1809, we have two-config --> (a) Define-Accounting-Principle & (b) Assign Ledger-Group to Accounting-Principle

      As per my experience, we need to set-up the relation between Accounting-Principle >> Ledger-Group so that while creating Dep-Area, when we assign Accounting-Principle, accordingly Ledger belonging to Ledger-Group will get picked-up.

      Thanks in anticipation to get the required clarity on above question. Regards

      Author's profile photo Asharaf Jamal
      Asharaf Jamal

      Excellent !

      Author's profile photo Dambuluwana Maddumage Ajith Madduma
      Dambuluwana Maddumage Ajith Madduma

      Very useful, Detail explanation.

      Thanks

       

      Author's profile photo Kushal Vaidya
      Kushal Vaidya

      Very Good Explanation.

       

      Hi Have one Question - I understand how technical Account works and post acquisition documents in each ledgers.

      Question - How can we handle posting different valuation to separate accounting ledgers during capex order settlement?

      Can we still use capitalization key in S/4 HANA to configure how much we want to capitalize in each ledger.

      Kushal Vaidya