Accounting Principles, Ledgers, and Parallel Accounting
Here’s some general information about accounting principles, ledgers, and parallel accounting:
Accounting principles are rules for legal accounting and financial statements and govern how companies record and report their financial data. Accounting standards are collections of accounting principles, for example, the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). In addition, there are local accounting standards, for example, the United States Generally Accepted Accounting Principles (US GAAP) or German Commercial Code (Handelsgesetzbuch, HGB).
- 0L: This mandatory leading ledger is a local ledger based on the generally accepted accounting principles (GAAP) of your country or region.
- 2L: This optional corporate or group ledger is based on IFRS.
- 3L: This optional corporate or group ledger is based on US GAAP.
You can use the following ledger or ledger combinations (parallel ledgers):
|0L||leading ledger (local GAAP)|
|0L + 2L||local GAAP + IFRS|
|0L + 3L||local GAAP + US GAAP|
To set up financial reporting in your system based on the accounting principles mentioned above, in the scope setting phase of your implementation, choose one of the following scope items:
Local ledger: Accounting and Financial Close (J58)
Parallel accounting enables you to perform valuations and closing operations for a company code based on the accounting principles of the group as well as additional accounting principles, such as local accounting principles.
Here’s a typical use case:
The German subsidiary of a US-American group has to create financial statements according to German commercial law (Handelsgesetzbuch, HGB) as well as according to the accounting principles of the group (US GAAP).
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