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May 13, 2020 1 minute read

Accounting Principles, Ledgers, and Parallel Accounting

Updated by Verena Stuetz

Here’s some general information about accounting principles, ledgers, and parallel accounting in SAP S/4HANA Cloud:

Accounting Principles

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).

Ledgers

SAP delivers the following ledgers with the following underlying accounting principles:

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 by default based on IFRS.
3L: This optional corporate or group ledger is by default based on US GAAP.

If you use parallel accounting, you should change the default assignments of ledgers to accounting principles as described here: Assign Accounting Principles to Ledgers and Company Codes.

You can use the following ledger or, if you use parallel accounting, ledger combinations (parallel ledgers):

Ledger	Description
0L	leading ledger (local GAAP)
0L + 2L	local GAAP + IFRS
0L + 3L	local GAAP + US GAAP
0L + 2L + 3L	Local GAAP + IFRS + US GAAP

For more information on the available ledger combinations, see Ledger Scenarios: Choosing the Right Combination for Your Business Needs.

To set up financial reporting in your system based on the accounting principles mentioned above, in the scope setting phase of your implementation, select the relevant scope items:

- Local ledger: Accounting and Financial Close (J58)
- IFRS: Accounting and Financial Close – Group Ledger IFRS (‏1GA‏)
- US GAAP: Accounting and Financial Close – Group Ledger US GAAP (‏2VA‏)

Parallel Accounting

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).

For more information, see Parallel Accounting Using Parallel Ledgers.

9 Comments

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Venkateswarlu Manduva

May 14, 2020 at 5:32 am

Hi Henrike Groetecke

Thanks for your post and this is very good information. I have one requirement for a Shell co code where we need to have posting periods like 4+4+5 weeks and so on and we are following Jan to Dec as fiscal year variant. We have 0L for IFRS and 1L for USGAP with same fiscal and posting period variants and Shell co also follow the same fiscal varinat but with different posting period varinat. The purpose of Shell co code is to post some adjustment entries only and not all business transactions. How to achieve this and i can thought of creating another ledger and use extension ledger concept but how to restrict normal postings to this standard ledger.

Thanks
Venkatesh

Marcin Nowacki

May 14, 2020 at 9:51 am

Thanks for sharing!

Owen Liu

May 15, 2020 at 12:58 am

Thanks for sharing.

Ana Moreira

May 15, 2020 at 8:26 am

Thanks for creating this

Rachel Suo

May 21, 2020 at 9:14 am

Thanks so much for this useful sharing~

Vijayendra Tiwari

June 2, 2020 at 4:33 am

Thanks for sharing!

Anjan Sinha

April 19, 2022 at 9:36 pm

Hello Henrike Groetecke,

In our 1909 system I cannot find the "

2L: This optional corporate or group ledger is based on IFRS.

How can I make it available.

Please let me know ASP.

Thank you in advance.

Regards,

Anjan Sinha

Davit Adoni

October 12, 2022 at 11:33 pm

Hello Henrike,

Thank you for the informative blog post.

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.

I have 2 questions about the above:

Is that true 0L ledger always GAAP, how about if we want to use IFRS and then 2L as Local Gaap?
We already have the company codes assigned to their respective accounting principles, which setting overrides? The ledger dependent vs ledger+company code dependent accounting principal assignment? Because it looks like a redundancy.

Thank you very much,

Regards,

Dave

Lance MTINSI

August 13, 2023 at 4:24 pm

Well explained simple and straight to the point! Thank you.