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 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 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):
|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:
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.