Reconciliation from HGB or Local GAAP to IFRS with SAP Analytics Cloud
In this article, I would like to describe a typical business planning challenge in the context of integrated financial- and cost planning and how they are handled within SAP Analytics Cloud.
Problem definition: In various areas of financial corporate planning, or in general planning processes, it is necessary to carry out operating results such as the income statement and the balance sheet in accordance with various accounting regulations. For example, the balance sheet and income statement in Germany are normally composed according to HGB (Handelsgesetzbuch). If the company is also listed on a stock exchange in other countries, the additional regulation exists, to execute the financial reporting additionally in the local GAAP (Generally Accepted Accounting Principles) or according to IFRS (International Financial Reporting Standards).
In general, the main difference between the IFRS and the accounting regulations of the HGB is that the HGB always sees the protection of creditors as their highest priority. On the other hand, IFRS and US GAAP, which is a prerequisite for entry to the New York Stock Exchange – focus on investor protection.
For planning or reporting, this means in detail that individual P&L and balance sheet items are valued differently, depending on the accounting variant. This has an impact on the way in which certain income statement and balance sheet items like Deferred taxes, Realization of profit on long-term contracts, Intangible self-produced goods or Accruals are calculated.
For example, the HGB prohibits the capitalization of self-produced intangible goods, although US-GAAP and IAS / IFRS allow this in certain cases.
The consequence now is, that you either must carry out the calculations of the income statement and balance sheet separately for each required accounting rule and possibly create some independent planning models which then calculate depending on the requirements and are loaded differently via loading processes. Or you can create a joint planning and reporting model and create transition rules that map the transition from HGB to IFRS.
In this case I would like to concentrate on the 2nd procedure of the transition and describe in more detail how this can be implemented with the SAP Analytics Cloud.
Technical Solution: Within the SAP Analytics Cloud, this task can be solved using a so-called “Bridge” dimension. For this purpose, an additional dimension (Bridge) is required in the respective data model in addition to the dimensions which are used anyway (like measures, organizations, Time, Version etc.).
Example : Corporate Finance Model
In this example the SAP Analytics Cloud data model which includes the income statement and balance sheet according to the different accounting regulations, has the following dimensions included: Version (Scenario), Date (Time), I_Company (Organization), I_Finance_Measure (Measures) and the additional Bridge dimension.
The bridge dimension is structured in such a way that the individual accounting rules are structured in a hierarchy of posting levels with additional adjustment elements. The adjustment elements can then be used to store adjustment data entries. This means that all correction postings can also be precisely traced. If a value now is entered as an HGB value, it will be aggregated up to IFRS, if no reconciliation entries have been entered. If a reconciliation entry is made, the aggregation will be corrected and adjusted.
If an adjustment booking has been entered, this will be calculated and added to the next accounting regulations rule. Of course, these adjustment bookings can be used in combination with all versions (Budget, Forecast etc.).
These adjustment bookings or transfer bookings can be entered manually for each P&L or balance sheet item. But it is also possible to do this using small calculation logics named DataActions. In this case, it is possible to add so-called DataActionTrigger to the input and analysis reports and use these buttons to execute the calculation logic in the background.
In this example, reconciliation and adjustment entries are made for 3 accounts. These can be created separately in several DataActions or they can all be used together in one. In the specific case, a correction entry with -50% is posted as an adjustment for the balance sheet item “Income from other investments”. The correction percentages could be different, or it is also possible to read out the percentages from a matching table or model.
Variance analysis report:
Outlook: The reconciliation with adjustment and correction entries can of course be used for all possible reconciliations. From Local GAAP according to IAS or IFRS, even without HGB. Only the bridge dimension needs to be structured accordingly. Additional In many other use cases, dimensions with a posting level are very useful in order to save and track correction bookings.