Accrual Engine in S4 HANA 1909: Manual Accrual & how it is processed periodically – Part 1

Accrual processing is a typical and painful period end activity for the business users. SAP has come up with Accrual Engine in S4 HANA 1909 to make accrual processing easier. In this blog series we will discuss on Manual Accrual – how it is configured and how it is processed on each period end. I have divided the complete article into 2 blogs:

Part 1 – that describes the theoretical part of Accrual Engine

Part 2 – We will see a DEMO in the system

What is Accrual Engine:

• Accrual postings belong to the typical period-end closing activities, since the amount of the necessary accruals is not usually known until the end of the period.
• From a technical point of view, the Accruals Management functions build on the Accrual Engine, which calculates the accruals that are posted in Financial Accounting.
• Accruals do not need any separate journal entries but are saved as line items in the Universal Journal with REFERENCE KEY =  ‘ACES4’

Accruals supported by Accrual Engine:

• Manual Accruals

For manual accruals, you enter the data of the business transaction to be accrued or load the corresponding data to the Accrual Engine. The system calculates the amounts to be accrued.

• Purchase Order Accruals

In purchase order accruals, the required data is taken from the Materials Management component, transferred to the Accrual Engine, and automatically converted to accrual items. The system calculates the amounts to be accrued

In this blog series we will discuss on Manual Accrual.

Business needs & Motivation: Advantages of S4 HANA Accrual Engine

The S/4HANA Accrual Engine

1. Is optimized for S/4HANA

• It is fully integrated into the General Ledger:
• All currencies of General Ledger are supported
• The Accrual Engine postings are stored only as line items of the universal journal entry, in table ACDOCA.
• The fiscal year variant of the G/L ledgers are supported.
• Standard FI reversal, e.g. using transaction FB08 or F.80 is supported.
• There is no redundant storage of the postings as original document.
• No reconciliation effort any more with G/L: Transaction ACACTRANSFER ‘Transfer of ACE Docs to Accnting’ is obsolete.

2. There are no summary records in the Accrual Engine:

• No limitation of the number of fields in reporting.
• No separate balance carry forward run required. The G/L balance carry forward is sufficient. Transaction ACACCARRYFORWARD is obsolete.
• Enables Complex Postings – More than two line items are possible by customer-defined of posting schemas.
• Allows optional review and/or approval of periodic accruals at period end.

3. Mass Upload of Accrual Objects is possible:

• Create or Update accrual objects with the total amount – For creating or update accrual objects. The total accrual amount is a required field.
• Create or update accrual objects with periodic amount – For creating or updating accrual objects. The periodic accrual amount is a required field.
• Update periodic amounts only (Quick mode) – For updating existing period periodic accrual objects.

Key Elements:

Delta Logic for Accrual Postings:

You can configure the accrual engine to post in each period the delta amounts compared to the former period or to reverse and post again the full amount:

• If delta posting is configured, the Accrual Engine calculates the amount for the given period and subtracts the amount that was already posted before. Only the delta is posted.
• If full posting is configured, the Accrual Engine first reverses the amount that was already posted. Then the Accrual Engine calculates the amount for the given period and posts this full amount. Both, reversal and full posting are done in the given period.

Journal Entries: For Accrual Transaction Type PP-Periodic Posting 

COMPLETE POSTING

• 1^st Periodic Posting

Dr Offsetting Account / COST Account

Cr Accrual Account / B&S Account

• 2^nd Periodic Posting

Reverse previous period posting

Dr Accrual Account / B&S Account

Cr Offsetting Account / COST Account

Post the Accrual amount for current period in the same JV

Dr Offsetting Account / COST Account

Cr Accrual Account / B&S Account

DELTA POSTING

Dr Offsetting Account / COST Account

Cr Accrual Account / B&S Account

Review and Approval:

• Review means: A reviewer can adjust the periodic accrual amounts that are proposed by the system. If no user performs the review, the system will post the proposed amounts.
• Approval means: An approver can approve or reject the periodic accrual amounts that are proposed by the system. If nobody approves the amount, the system will post no accruals for this accrual object.

Accrual Transaction Types – Different types of Posting:

• IP – Opening Posting
  When an accrual object is created, the total amount can be posted.
• PP – Periodic Posting
  The amount that is calculated by the accrual method for the single periods can be posted.
• FP – Automatic Release Posting (also called Final Posting)
  Reduce the accruals by posting them to some other account, for example a P&L account. This type of posting occurs if the status of the accrual object is changed to Prematurely Finished.

There are other transaction types as well which can be explored as per customer requirement.

Accrual Methods for Accrual Calculation:

• LINEAR – Amount equally distributed through all periods automatically
• UPLD_AMNT – Use amount that was uploaded into the Accrual Engine manually

There are other methods as well.

Configuration Steps:

• Basic Settings:

Step 1: Set Application Component to be Customized

Step 2: Assign Company codes

Step 3: Close Fiscal year in the Accrual Engine

Step 4: Define Accrual Line item type

If you want to use excel upload functionality, ‘Upld Allwd’ checkbox must be ticked

Step 5: Assign Currency type to Accrual line item types

• Accrual Calculation:

Step 6: Define Accrual Methods

In our DEMO, we have used LINEAR & UPLD_AMNT Accrual Methods

• Review & Approval of Accruals:

Step 7: Define Reasons why adjusting periodic amounts

Step 8: Define threshold variant for Review and Approval

• If Accrual amount is less than Lower Threshold, then the accrual object will not be processed by Accrual Engine.
• If Accrual amount is BT Lower Threshold & Upper threshold, Accrual object is auto approved.
• If Accrual Amount is GT Upper threshold, Review and Approval is required

Step 9: Define Time intervals variant for Review/Approval

• Accrual Posting:

Step 10: Define Posting Schema

Symbolic Accounts:

These are different type of G/L accounts that can be used for Accrual Postings.

Step 11: Assignment of Accrual Item types to Posting Schemas

‘Post Deltas’ checkbox unchecked here. That means full posting will take place in each period. Refer to the full posting logic mentioned above.

‘Post Deltas’ checkbox is checked here. That means delta posting will take place in each period. Refer to the delta posting logic mentioned above.

Step 12: Define Accrual object categories

Step 13: Define number ranges for Accrual Object Categories

Step 14: Assign number ranges to Object Categories

Step 15: Account Determination for Manual Accruals

This ends Part 1 of this series. We will discuss on the following in Part 2:

• DEMO in S4
• Batch jobs for Periodic Posting
• Available Fiori Apps

https://blogs.sap.com/2020/12/23/accrual-engine-in-s4-hana-1909-manual-accrual-how-it-is-processed-periodically-part-2/

I hope you enjoyed this article. Please feel free to share your inputs/suggestion/corrections in the comments sections.

Let’s keep learning together.

Cheers

You can reach out to me directly here https://www.linkedin.com/in/theratulchakraborty/