User Experience Insights
Financial Statement Imbalances in S/4HANA Group Reporting
When we post Journal entries in Group Reporting (GR) module, system will also calculate net income and generate additional entry to post the same. This is when we post journal entries between balance sheet and income statement accounts. i.e. when an entry between balance sheet and income statement accounts leads to an imbalance in the financial statements, SAP S/4HANA system will post a financial statement balancing adjustment entry automatically.
Business Scenario & Solution:
An adjustment to depreciation of machinery involves posting in both the income statement (for Depreciation posting) and the balance sheet (For depreciation Reserve). This causes an imbalance in both the balance sheet and the income statement. The system calculates this imbalance and automatically posts to the Income FS Item (P&L Account) and Retained earnings FS Item (Balance sheet Account). In Group Reporting it is called as balancing adjustments and it is an inbuilt facility provided by SAP so that we need not execute Net Income task as and when we post journals.
Below Financial statements illustrates the scenario:
We have taken the below Sample Trial Balance to explain the scenario:
Based on the above TB, below are the Income statement & Balance sheet
Now post the below journal entry in Group Reporting:
A/C >> 5061200000 – Depreciation Building Dr Rs 20000
A/C >>2012210000 – ACC. DEP. BUILDINGS Cr Rs 20000
Without balancing adjustment, the situation is as below for the income statement & Balance Sheet:
To make the balanced P&L Account and Balance sheet, system will post the below additional line items along with the original Journal entry:
GR70000010 Net Income (or Retained Earnings A/c) Dr 20000
GR70000020 Net income/loss (P&L A/C) Cr 20000
Below is the situation after balancing adjustment automatic postings by the system:
The system posts the balancing adjustment automatically. This ensures that the balance sheet and income statement are posted consistently. Once the adjustment is posted, the two statements balance again.
Point to Note: This automatic posting is nothing but execution of Calculation of Net Income task. So while executing Net Income task, system will not consider these journal entries as the calculation happens at the time of journal entries posting time itself.
Related FS Items Configuration for Automatic Postings:
To achieve this automatic posting, we need to assign the relevant FS Items in the system. To make it as a simple process assign the relevant role to the FS item so that in future you can change the FS Item by changing the Role, if required. In our case, we have considered SAP Delivered Role S-ANI-BS for Balance sheet FS Item and S-ANI-PL for Income-Statement FS Item.
For Balance Sheet FS Item:
SPRO>>SAP S/4HANA for Group Reporting>>Consolidation FS Items configuration>>Specify selected FS Items for automatic postings.
For Profit and Loss Account:
Note: The above solution works for all the Journal entries i.e applicable for the journal entries posted by way of flat file as well.
Conclusion: Once you release the Trial balance data from Universal journal or upload the transactional data through flat file, you need to calculate the net income task from the data monitor. This solution works only when you post a transactional entry where one side of the Accounting entry is Income Statement (Profit & Loss Account) type Account and the other side of the Accounting entry is a Balance Sheet Account. For this kind of postings, the consolidation engine calculates the Net Income/Loss and post it to the FS items as per the configuration explained above. I Hope this helps in understanding the Financial Statement Imbalances functionality in Group Reporting and I look forward for your comments and queries.
Thank You Srihari
Very well presented.