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Author's profile photo Sarah Roessler

Universal Parallel Accounting in SAP S/4HANA

This blog introduces the topic of Universal Parallel Accounting which was delivered in SAP S/4HANA Cloud, public edition 2105 and will be delivered to SAP S/4HANA 2022 and SAP S/4HANA Cloud, private edition customers in October 2022 (for a general product update on SAP S/4HANA 2022, please refer to this blog by Ulrich Hauke).

I will outline the motivation for the delivery, the use cases addressed by Universal Parallel Accounting and discuss how you can judge the impact on your SAP S/4HANA implementation.

Motivation

Parallel Accounting has been supported by SAP for some time, initially using parallel accounts and later using parallel ledgers. It allowed customers to fulfill their reporting requirements according to different GAAPs. In addition, SAP provided the option to add parallel “management” valuations represented by additional currency types to distinguish a legal valuation from a group valuation. However, these solutions had some shortcomings since currencies and ledgers were not consistently supported across the different subledgers (specifically Material Ledger, Controlling and Asset Accounting). This led to additional period-end closing activities to adjust the local GAAP values, complex configuration, and cumbersome filtering of values in reporting, since the additional currency types were part of the leading ledger.

Universal Parallel Accounting provides a harmonized architecture for ledgers and currencies. This provides a foundation for not only calculating and posting values per ledger and currency along end-to-end processes, but also the baseline for future innovations in the area of Finance such as Value Chain Analysis and Transactional Carbon Accounting.

Use Cases

Let’s take a closer look at the use cases currently covered by Universal Parallel Accounting.

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Figure 1: Use Cases addressed by Universal Parallel Accounting

Support of parallel legal valuations means consistent calculation and posting of values for legal ledgers, e.g. Group GAAP and Local GAAP. This worked already before Universal Parallel Accounting in some processes, e.g. depreciation or Universal Allocation, but not in many of the Management Accounting processes. During distribution, assessment and settlement, the values in the leading ledger values were posted in all ledgers, meaning that the sender values were not cleared properly in the second GAAP. This “shortcut” led to issues in processes like asset capitalization according to different GAAPs or when companies require to perform actual costing according to parallel GAAPs. This is solved now with Universal Parallel Accounting where we support settlement per ledger and – optionally – ledger-specific settlement rules, as shown in Figure 1. For a more detailed description of the changes in the area of Overhead Accounting, please refer to the blog focusing on Overhead Accounting in the context of Universal Parallel Accounting by Janet Salmon.

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Figure 2: Ledger-specific settlement rules

Actual cost rate calculation and actual costing is done per ledger with Universal Parallel Accounting and thus allows to perform actual costing for only one ledger or even both ledgers in parallel. Figure 2 shows the selection screen for a costing run with the link to the ledger that will be updated when actual costing is complete. For more details on the impact of Universal Parallel Accounting in Inventory Accounting, please refer to the blog focusing on Inventory Accounting in the context of Universal Parallel Accounting by Janet Salmon.

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Figure 3: Actual Costing Run per ledger

When talking about legal requirements, there is often the requirement to support alternative fiscal year variants for company codes in countries like India, where the fiscal year starts in April and ends in March, whereas financial reporting might have to be done according to calendar year on group level. In the past, the support of alternative fiscal year variants was limited, especially in the area of asset accounting (see note 844029), where the fiscal year has an impact on the required movement types, accounts and the posting itself . These restrictions were often the reason that customers created separate Controlling Areas or made subsequent adjustment postings. These restrictions have been resolved with Universal Parallel Accounting which now consistently supports alternative fiscal year variants as long as the period borders are the same in each fiscal year. For more details on the impact of Universal Parallel Accounting in Asset Accounting, please refer to the blog focusing on Asset Accounting in the context of Universal Parallel Accounting by Astrid Hilgenberg.

In addition to the parallel legal valuations, Group Valuation is supported with Universal Parallel Accounting. In comparison to the existing Group Valuation solution, it is now included in a separate single valuation ledger which allows for simplified reporting and separate closing of this ledger, if required. In addition, it is based on the Advanced Intercompany Sales & Stock Transfer processes and provides an enhanced posting logic. In the new Group Valuation ledger intercompany profits are eliminated in real-time.

The topic of ledgers is tightly connected to currencies – which are another dimension which is crucial for financial reporting. Before Universal Parallel Accounting, ten currencies were supported in the Universal Journal, however, Controlling processes where “only” able to calculate in object and Controlling Area currency, Material Ledger could deal with a maximum of three material ledger currencies and Asset Accounting was tied to the three FI integrated (“BSEG”) currencies. If additional currencies were active in the ledger these were calculated at current exchange rate at the time of the posting which led to often undesired currency effects in secondary processes such as depreciation or settlement – see notes 2894297 and 2344012.

Figure 4: Multicurrency capabilities

With Universal Parallel Accounting, up to ten currencies are calculated and posted in parallel. In line with this, currency configuration is centralized as part of “Define Settings for Ledgers and Currency Types”, making material ledger currency configuration and the configuration of the currency and valuation profile obsolete. We’ll explain how this changes the approach to group valuation in the Inventory Accounting blog.

To sum it up, Universal Parallel Accounting is solving many pain points companies had in the past providing an optimized support of ledgers and currencies along end-to-end processes.

What does this mean for you?

As SAP S/4HANA Cloud, public edition customer you are already using the improved Universal Parallel Accounting architecture and can benefit from current and future innovations to come in this area. In order to recognize and fully leverage the benefits coming with Universal Parallel Accounting, you might want to check out the blog series published in May last year when Universal Parallel Accounting was delivered to SAP S/4HANA Cloud – in  SAP S/4HANA Cloud 2105 for the legal valuations and later on extended for additional use cases, e.g. Alternative Fiscal Year Variant in CE2208 (see release blog for Finance by Ulrich Hauke).

If you are starting an SAP S/4HANA or SAP S/4HANA Cloud, private edition project or are currently in the implementation project, you might want to consider activating Universal Parallel Accounting which will be released with SAP S/4HANA 2022 for Greenfield customers. By doing so, you could make use of the benefits coming with Universal Parallel Accounting right away. However, you need to consider that Universal Parallel Accounting currently comes with a smaller scope compared to what you are used to. The reason for this is twofold – on the one hand, 2022 is the very first release of Universal Parallel Accounting for SAP S/4HANA and SAP S/4HANA Cloud, private edition. On the other hand, a conscious decision was taken to enable strategic solutions such as Universal Allocation, Event-Based Revenue Recognition and Margin Analysis for Universal Parallel Accounting, whereas alternative solutions which do not fit the target architecture such as classic assessment/distribution, classic WIP and variance calculation, Results Analysis and costing-based CO-PA are not supported any longer with Universal Parallel Accounting. The respective configuration activities have been removed from the IMG menu accordingly and their usage is avoided via checks if Universal Parallel Accounting is active.

If you come to the conclusion that the 2022 scope described in note 3191636 is not yet sufficient to fulfill your requirements, you can still consider taking a closer look at Universal Parallel Accounting by e.g. activating it in a sandbox. As you might want to activate Universal Parallel Accounting at a later point in time, we encourage you to keep an eye on the SAP Roadmap Explorer to evaluate when there might be a good point in time to adopt Universal Parallel Accounting. Please also check the roadmap when it comes to transition scenarios which are planned to enable existing SAP S/4HANA customers as well as customers who plan to start without Universal Parallel Accounting to benefit from the innovations coming with Universal Parallel Accounting.

Conclusion

With Universal Parallel Accounting legal as well as management valuation ledgers and up to ten currencies are supported along end-to-end processes resolving many restrictions of the past, improving steering effectiveness and providing simplified configuration and processes. It will be the foundation for additional innovations in the future.

For more information on Universal Parallel Accounting, check out the following links:

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