Discounting of Long-Term Assets and Liabilities in SAP S/4HANA Public Cloud

[Shakeel_Ahmed]

Objective

This blog will help you understand overall purpose and processes of Discounting of Long-Term Assets and Liabilities in S/4HANA Public Cloud. It will explain in detail about the importance, configurations, master data update and process execution itself.

 Key Points

• What Is Discounting? Discounting is the process of determining the present value of a payment that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow.

• Discounting of Long-Term Assets and Liabilities function is used where we have single financing component. If For revenue contracts with more than one significant financing component, please use the revenue recognition applications. For discounting of lease contracts, please use SAP Contract and Lease Management.


• It is used for Long Term Accounts Receivable or Payable due to some contract


• It posts to original Accounts Receivable (Reconciliation Account) and Accounts Payable (Reconciliation Account).


• Accounting documents generated from this function can be seen in Manage Line Items in General Ledger app, but it will not be reflected in Manage Customer Line Items app and Manage Supplier Line Items app.


• It helps mainly in IFRS 9, 15, and 16 reporting.


• Basically, you are enabled to treat your long-term assets and liabilities as a loan


• This functionality is available with Advanced Valuation function


• If you are a consultant with not much accounting experience, you might find this process a bit funny as it reduces the receivables and revenue initially and then on monthly basis post the interest revenue. 😊


• See limitation and activation & Deactivation possibility for Advance valuation. Kindly follow Advanced Foreign Currency Valuation

Configuration & Master Data

1. Define Interest Indicator

You can define your own indicator or use the standard ones

2. Define Interest Rates 

It will not be captured in TR

 

3. Define Financial Statement Versions

(In Manage Global Hierarchies app)

We need to assign ACCREC and ACCREC_OTH semantic tags for Accounts Receivable and ACCPAY and ACCPAY_OTH semantic tags for Accounts Payable to G/L Accounts in Financial Statement version in Manage Global Hierarchies App.

These sematic tags are also configured in config for this function integration.

 

4. Assign Financial Statement Versions to Accounting Principles

You can assign your own financial statement version or use the standard one.

 

5. Activate Advanced Valuation

You can activate for specific accounting principle as per your requirement.

 

6. Define Aging Increments for Advanced Valuation

You can define your aging increment or use the standard one

 

7. Define Discounting Rules

Semantic tags assigned here will be consider during process execution and it shall also be mapped to your financial statement version against your required g/ls.

 

Similarly, you need to define for step 20 for Accounts Payable.

It is defined without risk class. We do not need to maintain risk class for supplier master data.

 

8. Manage Default Account Assignments

Default cost center setting for expense G/L

9. Risk Class Update in Business Partner via Maintain Business Partner App

Business partner is updated with Risk Class, it is only required for Customer masters. It is helpful in determining the rate of interest. It is Not applicable for Suppliers/ accounts payable.

Process execution: Discounting of Long-Term Assets and Liabilities

1. Your customer invoice and supplier invoice shall be posted.

It is assumed that due date of these receivable will be more than 1 year, otherwise this program will consider that it is a current asset or liability. Post your invoice from Sales side or use Create Outgoing Invoice app for creating AR invoice without Sales Order.

Or post your invoice from Procurement side or use Create Incoming Invoice app for creating AP invoice without Purchase Order.

2. Discounting of Long-Term Assets and Liabilities: Program execution

App: Schedule General Ledger Jobs

Job Template Post Discounting of Long-Term Assets and Liabilities

You see the details one by one

Initial entry accounting entry

This posting can be considered as revenue and receivable has been reduced with the mentioned value.

It posts to original Accounts Receivable and Payable reconciliation G/Ls. These Accounting documents can be seen in Manage Line Items in General Ledger app, but it will not be reflected in Manage Customer line items app and manage supplier line items app.

 

Monthly Accounting Entry: As Interest earning posting.

 

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Related Blogs:

Balance Sheet Reclassification and Regrouping in S/4HANA Cloud | SAP Blogs

Advanced Foreign Currency Valuation in S/4HANA Cloud (Cloud ERP) | SAP Blogs