The need to provide parallel financial statements to meet the requirements of inter-national accounting standards is growing with the continued globalization of capital markets. Previous SAP releases provided methods to support parallel accounting, but mySAP ERP offers a new approach to help companies reduce the complexity of parallel accounting. The new general ledger (G/L) solution available with mySAP ERP 2004 onward gives you the ability to keep parallel ledgers simultaneously in the new G/L according to different accounting standards. This new method is called the ledger solution.

I’m going to discuss the use of the new G/L ledger solution to model parallel accounting and give examples of how it works. As I explained in my article “Simplify Segment Reporting with the New General Ledger,” the new G/L introduced the concept of leading and non-leading ledgers, which are both used to produce financial statements.

The leading ledger 0L is the main general ledger provided standard in the new G/L in mySAP ERP. Each company has exactly one leading ledger in the new G/L. The leading ledger uses the local currency, fiscal year variant, and posting variant assigned to the company code. In addition to the leading ledger, you can define non-leading ledgers to maintain information for different accounting standards simultaneously.

SAP recommends that you either maintain the main GAAP in the leading ledger or keep the existing GAAP in the leading ledger if you are an upgrade customer. The leading ledger is the only ledger that updates CO and you can define only one leading ledger in the system. When CO is writing data back to FI (e.g., during order settlement or capitalization of assets under construction), all ledgers are updated simultaneously. Figure 1 shows the flow of the process.

Figure 1

Basic components and operation of parallel accounting in the new G/L

The concept of parallel ledgers is at the heart of the new G/L. You keep parallel ledgers for all group and local postings to meet different accounting standards. Each ledger represents one of the accounting standards. The system posts to all ledgers unless otherwise specified by the configuration or the user. Therefore, accounting standard- specific postings are made to specified ledgers only. All accounting transactions (e.g., invoice against receivables, vendor invoice, or material procurement) are posted to all ledgers simultaneously. Valuation differences such as foreign currency valuation, asset acquisitions, and depreciation necessitated by different accounting principles are posted only to the necessary ledgers.

After you activate the new G/L, the system creates the leading ledger 0L automatically. To set up parallel accounting with the ledger solution, you need to create the non-leading ledgers for each of the accounting standards you plan to use for reporting.

Defining Non-Leading Ledgers

To define and activate the non-leading ledgers required by the ledger solution, follow menu path Financial Accounting (New)>General (New) >Financial Accounting Basic settings(New) >Ledgers>Ledger>Define Ledgers for General Ledger Accounting.

Create the ledgers at the client level (Figure 2) and then activate and assign them to relevant company codes (Figure 3). You must specify the local currency defined in the leading ledger as the local currency in the non-leading ledgers as well. The same is the case for the second and third currencies. In other words, you can have multiple currencies in the non-leading ledgers only if the leading ledger has them also.

Figure 2

Define ledgers for general ledger accounting

Figure 3

Define and activate non-leading ledgers

You can assign a different fiscal year variant and posting variant to the non-leading ledgers so that you can comply with various accounting principles (Figure 3). The use of different fiscal year variants in the same company code was only available in the Special Purpose Ledger (FI-SL) in previous versions. To define and activate non-leading ledgers for these variants, follow menu path Financial Accounting (New)>General (New)>Financial Accounting Basic settings(New) >Ledgers>Ledger>Define and Activate Non-Leading Ledgers.

In Figure 3 Company Code 1000 has fiscal year variant V3 for Ledger N1. Since the fiscal year variant of company code 2000 is not specified here, it uses the one from the leading ledger. Unlike company code 2000, company code 1000 cannot have parallel currencies for ledger N1 since the leading ledger does not have any. You can also use different posting variants for each company and ledger combination. For this you need to populate the last column in Figure 3 labeled Var. with the posting variant required.

When you create a ledger, the system automatically creates a ledger group with the same name. You can change the name of the ledger group or you can combine any number of ledgers in a ledger group. Ledgers in the ledger group are combined for joint processing in a function. Each ledger group has only one representative ledger used to determine the fiscal year variant at the time of posting and posting period control. If the ledger is not a representative ledger with a closed period and the period for the representative ledger is open for posting, the system posts to all ledgers in the group.

I will now show you how the system updates the parallel ledgers simultaneously. In my example, ledger 0L is used for local GAAP, N1 is used for IFRS, and N2 is used for US-GAAP reporting. Ledger 0L is the leading ledger whereas N1 and N2 are non-leading ledgers. Suppose that IFRS (ledger N1) requires a different fiscal year variant than local ledger (ledger 0L) for company code 1000, whereas US GAAP accounting standard (ledger N2) requires the same fiscal year variant as local accounting standards. The invoice from the vendor is posted against the expenses. All ledgers update simultaneously and the system creates one document for each ledger. Figure 4 shows the leading ledger posting, which is the basis for local GAAP reporting. Figures 5 and 6 show the postings to the non-leading ledgers. Note that the posting period for ledger N1 in Figure 5 is 6 and not 9. This posting provides the basis for IFRS reporting. In Figure 6 the posting to ledger N2 is the same as to ledger 0L. The system creates three documents, one for each ledger. To tab between the ledgers, click on the Other Ledger button. Note also that only Figure 4 includes the assignment to Profit Center, Cost Center, and Segment. The other ledgers do not update CO.

Figure 4

Posting to the leading Ledger 0L

Figure 5

Posting to the non-leading Ledger N1

Figure 6

Posting to the non-leading Ledger N2

The new G/L provides two new transactions for adjustment and correction postings, FB01L and FB50L, for the ledger solution. FB01L corresponds to the complex posting FB01 and FB50L to Enjoy SAP transaction FB50. With these special transactions, if you enter a ledger or ledger group in the Ledger Group field, the document is posted only to ledgers in the ledger group specified (Figure 7).

Figure 7

Use new transaction code FB01L to assign a ledger to a ledger group in the new G/L

Next, I’ll explain how the ledger solution for parallel accounting works with currency valuation and in asset accounting.

Foreign Currency Valuation with Parallel Ledgers in the New G/L

The new currency valuation program in the new G/L is FAGL_FC_VALUATION. Use this program to perform foreign currency valuation for the creation of your financial statements according to the different accounting standards. The foreign currency balance sheet accounts and the open items in foreign currency are valuated, and the exchange rate differences are posted to the expense and revenue accounts for exchange rate differences in local currency. The new G/L no longer uses the old program SAPF100. A new concept, accounting principle, is introduced in the new G/L — this is an umbrella term for each accounting approach represented in the new G/L. To post data automatically to your parallel ledgers, set parameters for the accounting principle, the valuation areas, and the valuation methods.

First, assign the valuation area to the valuation method in the configuration (Figure 8). Previously you did this in the selection screen of the currency valuation program. Follow menu path Financial Accounting (New)>General Ledger Accounting (New) >Periodic Processing>Valuate>Define Valuation Areas.

Figure 8

Assign Valuation method to Valuation area

Next create the relevant accounting principles and assign accounting principles to each valuation area. Figure 9 shows the definition of accounting principles and Figure 10 shows the assignment of accounting principles to valuation methods. In my example, I assigned the 01 Local GAAP accounting principle to L0 (local valuation) with the L01 (local valuation) method (Figure 8).

Figure 9

Define Accounting Principles

Figure 10

Assign Valuation Area to Accounting Principle

To define the accounting principle, follow Financial Accounting (New) Financial Accounting Basic Settings (New)>Ledgers>Accounting Principles>Define Accounting Principles.

The last step is to assign the accounting principles to the relevant ledger group. (Figure 11). To assign the accounting principle to a ledger group, follow Financial Accounting (New) Financial Accounting Basic Settings (New)>Ledgers>Parallel Accounting>Assign Accounting Principle to Ledger Groups.

Figure 11

Assign Accounting Principle to ledger groups

As a result of these settings, the system posts the currency valuation differences directly to the relevant ledgers. You no longer need to enter the valuation method as a parameter in the selection screen of the currency valuation program.

Parallel Accounting in Asset Accounting

You can set up asset accounting to comply with various accounting standards such as IFRS, US GAAP, and local GAAP. Valuation differences are due to multiple, diverse asset accounting requirements, usually in the areas of asset acquisitions, depreciation, and retirement. Depreciation areas portray these valuation differences. You assign each depreciation area to a ledger group. For each depreciation area, specify the depreciation terms, useful life, and other parameters. The system then determines depreciation value for each depreciation area using the rules specified. The system posts depreciation and the acquisition and production cost (APC) values separately for each depreciation area to the assigned ledgers.

A wizard is available to help set up parallel valuation in Asset Accounting when you use the new G/L. The wizard is located under Financial Accounting (New)>Asset Accounting>Valuation>Depreciation Areas>Set up Areas for Parallel Valuation.

To set up parallel accounting in Asset Accounting, you need to create the relevant depreciation areas and ledger groups. Depreciation area 01 is the master depreciation area. You post the depreciation values of depreciation area 01 to all ledgers. Suppose that the master depreciation area 01 valuates according to your local accounting principles, whereas depreciation area 35 uses valuation according to IFRS. You should create a new depreciation area that contains the difference between areas 35 and area 01. Using this new area, you post the APC differences to the ledger group that you use for IFRS valuation. Area 35 posts depreciation to the same ledger group as well.

The first step of the parallel accounting is to assign the master depreciation area to the ledger group. In this step, assign the master depreciation area 01 to the ledger group 0L. Note that the ledger group of the master depreciation area should contain the leading ledger. This updates the values in CO so you can see the depreciation values by cost center (Figure 12).

Figure 12

Make sure the ledger group of the master depreciation area contains the leading ledger when you Assign Master Area to Ledger Group

As a second step, assign the depreciation area 35 that is used for IFRS valuation to ledger group N1 (Figure 13).

Figure 13

Assign Depreciation area to the Ledger Group

The system needs a delta depreciation area that shows the difference between local and parallel valuation and posts these differences in the ledger group for parallel accounting. In my example, I created depreciation area 80 as a delta depreciation area. Posting control in the derived depreciation area is set so that you can post either APC only or Only APC Directly. The real depreciation area 35 for IFRS valuation posts only depreciation (Figure 14). Both depreciation areas use the accounts of the master depreciation area. You do not need to adjust the account determination.

Figure 14

Enter posting controls for the Delta Area

Next, I’ll show you the depreciation run after setting up parallel valuation in Asset Accounting.

In my example, the asset 3407 has an acquisition value of 100 EUR to be depreciated straight line. Suppose that local accounting standards require this asset to be depreciated in five years (in other words, 20 EUR each year) whereas IFRS requires it to be depreciated in two years (in other words, 50 EUR each year). As you see in Figure 15, the depreciation run calculates the depreciation values according to different accounting standards. As I noted earlier, depreciation area 01 valuates according to local accounting principles, whereas depreciation area 35 uses valuation according to IFRS. All ledgers are updated simultaneously and the system creates one document for each ledger. Figure 16 shows the depreciation posting to leading ledger 0L and the non-leading ledger N1. You can see that the depreciation run updates the specified ledgers only.

Figure 15

Review Depreciation Posting Run to verify updating of specified ledgers only

Figure 16

Review ledgers 0L and N1 to confirm correct updates