Universal Parallel Accounting in S/4 HANA 2022 (On-Premise) Series (Part 1) – Asset Accounting

This is the first part of Universal Parallel Accounting in the SAP S/4HANA® 2022 Series. In this part 1 we will go through the impacts on Asset Accounting and simplified configuration steps. I have also covered the main business transactions and reporting in SAP FIORI Apps.

Introduction:

Global organizations must submit financial statements according to multiple local accounting principles. However, for Management purposes, Businesses may also prepare financial statements according to a common accounting principle, e.g., IFRS, across all locations.

Different Ledgers are used to distinguish the approaches.

• One ledger captures financial information according to a common accounting principle, so the same approach is used to value assets and inventory, recognize revenue, Profit & Loss, and so on.
• A second ledger captures financial information in accordance with the various local or industry-specific or Statutory reporting requirements, potentially using a different approach to value assets and inventory, recognize revenue, Profit & Loss, and so on.

The ledgers manage which currencies are used for reporting. All journal entries include a global currency and a local currency, and further currencies may be added as required. To avoid on-the-fly conversions, the currencies must be handled consistently across all financial applications.

Motivation for Universal Parallel Accounting:

Before Universal Parallel Accounting, SAP is having no harmonized approach across Financial and Managerial accounting. Each sub-ledger in SAP S/4HANA Finance & Controlling has its own dimensional reporting which leads to complexity in the extraction of common reporting across the different sub-modules.

• Asset Accounting – Valuation and Reporting based on depreciation area to calculate the different values in parallel for each fixed asset.
• General Ledger – The ledgers will store the accounting documents in the G/L module based on different accounting principles. Using the Ledger approach, financial reporting is extracted at the Ledger level.
• Inventory Valuation – Using parallel valuation in Material Ledger, possible to do a valuation of inventory in different currencies. Obviously, it is limited to 3 currencies in Material Ledger.
• Controlling – Version being used to store the plan and actual transactions within controlling. All the management reporting extracted from the Controlling module will be determined at the Version level. Leading ledger was the only source for controlling reporting.

This creates inconsistent structures and each sub-ledger has a set of dimensions in SAP ECC and SAP S/4HANA that resulting implementation, maintenance, and custom reporting efforts during the project. Extraction of management reporting needs a combination of multiple tables across different submodules.

Source: SAP

In SAP S/4HANA 2022 version, SAP introduced Universal Parallel Accounting (UPA) which majorly uses parallel ledgers and parallel currencies to store the business transactions from other submodules which address many business use cases. SAP provides a universal solution for General Ledger and other sub-ledgers which are fully aligned for Financial and Management reporting. Many future innovations in core areas like asset accounting, inventory accounting, overhead accounting, production accounting, and sales accounting will be based on Universal Parallel Accounting.

Source: SAP

Scope documentation available in OSS note: 3191636

What is behind Universal Parallel Accounting?

Let us understand first what are the main purposes behind Universal Parallel Accounting.

Source: SAP

With Universal Parallel Accounting, you can benefit from the flexibility of the parallel ledgers not only in General Ledger Accounting but also in various sub-ledgers like Asset Accounting, Controlling, and Inventory valuations, etc. It can post different data for each ledger and therefore also display or select data from different ledgers in many SAP S/4HANA Finance Fiori Applications.

Parallel Accounting

2 or more accounting principles can be depicted, allowing you to carry out accounting tasks and closing operations for an entity according to a local accounting principle and a second (parallel) accounting principle, for example, the group accounting principle.

Parallel Valuation

Using Universal Parallel Accounting enables a single business transaction to be recorded with multiple valuation principles across financial and management accounting. This allows a (business unit or) group view on the Journal entry level with real-time currency translation and elimination of intercompany markups, COGS, and revenues on a transactional level as parallel valuation.

Parallel Currencies

Using FINSC_LEDGER, it is possible to define up to ten currencies that can be used across all ledgers and accounting processes in SAP S/4HANA Finance.

Along with the above, there are multiple use cases addressed by Universal Parallel Accounting like a parallel valuation for inventory and asset values, Alternative fiscal variant scenario in Asset accounting, and multiple currencies along end-to-end processes.

Source: SAP

Pre-requisites for Universal Parallel Accounting (UPA):

• Currently, UPA can be activated for customers with SAP S/4HANA 2022 Greenfield implementations only as an optional feature. SAP still has not provided UPA migration tools for SAP S/4HANA Conversion or Upgrades from previous versions.
• SAP provided a new business function FINS_PARALLEL_ACCOUNTING_BF to activate Universal Parallel Accounting in SAP S/4HANA 2022. As of now, Only SAP authorized customers can activate this business function as a pilot release (Corrections provided over the Pilot Note 3207221 )
• Usage of Fiori is necessary to utilize the UPA functionalities and execute the business transactions across the different modules. After activation of the business function, there are certain existing GUI transactions and Fiori apps are obsolete. SAP has provided new Fiori apps that should be considered across the impacted scope.

Central Configuration for Ledgers and Currencies (With UPA):

In SAP S/4HANA, Transaction FINSC_LEDGER is the central configuration for managing the Ledgers, currencies, and parallel valuation. Now it’s not required to maintain currencies in Material Ledger (ML) as a separate configuration, as the ML currencies for parallel valuation will also be managed using Universal Parallel Accounting. The previous limitation of 2 currencies at the controlling area level is no more valid now. After activating UPA, all the Financial currencies will also flow into Controlling reporting.

Group valuation currencies are to be managed as a separate Non-Leading ledger with help of “Group valuation View”. The system will assign  Group valuation (Ctype 11 or 31) or Profit center valuation (12 or 32) automatically to the ledgers.

Accounting Principles will be assigned to each ledger configured in the system to manage parallel valuations.

Features of Universal Parallel Accounting – Asset Accounting

Redesigned Customizing:

Note that below new customizing named “Asset Accounting (Parallel Accounting)” is displayed in IMG, only if Universal Parallel Accounting is active.

The new asset accounting configuration will help us to configure,

• New customizing settings either based on ledger or accounting principle
• Possible to define the validity of depreciation keys per accounting principle
• Manage each depreciation area for all the currencies
• Possible to use new entity “Valuation View” per depreciation area
• Account determination has been simplified and can be configured
• Decoupled status tables from customizing tables (see FIORI app “Make Company Code Settings”)

Customizing Changes with Asset Accounting:

In Asset Accounting, you define valuation views to map valuations in accordance with different valuation rules (for example, according to local commercial or tax laws, or according to international accounting principles). In the valuation view, you can also define rules for calculating depreciation.

Here, we should have a bit of focus on the Valuation view type which manages real-time postings, special reserves, and depreciation postings.

Valuation view settings will be similar to depreciation area rules but simplified in UPA. The depreciation area will no longer be a key field in the new Asset Accounting Architecture.

It is required to assign the valuation views to the accounting principle defined in financial accounting. This integrates and post transactions into accounting principles and ledgers defined within SAP S/4HANA Finance.

Note that all valuation views are independent of each other, even those valuation views that are assigned to the same accounting principle. This means: Changes to the depreciation terms (such as to the useful life, to the depreciation method, or to the depreciation start) in a valuation view do not affect the depreciation terms in other valuation views.

Define depreciation areas in the company code:

In this activity, Depreciation area codification is to be defined and assigned to both ledgers & valuation views within the company code. We can maintain different fiscal year variants for depreciation area and valuation view to manage alternative fiscal year variants.

Technically, Depreciation areas are to be mapped to valuation views as the “valuation view” field is not available in ACDOCA and ANLC in standard.

Assignment of GL accounts required at Valuation View level:

In older versions, the account determination (Transaction Code AO90) in asset accounting is no longer available with UPA functionality. Now, SAP simplified the G/L Account determination and can be maintained on one screen.

Make Cross-Company Code FI-AA Settings per Accounting Principle:

Here, we can manage the assignment of accounting principles to the chart of depreciation and distribution rules to manage Net Book Value.

Make Company Code-Dependent FI-AA Settings per Accounting Principle:

In this step, we can assign a chart of depreciation and accounting principle specific to one company code. Note that you override company code-specific settings that already exist at the accounting principle level in case maintained in both settings.

Specify Amounts for Low-value Assets:

In this configuration, we can manage the maximum amount limits for low-value assets that can be assigned to accounting principles.

Define Layout for Asset Master Record:

In UPA, the screen layout has been modified/simplified for managing fields for asset master data. Classic screen layouts are obsolete.

Define Asset Classes:

Maintenance of asset class is similar to previous releases however “Line-Item Settlement” check box for asset-under construction is no longer available in UPA.  We should utilize the investment Measure option, where assets can only be processed by means of the order or the WBS element, to which they are assigned. Now the settlement postings will be at each ledger.

Note: The below settings are applicable for all company codes

Make Company Code-Dependent Settings for Asset Class:

Considering the above asset class settings which apply to all company codes, we can restrict the settings specific to individual company codes. These settings override the settings you made when defining the asset classes (in Customizing for Asset Accounting under Define Asset Class).

Make Valuation View-Dependent Settings for Asset Class:

The fixed assets of an asset class generally have the same depreciation terms (depreciation key and useful life). Because of this, you do not need to specify the depreciation terms for each fixed asset.

In this activity, you can even define the depreciation terms that are used in the asset class at the level of the accounting principle and the valuation view.

Activate Account Assignment Objects:

Possible to define how account assignment objects (such as cost center, internal order, profit center, and segment) should be handled for postings in Asset Accounting. To control the account assignment in the postings, whether to use it from master data (Identical check) or override (Overwrite in Doc check) during posting.

Define Account Assignment Rules per Accounting Principle:

We configure the assignment of account assignment object to accounting principle. However, if any object relevant to the balance sheet and postings already exists, it is not allowed to deactivate here. Otherwise, it creates inconsistencies during reporting as all the journal entries are not updated with the specified account assignment object.

Earlier, we activate the account assignment object at Acquisition and depreciation postings however, now activation is required at the Cost object level. 

Define Account Assignment Rules per Company Code:

We configure the assignment of account assignment objects limited to company code. However, if any object relevant to the balance sheet and postings already exists, it is not allowed to deactivate in this activity. Otherwise, it creates inconsistencies during reporting as all the journal entries are not updated with the specified account assignment object.

Account assignment objects can be activated either at the accounting principle or company code level. 

For the AUC settlement process, it must have an investment profile configured and assigned to the Investment AUC asset class. This Investment profile will be assigned to the Internal order/WBS master data.

Assignment of Investment profile to Order master data to settle the IO costs to AUC. Considering the IO cost object parameters, the system will automatically create an AUC asset as a standard process.

Settlement profile – Ledger-specific settlements:

UPA functionality allows posting Ledger-specific settlements. This can be handled with the “Ledger specific distribution rules” indicator in the settlement profile. Additionally, we can post the settlement documents to financial accounting with parallel currencies (Freely defined currencies)/ledgers. It also reduced the value receivers to be settled i.e., reduced from 13 receivers to 8 receivers.

Settlement Rules from Internal Order or WBS Elements to AUC can be defined for each ledger specifically.

Asset Transactions with UPA:

In UPA, Asset Master is no longer possible through classic GUI transactions like AS01, AS02, AS03, etc. It should be managed using the new Fiori Application “Manage fixed Assets”. This Fiori App will be used as a single source for creating, changing & posting the asset transactions.

Fiori App “Manage Fixed Assets” consists of new sections for Ledger (managing the ledgers) and Valuation (Depreciation terms) are available in asset master data using the Fiori App.

UPA has introduced the “Ledger” field in AFAB – Depreciation posting. We can able to post the depreciation for all the ledgers in one execution however it needs independent execution if we maintain alternative fiscal year variants else it generates the standard error as below.

In specific to Fiori Apps enabled with UPA, the field “Ledger” is available in the selection criteria for execution of ledger-specific postings.

Fiori App “Asset History Sheet” in UPA active environment where we can see Ledger in selection criteria.

Alternative Fiscal Year Variant Functionality:

During previous versions, SAP has limitations to manage alternative fiscal year variants in asset accounting as part of country-specific local requirements from many customers. However, SAP provided a workaround using OSS Note 2220152 – Ledger approach and Asset Accounting (new): Alternative fiscal year variant for parallel valuation with certain limitations.

As explained in the above use cases addressed in Universal Parallel Accounting, SAP addressed this functionality that manages different fiscal year variants that can be assigned to the explicit ledger. Now representative ledger is not relevant anymore.

Below example provides capitalization assets with different fiscal year variants assigned to multiple ledgers. The system will post and display in reporting according to the period/year mentioned in the fiscal year variant in financial accounting.

While posting external asset acquisition documents, the system will generate an entry view that focuses on payables whereas, in the asset accounting view, it will display the documents based on the sub-ledger specification line item types. Using sub-ledger line item type, the system will identify/differ the nature of asset transactions e.g. Acquisition, Retirement, Transfer, and Scrapping, etc.

It also shows documents in different periods (e.g. 0L posted in 01/2023, 2L posted in 10/2022) as per fiscal year variant configuration.

Also note that, earlier, the system posts two separate accounting documents for the entry view and asset accounting view in pre-UPA architecture. However, it posts a single accounting document number for both FI Entry View and Asset accounting view which resolves the traceability issues.

Technical Ledger for the line items in ACDOCA:

UPA will post line items to ACDOCA with different ledgers. Along with this, it also updates technical ledgers, for the statistical depreciation areas which do not post in real-time. Original Ledgers and Technical Ledgers will have a mapping in Table FINS_TECH_LEDGER.

Technical Changes in Asset Accounting

Considering UPA technical architecture, many classic Asset accounting tables are obsolete e.g., ANLA, ANLB replaced with FAAESMD and FAAESMDTDD.

Legacy Migration for Asset Accounting:

SAP provides pre-delivered migration objects to be able to migrate the legacy Asset Master data and Transaction data. We cannot use the classic object anymore with Universal parallel accounting active. Below are the provided objects to migrate the legacy fixed assets during data migration.

SAP Best Practices:

It is important that New Best Practice Content is delivered to accommodate the new customizing required in the Asset accounting area for new functionalities delivered with Universal Parallel Accounting.

This Content needs to be analyzed as part of the project before activation. The selection of scope items must be done based on the decision regarding Universal Parallel Accounting usage.

Conclusion:

The new intelligent asset accounting for SAP S/4HANA integrates with Universal Parallel Accounting and provides extended features of ledger-wise reporting and settlement. It allows alternative fiscal year variants and avoids the maintenance of representative ledgers. ACDOCA stores all the asset transactions but avoids them in BSEG except External Purchases and Sales. The depreciation engine remains unchanged except for execution at the ledger.

These new features provide more flexibility and data consistency between all the SAP S/4HANA Finance and SAP S/4HANA Asset accounting reporting.

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

Blog series on Universal Parallel Accounting with a focus on

• Overhead Accounting by Janet Dorothy Salmon
• Asset Accounting by Astrid Hilgenberg
• Inventory Accounting by Janet Dorothy Salmon
• Event-Based Revenue Recognition by Volkmar Zahn and Gerold Wellenhofer
• Production Accounting by Shuge Guo
• Scope Information Note for SAP S/4HANA and SAP S/4HANA Cloud, Private Cloud Edition
• Business Function Documentation

I would like to thank VenkatTalluri & Dharmendra Nemallapudi for their support on this blog.

Thank you for reading the blog and please do let me know your thoughts in the comments if this content helps.

Original Article:
https://blogs.sap.com/2023/02/02/universal-parallel-accounting-in-s-4-hana-2022-on-premise-series-part-1-asset-accounting/