SAP S/4HANA Adoption: Subsequent Implementation of the Parallel Ledger

  • by Gaurav Aggarwal, Lead Consultant, SAP S/4HANA Finance, Infosys Limited
  • September 7, 2017
Learn various SAP S/4HANA adoption options available for companies running the classic General Ledger. Follow steps to introduce the ledger subsequently in a live SAP S/4HANA system.
Learning Objectives

By reading this article, you will learn:

  • The various SAP S/4HANA adoption options available for a company running on the classic general ledger (G/L)
  • Steps to introduce the ledger subsequently in a live SAP S/4HANA system
Key Concept

SAP introduced the parallel ledger concept with the SAP ERP Central Component (ECC) system in 2005, and since then, it is gaining popularity due to its robust architecture. It simplifies the account structure and minimizes the data space needed to store the information supporting multi-Generally Accepted Accounting Practices (GAAP) reporting. Various financial reporting can independently rely on the ledger-specific data to meet regulatory requirements. The parallel ledger concept has been brought into SAP S/4HANA along with other SAP General Ledger functionalities. SAP S/4HANA does not accept the classic general ledger as a way of working; therefore, SAP S/4HANA provides an opportunity for companies to implement the parallel ledger for a financial reporting framework.

In today’s global environment, business is not limited to a single country, and thus, companies need to comply with accounting and regulatory requirements of various countries. The most common frameworks are US Generally Accepted Accounting Principles (US GAAP), International Financial Reporting Standards (IFRS), and country-specific reporting standards such as standards in India, Germany, Brazil, and Mexico. Each reporting framework acts as an accounting principle in the SAP system.

SAP provides two approaches to meet these multi-reporting requirements as represented in Figure 1: the account approach and the ledger approach.


Figure 1
The ledger approach versus the account approach

In the account approach, the chart of accounts is designed in a way that usual business transactions applicable to all accounting principles are stored in a unique range of general ledger (G/L) accounts. Then, accounting principle-specific postings are posted in separate sets of G/L accounts. So the financial reports are prepared using the specific sets of G/L accounts in the same chart of accounts within the same ledger.

In the ledger approach, a separate ledger is used for each accounting principle, but the same set of G/L accounts is used. Financial reports are prepared using the separate ledger set.

Note
The ledger approach makes it easy to roll the results into the consolidation system. The rolling is based on the ledger filter.

The account approach requires a significantly large number of accounts as every accounting principle needs a separate range of G/L accounts. It is also difficult to maintain such a complex chart of accounts. Moreover, if local reporting is in a different fiscal year, the Special-Purpose ledger (FI-SL) would be needed. FI-SL can be replaced by the parallel ledger in the SAP General Ledger. In SAP S/4HANA, FI-SL is not needed. However, if a company wants to continue its old way of working for FI-SL, SAP has not taken away this feature. Using the ledger approach unleashes the true potential of the SAP General Ledger capabilities and SAP S/4HANA platform. It minimizes the number of G/L accounts, and the ledger concept is built into various business transaction flows, such as foreign currency valuation and Asset Accounting (FI-AA), and even in reporting outputs for financial statements and cash flows.

Note
Here are SAP General Ledger migration scenarios offered by SAP in the SAP Business Suite environment:
  • Scenario 1: Merge of FI Ledger.
  • Scenario 2: Merge of FI, PCA, and /or SL Ledger.
  • Scenario 3: Scenario-2 + Segment Reporting (supported by Document splitting).
  • Scenario 4: Scenario-2 + change to ledger solution for parallel ledger Accounting.
  • Scenario 5: Scenario-3 + change to ledger solution for parallel ledger Accounting.

These additional scenarios are offered for subsequent implementation in SAP Business Suite Environment:

  • Scenario 6: Subsequent Implementation of Document Splitting.
  • Scenario 7: Subsequent Implementation of further Ledgers.
  • Scenario 8: Subsequent change from account solution to Ledger solution.

When a company is using the classic G/L in the SAP Business Suite system and wants to use the parallel ledger approach, it can choose the following options while adopting SAP S/4HANA:

  • Migrate to the SAP General Ledger (with parallel ledger functionality) and then to SAP S/4HANA (using scenario 4 or 5)
  • Migrate to SAP S/4HANA activating the SAP General Ledger technically and then add the parallel ledger subsequently (using scenario 7)

The first five scenarios are not applicable to SAP S/4HANA. If you want to use these scenarios, then you have to migrate to the SAP General Ledger before migrating to SAP S/4HANA. Beginning with SAP S/4HANA Enterprise Management 1610 and SAP S/4HANA Finance 1605 Support Package Stack (SPS) 05, SAP has enabled scenario 7 as the subsequent introduction of a further accounting principle. However, scenario 6 is planned for SAP S/4HANA Enterprise Management 1709, and scenario 8 is not yet supported or planned for in SAP S/4HANA.

So what are the use cases for subsequent implementation of the parallel ledger in SAP S/4HANA?

  • An already live business wants to introduce a new accounting principle or ledger
  • A company was using the classic G/L in its source system and has converted to the SAP General Ledger as part of an SAP S/4HANA conversion project and now wants to shift to the ledger approach.

I explain in detail the process to implement the accounting principle and parallel ledger subsequent to an SAP S/4HANA conversion as facilitated from SAP S/4HANA Enterprise Management 1610 or SAP S/4HANA Finance 1605 SPS 05. Figure 2 summarizes the various activities involved in a project for subsequent introduction of the accounting principle and the parallel ledger.


Figure 2
Activities involved in subsequent introduction of the parallel ledger

In my example scenario, I am adding a new ledger ZL copying data from source ledger 0L.

Gaurav Aggarwal

Gaurav Aggarwal is SAP S/4HANA lead consultant at Infosys Limited. He has more than 14 years of experience, including 11 years in SAP Finance. He has expertise in both SAP FI and Controlling (CO) with integration to other modules in manufacturing and process industries. He is a chartered accountant and SAP Certified Financial Consultant. He holds a bachelor’s degree in commerce and is a techno-functional expert with thorough knowledge of the necessary ABAP for functional experts. He is a veteran in G/L, AR, AP, banking, FA, Travel Management, and closing cockpit and has handled greenfield implementation, upgrades and conversions, rollouts, and support projects. 

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