SAP S/4HANA Finance: Understand the Different Options and Nuances of Enabling Parallel Accounting in New Asset Accounting

  • by Ravish Prabhu, SAP FI/CO Senior Consultant, Infosys Limited
  • Phani Kiran Bandaru, SAP FI/CO Consultant, Infosys Limited
  • January 18, 2017
Learn about the configuration options available in SAP S/4HANA Finance to set up parallel accounting aligned to different accounting principles, especially when you are migrating from classic Asset Accounting (FI-AA), a parallel accounts approach, to the new FI-AA module.
Learning Objectives

Reading this article, you’ll learn:

  • Features and functionalities of parallel accounting approaches (accounts, ledger, and dual) in SAP S/4HANA Finance new Asset Accounting (FI-AA)
  • The parallel accounting approach to use while upgrading from SAP ERP Central Component (ECC) 6.0 classic General Ledger (G/L) using the accounts approach to the SAP S/4HANA Finance system
  • Setup of relevant asset accounting configurations for the parallel accounting approaches
  • Accounting flow and differences in SAP system postings in various asset life cycle scenarios between the accounts approach and dual approach
Key Concept
The SAP S/4HANA Finance system provides a transparent, real-time, optimized IT solution for implementation of the Asset Accounting (FI-AA) module. It provides comprehensive standard and customization options for a business to monitor, control, and report property, plant, and equipment transactions. In SAP S/4HANA Finance, new FI-AA is introduced with features such as real-time acquisition and production cost (APC) postings, ledger-specific postings, parallel accounting that supports accounts, and the ledger or dual (accounts plus ledger) approach.

Large businesses that have operations in multiple geographic areas have to comply with varied accounting regulations as per law. With International Financial Reporting Standards (IFRS) becoming the standard of reporting for consolidated financial statements and a few countries such as China, Mexico, Brazil, and India having their own accounting standards and different reporting periods, it is imperative for large businesses to record daily transactions in more than one accounting principle.

These large corporations are required to report consolidated financial statements as per IFRS or US Generally Accepted Accounting Principles (GAAP) regulations and also need to prepare financial statements of their subsidiaries per local GAAP and tax accounting requirements of their country of operation. These different accounting guidelines necessitate assets to be valued and reported differently.

To begin with, we describe different business functions in the asset life cycle along with certain key concepts such as asset class and chart of depreciation.

If you are already familiar with asset-related business functions, you can skip to the section “SAP S/4HANA New FI-AA.”

The Business Process in FI-AA

An asset can be tangible or intangible property owned by a company that is expected to provide future economic value and cash flows. The tangible assets in the business include land, machines, furniture, equipment, and hardware. Intangible assets could be patents, copyrights, and computer software applications.

An asset life cycle begins with the asset’s acquisition. It may be purchased from an external source or constructed in house. In the case of assets under construction, it needs to be settled to a fixed asset before being put into use. In integrated asset acquisition, assets are capitalized through invoices based on purchase orders (POs). In a non-integrated acquisition, a clearing account is used as an offsetting account instead of a vendor.

After an asset is capitalized, it is depreciated periodically during its useful life. When an asset is no longer needed or used, it is retired. Retired assets can be sold to external customers (integrated with the Accounts Receivable [FI-AR] module) or may be scrapped.

An asset can also be transferred to other companies in the group (intercompany transfer) or transferred to other plants (intracompany transfer). Assets can be revalued to adjust to market price. These business transactions of an asset must comply with international accounting standards, local GAAP, and tax reporting requirements.

Figure 1 shows different transactions in the asset accounting life cycle.

Figure 1
Asset life cycle overview

Ravish Prabhu

Ravish Prabhu is an SAP FI/CO senior consultant at Infosys Limited. He has more than 10 years of IT experience and more than six years of consulting experience in SAP FI/CO. He has been a part of multiple SAP implementations and rollouts in different geographies and is currently working on an SAP S/4HANA Finance implementation project. Ravish holds a bachelor’s degree in computer science and a post-graduate diploma in finance management.

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Phani Kiran Bandaru

Phani Kiran Bandaru is an SAP FI/CO consultant at Infosys Limited. He has more than eight years of IT experience working on diverse areas in SAP Financials and Controlling. He has been a part of multiple SAP projects and is currently working on an SAP S/4HANA Finance implementation project for Johnson Controls. Phani holds a master’s degree in business administration.

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8/24/2017 9:02:01 AM
Loren Schmidt

Great article!

Can we do all of these steps during the migration or do we only do 0L during migration and add the non-leading ledgers as a subsequent activity after system is S4?
8/24/2017 9:01:51 AM
Loren Schmidt

Great article!

Can we do all of these steps during the migration or do we only do 0L during migration and add the non-leading ledgers as a subsequent activity after system is S4?

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