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Parallel Valuation in Asset Accounting
Many companies operate in multiple regions and countries. Therefore they need to report on their fixed assets based on various legal and valuation frameworks. SAP S/4HANA provides the tools and processes to fulfill these parallel valuation requirements. Still, some of those requirements could be technically challenging to meet, such as when different fiscal year variants need to be used in the different valuation frameworks.
The fiscal year variant (FY variant) determines the financial periods and their calendar assignments, which are used to post documents in financial accounting.
For example, one of the commonly used standard SAP fiscal year variants is K4, which matches the calendar periods: period 01 corresponds to January, period 02 to February, period 03 to March, and so on. However, in some countries or industries, it is common to use more specific fiscal year variants, such as the 4-4-5 fiscal year variant. It is frequently used in industries such as retail and manufacturing. In this fiscal year variant, each quarter consists of three periods, consisting of four weeks, four weeks, and five weeks. Such fiscal year variant has a different start and end date than the calendar fiscal year variant, which poses a technical challenge to asset accounting in SAP S/4HANA.
Let’s take for example a company that uses the 4-4-5 fiscal year calendar for US GAAP group reporting, and the standard calendar year (K4) for local GAAP reporting in the various countries in which it operates.
In S/4HANA is possible to assign different fiscal year variants to the different ledgers in General Ledger accounting. It is also possible to have different fiscal year variants in the different asset depreciation areas, which are assigned to those ledgers. However there is a technical restriction that these different fiscal year variants need to have the same start and end date, only the periods could be different. This is described in the OSS note 2220152 - Ledger approach and Asset Accounting (new): Alternative fiscal year variant for parallel valuation.
Since the two fiscal year variants in our example have different start and end dates than the variant used for local reporting, it is not possible to assign them to different depreciation areas within the same chart of depreciation. If you do that, you will get an error message when trying to assign company codes to the chart of depreciation, which is configured this way.
Additional Representative Ledger Solution
The recommended solution is to use an additional representative ledgers. It involves creating additional ledgers that have the FY variant used in the leading ledger and serve as representative ledgers in new ledger groups.
In our example, we will use the leading ledger 0L to represent US GAAP valuation, and two more accounting principles, which represent local GAAP and local tax valuation. The 0L leading ledger will use the 4-4-5 FY variant, which we will call F1. We will create ledgers Z1 and Z2, which will represent local GAAP and local tax valuation and will use FY variant K4. Then we will also create ledgers Z3 and Z4, which will be assigned to the same ledger groups together with Z1 and Z2, but will use the F1 variant, and will be marked as representative ledgers.
Schematically, this looks as follows:
Using this approach there will be no technical error when assigning company codes to chart of depreciation. The ledgers Z1 and Z2 represent the valuation according to Local GAAP and Local Tax, using the K4 FY variant. However, there is still a technical limitation that in Asset Explorer and in other asset reports will be displayed values and periods based on the leading ledger FY variant only. This is standard SAP behavior, as explained in the OSS note 2490222 - Additional Explanation to SAP Note 2220152: Alternative Fiscal Year Variant / Parallel Valuation / Period Determination / Reporting.
As the note explains:
This means that the amounts and periods shown in asset reports are based on the F1 calendar, even for the Local and Local Tax depreciation areas.
The reporting for the non-leading areas should be done from the non-leading ledgers, which use the K4 variant (Z1 and Z2), from table ACDOCA (General Ledger line item table).
This is possible with standard SAP reports, or with customer developed reports from the ACDOCA table, if there are more complex requirements.
Standard SAP reporting can be used via the following menu path in SAP Easy Access:
Accounting - Financial Accounting - General Ledger - Information System - General Ledger Reports - Financial Statement / Cash Flow - General - Actual/Actual Comparisons - Financial Statement: Ledger Comparison.
It is also possible to implement alternative solutions:
a. Change the leading ledger fiscal year variant – if it is possible to adopt variant which has the same start and end date as the one used for local reporting there would be no technical issue.
b. Implement a very complicated solution to create additional company codes with the local FY variant, and develop a program to replicate all fixed asset postings to these company codes, which will be used for reporting. There was an additional paid tool from SAP called Asset Accounting Multiple Calendar Tool, available in previous SAP releases, which automates as much as possible the postings to these “mirror” company codes, but it is not available with S/4HANA. Still, it is possible to develop a similar custom solution, but it would be a major development effort.
The best approach is the additional ledger approach, which is the most cost-effective. Depreciation amounts per month follow the leading ledger calendar in Asset Accounting, however, on a yearly basis, it represents properly all valuations, and on ledger level also the proper periods can be reported.