UPA-High Level Overview

1. High-Level Summary and Context

This document contains the decision rationale for the usage of Universal Parallel Accounting

• Ledgers?in SAP S/4 Hana are an area in the general ledger application that stores accounting documents based on different accounting principles.
• Leading Ledger-?At a minimum, you’re required to have a leading ledger, which always is called 0L and which represents the main accounting principle from a group point of view.
• Non-Leading Ledger-We can have as many nonleading ledgers as required, to represent, for example, local accounting principles, local taxation rules, and so on.
• S/4 Hana-Non-leading ledgers are fully integrated and posted in real-time across all applications. So, let’s examine how you can configure ledgers in?S/4 Hana.
• Activation/Setup must define which ledgers are required in your organization from the beginning.
• Main accounting frameworks-

- Europe-International Financial Reporting Standards (IFRS)

- United States-US Generally Accepted Accounting Principles (US GAAP). Most big US companies opt for US GAAP for the leading ledger, then many of them have IFRS in a non-leading ledger.

- In addition, a wise approach is to set up non-leading ledgers that represent local GAAP and local tax rules for companies with significant international footprints.

?Parallel ledgers helped us to fulfill the reporting requirements according to different GAAPs. In addition, SAP provided the option to add parallel “management” valuations represented by additional currency types for legal valuation and group valuation. However, these solutions had some shortcomings since currencies and ledgers were not consistently supported across the different sub-ledgers (specifically Material Ledger, Controlling and Asset Accounting). This led to additional period-end closing activities to adjust the local GAAP values, additional configuration, and cumbersome filtering of values in reporting, since the additional currency types were part of the leading ledger.

Universal Parallel Accounting

Universal Parallel Accounting provides a?harmonized?architecture for ledgers and currencies. This provides a foundation for calculating and posting values per ledger and currency along end-to-end processes. This will be the baseline for future innovations in the area of Finance such as?Value Chain Analysis?and Transactional Carbon Accounting.

2. High-Level Architecture Overview

Listing of the relevant business process, application, or environment that the decision is affecting

• Parallel Valuation(Non-Consolidated)- Means consistent calculation and posting of values for legal ledgers, e.g. Group GAAP and Local GAAP.

- Asset Accounting- Asset capitalization according to different GAAPs. AuC settlement per ledger and – optionally – ledger-specific settlement rules,?.

- Controlling- In some of the Management Accounting processes like During distribution, and assessment, the values in the leading ledger values were posted in all ledgers, meaning that the sender values were not cleared properly in the second GAAP. When companies are required to perform actual costing according to parallel GAAPs.

- Actual Costing- Cost rate calculation and actual costing are done per ledger with Universal Parallel Accounting and thus allow to perform actual costing for only one ledger or even both ledgers in parallel. In the selection screen for a costing run with the link to the ledger that will be updated when actual costing is complete.

• Alternative Fiscal Year (Country specific)-If we are operating in the countries where we need to have a different Fiscal Year than the Group Fiscal Year. In India April to March, US June to May.?
• Parallel Valuation (Consolidated-Group Valuation)-Helps to eliminate Intercompany profits in real time for the Group Level Reporting.
• Multicurrency Capabilities- Even though we had the option to have 12 Currencies in S4 but in Material Ledger it was still 3 Currencies, now this has been integrated with Currency settings.

3.?? Detailed Design and Strategy

Detail which alternative of recommendation is put forward for decision.

• Asset Accounting-

- Each Depreciation Area is handled in all currencies.

- New Entity Valuation View has added Ledger/Depreciation Area Vs Accounting Principle/Valuation view.

- Validity of Depreciation Area is defined per Accounting Principle

- New simplified Account Determination

- All Settings done per Ledger or Accounting Principle

• Controlling- Overhead Costing

- Overhead calculation will run per ledger, it is possible to start the period end run for several ledgers at once.

- Base values for overhead calculation are ledger-dependent, overhead percentages are ledger-independent,

• Controlling- Product Costing

- Periodic and event-based overhead calculation is supported

- Production scenarios, using event-based WIP, event-based overhead calculation has to be used.

- Settlement will calculate and post values per ledger/ currency, it is possible to start the period-end run for several ledgers at once. As we have the new parameter to activate ledger-specific Settlement.

- Ledger-specific Distribution Rules could be maintained.

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- Costing Variant-Per Ledger

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• Controlling-Material Ledger

- Material Ledger- SAP S/4 Hana supported multiple approaches to product cost planning, covering group valuation, profit Center valuation and legal valuation, but did not support multiple material prices for different legal valuations. The business function “parallel cost of goods manufactured” delivered alternative views in Actual Costing, but not for the standard costs or variance analysis.

- Central Configuration of Ledgers and Currencies

- Actual Costing-

Actual Costing in Local GAAP only country-specific requirement.

Actual Costing in all GAAPs-Actual costing is performed in all ledgers and actual cost rates are calculated in all ledgers.??

4.?? Limitations of UPA

• General Restrictions-

1. For Pilot Customers will be selected by SAP only.
2. Level of Activation is at the system level not at Org Structure Level. So will be not able to revert once activated.
3. Not?possible in SAP S/4HANA (on-premise) 2022. Activation of Universal Parallel Accounting business function with a new implementation in a system in which no data has been posted yet.?
4. As of now, Universal Parallel Accounting is supported for the following countries: USA, Germany, France, Japan, and Romania.
5. If universal parallel accounting is activated in your source system, only the valuation of the leading ledger is taken into account in your Central Finance system. Activating universal parallel accounting in your Central Finance system is not part of a standard scenario and the potential results of doing so must be considered carefully by the project team.

• Logistics-

1. Classic intercompany processes are not supported in combination with Group Valuation. Please use the Advanced Intercompany business processes instead.?
2. The elimination of intercompany margins is supported for Advanced Intercompany Sales and Stock Transfer?processes. For other intercompany processes, the elimination posting logic is not available yet. For more information, see?Advanced Intercompany Sales?and?Advanced Intercompany Stock Transfer.

• Fixed Assets

1. ALV Reports are not enabled for Universal Parallel Accounting, instead SAP FIORI analytics reports should be used.
2. Independent asset under construction settlement is obsolete, instead, asset under construction must be based on an investment measure in Investment Management (IM) with a primary cost object assigned (such as a WBS element (project)
3. Post impairment and new valuation (AR29N) is not in scope, instead manual revaluation posting

• Controlling-

1. Classic KP26 which is replaced by Manage Cost Rates.
2. Classic Assessment/Distribution are not supported only Universal allocations will work.
3. Result analysis is not supported need to use Event Based Revenue Recognition.
4. A preliminary cost estimate could be created for Leading Ledger only.
5. Top-down distribution using KE28/KE28A is not supported.