Ledger Setting Hana

Ledger Setting in HANA 2021.

Multinational companies have to prepare their financial statements as per accounting principles such as Indian GAP, US GAP and IFRS to name a few. It is also called Parallel books. Below are some transactions accounted differently as per accounting principles.

  • Tax treatment
  • Accounting for exchange rate differences
  • Capitalization and revaluation of asset
  • Depreciation calculation
  • R & D expenditure treatment
  • Provisional entries
  • Gratuity Fund or Gratuity grants
  • Revenue or contingent recognition
  • Inventory valuation
  • Valuation of WIP
  • Segmental reporting
  • Goodwill
  • Prepaid Insurance

We have majorly two approaches to handle parallel books in SAP

  1. Account Approach
  2. Ledger Approach
  1. Account Approach

The account Approach is the traditional Approach. It is supported both in ECC and S/4 HANA.

  1. In a parallel account approach, we can create the separate GL accounts for each accounting principle wise for those accounting transactions areas differs from one accounting principle to another accounting principle.
  2. In addition to accounting principle Specific GL accounts, we also create common GL accounts for those accounting transactions areas treatment of accounts which are the same for all accounting principles.
  3. We can prepare the financial statement for specific account principles wise by considering the common accounts plus separate accounts which are created for specific accounting principles
  4. The parallel account approach cannot be used where the financial years are different between a parent company and subsidiary company or between Accounting Principles

  1. Ledger Approach

Ledger represents one set of books. The ledger approach supports maintaining parallel books for each accounting principle wise, where the FY differs between a Parent company and Subsidiary companies, where the FY differs between accounting principles. We can have multiple ledgers to address the different accounting principles and to address the management reporting purpose.

2.1 Leading Ledger

  • The leading ledger is the main ledger and it generally follows the parent company accounting principle requirements.
  • We can define a maximum of one leading ledger in a client.
  • SAP predefined leading ledger is “0L”. Although we can define our own leading ledger it is highly recommended to use the standard leading ledger 0L.
  • Leading Ledger “0L” (Zero L) by default is assigned to all the Company codes in a client.
  • The leading ledger will follow as per the parent company’s fiscal year and posting period variant.
  • Leading ledger integrated with CO (Controlling Module) and logistic modules
  • Leading ledger is used as per parent company purpose to address consolidation, group reporting purpose, and specific parent company accounting principle requirements.

2.2 Non–Leading Ledger

  • Non-Leading Ledgers are used to address the different legal (Accounting principles) and internal reporting purposes.
  • We can have multiple non-leading ledgers for a company code.
  • We can assign multiple company codes to the single non-leading ledgers.
  • Non-leading ledger adopts the first two currency types from Leading Ledger and not possible to change first two adopted currency types but possible to change reaming 8 currency types at Non leading ledger level i.e. you can have different 8 currency types at the non-leading ledger.
  • The non-leading ledger can have different financial years and posting period variants.
  • Each nonleading ledger represents one set of books.
  • The Non-leading ledger, it’s not integrated with the Controlling module and Logistic Module. It means, we can’t post entries directly from CO Module or Logistic modules to the specific Non-Leading Ledger only. The Data always updates to the Non-leading ledger along with the Leading Ledger while posting from CO and Logistic Modules.
  • Not possible to post non-leading ledger-specific entries to Open Item management GLs.
  • Not possible clear to non-leading Ledger specific clearing for Open Item management GL accounts.
  • If one wants to post and clear nonleading ledger specific then activate “Clearing Specific to Ledger Group” and do not select open item management.
  • It is highly not recommended to create a non-leading ledger with the special character @, #, $, %, ^, &, *, (,)! It may give a dump.

2.3 Extension Ledger

An extension ledger is used to post delta values on top of the underlying ledger. The underlying ledger/Base Ledger should generally be a standard ledger (but one extension ledger can also be an underlying ledger to another extension ledger.) This is because a delta posting is meaningful only in combination with the original posting. We can introduce extension ledgers at any time and are not required to perform any cutover activities to get historical data.  There are four types of extension ledger- Standard Journal Entries, S-Line Items with technical numbers/deletion possible (Simulation Ledger), P-Line Items with technical numbers/no deletion possible (Predictive & Commitment Ledger), and V-Journal entries for valuation differences.

Below is a limitation with the extension ledger.

  • Extension ledger is not possible to integrate with asset accounting. A separate depreciation area for the extension ledger is not required.
  • Extension Ledger currency types by default adopted from underlying/base Ledger.
  • Extension Ledger FY by default adopted from Base Ledger but not possible to keep a different FY.
  • Possible to keep different Posting period Variant and accounting principles at Extension Ledger Level.
  • Not possible to create a Ledger group by combining both Standard and Extension Ledger. We can create a separate ledger group for extension ledgers only.

2.3.1 Standard Journal Entries

It is used to post manual adjustment entries to address accounting principles and management reporting requirements. For example- manual tax posting and royalty charges posting. It creates a normal FI Document and not possible to delete an FI Document but possible to reverse an FI document.

2.3.2 P-Line Items with technical numbers/no deletion possible

It is also known as a predictive ledger. It wouldn’t create an FI document. It creates technical documents only (The system creates internal documents) and not possible to delete technical documents but can be reversed. The purpose of this ledger is cost center budgeting/commitment, Incoming sales order for margin analysis and Statistical Condition type values updates for Margin Analysis.

2.3.2.1 cost center budgeting/commitment

  • Cost center budget and commitment updates to the Predictive Ledgers.
  • Possible to control the cost center budget i.e., the system can trigger either warning or error messages if expenditure exceeds the budget.
  • Possible to maintain a budget for a combination of cost elements and cost center combinations.
  • Possible to record the commitment while placing the Purchase Orders

2.3.2.2 Incoming sales order for margin analysis

  • It updates sales order information along with Key figures like Sales Qty, Revenue, Cost of Sales, and any other sales Expenses while creating of Sales Order
  • Possible to prepare reports like what is projected revenue, Profitability based on Sales Orders received.

2.3.2.3 Statistical Condition type values updates for Margin Analysis

Possible to update statistical condition type such as employee sales commission, royalty charges to Predictive Ledger for Margin analysis purpose in S/4 2021.

2.3.3 S-Line Items with technical numbers/deletion possible (Simulation Ledger)

  • We can run FX revaluation multiple times before month-end and get to know FX gain or loss.
  • Foreign currency revaluation simulation postings to the simulation Ledger.
  • Possible to run multiple times with simulation mode and it will get deleted previous simulation run.
  • We can extract financial reports along with foreign currency fluctuations before running foreign currency revaluation with real mode.

Customizing setting in S4 HANA 2021.

SAP has given predefined four ledgers 1. 0L leading ledger 2. 2L Non – Leading ledger 3. 0E – predictive ledger for cost center budgeting and commitment and 4. 0C – Predictive ledger for incoming sales orders. Except for 0L, one can create many ledgers.

Summary:

  • While running a report for the extension ledger it shows balances of the base ledger (underlying ledger) +extension ledger.
  • Extension ledger is not integrated with asset accounting.
  • If the non-leading ledger is having different fiscal year variant than the company code’s fiscal year variant then we need to create an additional ledger for asset accounting purposes in our case Y0 and otherwise not needed.
  • Representative ledger checks posting period variant opened or not. If the representative ledger posting period is opened then the system allows posting the entry for all the ledger which belongs to the same ledger group even if another ledger period is closed.
  • If the representative ledger period is closed then the system rejects to post the entry for all the ledgers which belong to the same ledger group even though other ledger periods are opened.
  • If we select the manage posting period option from OBY6 then the system checks whether all the ledgers posting period opened or not in the ledger group and it ignores the Representative Ledger functionality.
  • If the ledger group is having the leading ledger, then always leading ledger is the representative ledger for the specific ledger group.
  • If the ledger group does not have the leading ledger, then we need to specify if any ledger following FY is similar to the Leading Ledger as the representative ledger.

After configuration is done, always run the below option for configuration error checking.

Path :- IMG–> Financial accounting –> Financial Accounting global settings –> Ledgers –> Execute consistency check of general ledger settings

Disclaimer – It is based on my implementation experience and knowledge.