Introduction
Understanding the following fundamentals is crucial for the concept of parallel accounting:
Parallel accounting is what is it?
An Account-Based Approach is what?
What is the ledger-based methodology?
You may, of course, use the Configuration Guide alone to learn how to configure parallel accounting topics, but if you’d want to learn more about parallel accounting and comprehend it better, this will be a big help. Let’s respond to each of these queries.
Parallel accounting is what is it?
Many of you may already be aware that all worldwide businesses are required to prepare financial statements using several accounting rules (Accounting principles – is an accounting standard, e.g. IFRS or Local GAAP). This raises the general issue of why businesses are required to submit financial statements using various accounting principles.
When a corporation is a member of a group, something occurs. As an illustration, Coca-Cola in the USA and Coca-Cola in Russia are two different local branches of the same business. Such a corporation, which has branches in other nations, must abide by the following statements:
– One local reposting peculiar to this area (for example, in the USA – GAAP)
– the second reporting group (for example IFRS)
We shall apply parallel accounting in this instance.
Using local accounting rules in addition to group accounting standards, parallel accounting enables valuing and closing transactions for a company code.
You could utilise parallel ledgers, for instance, to perform parallel accounting in your system. In other words, you create financial statements using local accounting standards as well as IFRS or US GAAP.
It’s important to note here:
- SAP offers two choices. – using parallel ledgers and parallel accounts
- In both cases, accounting principles are employed.
- Used exclusively is ledger (0L).
- Several accounting principles are allocated to the leading ledger if an account-based method is utilised.
- In the case of a ledger-based strategy, the ratio between the ledger and the accounting principle is 1: 1.
What exactly is an account-based strategy?
Account-based approach is a parallel accounting solution in which the Chart of Accounts is created utilising several accounting concepts.
Account logic may serve as the foundation for the account-based approach’s architecture. For instance, we choose to apply the IFRS accounting principle to all accounts with the prefix A and the Local GAAP accounting principle to all accounts with the prefix B.
Example of using Prefix: Example of using Suffix:
A – IFRS 0 – Common accounts
B – Local GAAP 1 – Local GAAP
C – Common accounts 2 – Local Accounts
What is a ledger-based approach?
Ledger-based approach – it is an option of using Parallel Accounting where each Ledger assigns to Accounting principle.
Example of a ledger-based approach:
0L ledger – IFRS
2L – Local GAAP
TX – Local Tax
Configuration steps Parallel Accounting (example on Ledger-Based approach)
Stay in the same configuration step and go to the tab “Company Code Settings” and make the basic settings for the relevant company code.
Example from the system:
2. To complete Step 2, firstly you have to finish Step 4. Step 2: Go to the last tab “Accounting principles for Ledger” and maintain values
Example from the system:
Save the configuration once it is completed
Example:
