Companies can set up parallel valuation in several accounting principles by using the parallel ledger.
A local business that is a member of a group typically needs to adhere to both local and group accounting principles.
We can set parallel ledger accounting in assets accounting by employing depreciation zones.
According to the relevant accounting principles, we must define the depreciation area.
In our hypothetical scenario, business FR01, a local branch of an international organization, is required to produce financial statements in accordance with both local GAAP accounting principles and group accounting principles (IFRS).
For IFRS, we defined the Leading ledger as “0L,” and for LG accounting principles, the Non-Leading ledger as “2L.”
In order to illustrate the effectiveness of the ledger technique in parallel valuation in assets accounting, let’s look at the main customization steps and a process flow.
1. Define settings for ledgers
For the company “FR01,” we assigned relevant ledgers accounting principles.
- Ledger 0L:
- Ledger 2L:
2. Define the areas of depreciation.
In our example, we established the two depreciation zones listed below:
- According to IFRS accounting rules, depreciation area 1 (0L Ledger group)
- According to LG accounting standards, depreciation area 12 (2L Ledger group)
Both regions Real-time posting of 1 and 12
Please take note:
The system posts in real time to both ledgers in New Assts accounting, therefore the delta depreciation area is no longer required.
3. Identify GL Accounts.
We must assign GL accounts for both the depreciation areas, 1 and 12, in this stage.
Since both sectors have distinct ledgers, we used the identical accounts for both.
Area 1 is covered by the screens below, while area 12 has the same account assignments.
4. Specify the technical clearing account for the acquisition of integrated assets:
The integrated aquisition postings described by SAP and made available through SAP HELP are below.
This definition can also be found by clicking on the eyewear icon before the main customising menu.
The system separates the business transaction into an operational portion and a valuing part for an integrated asset acquisition posting:
For the operational portion (vendor invoice), the system posts a document against the technical clearing account for integrated asset acquisitions that is valid for all accounting standards. Technically speaking, the system creates a document independent of ledger groups.
The system generates a unique document for each valuing component (asset posting with capitalization of the asset) that is only valid for the specified accounting principle. This document is also posted to the integrated asset acquisitions technical clearance account. From a technological standpoint, the system creates records for each accounting principle that are specific to ledger groups.
5. Describe an alternate document type for the posting’s valuation section.
The derived document type is for the valuation posting that is prepared simultaneously with the posting of the vendor invoice. Asset purchase
6. Identify the Asset Class Depreciation Areas
A choice of Asset class 3000
-> Turn off all areas that have been deprecated, excluding Areas 01 and 12.
-> Set the useful life to 2 years for area 01 of depreciation and 4 years for area 12 of depreciation.
Business Case for Parallel Ledger Valuation, Case Seven
Assets must be reported and accounted for by the company FR01 according to both global and regional accounting standards.
The following flow will be processed in this scenario, and both accounting principles’ posting and reporting will be tracked.
Create an asset, run depreciation after acquisition, and after retirement
7.1 Make an asset
Create a fixture and fitting asset (class 3000) using the straight line depreciation technique for areas 1 and 12.
The usable life in Class 3000 for Area 1 is 2 years.
The usable life in Class 3000 for Area 12 is 4 years.
Asset Acquisition (7.2)
purchasing an asset for 2400 euros
- Operational part (vendor invoice)
valuing component (asset posting with capitalization of the asset)
7.3 Run Transaction for Asset Depreciation: AFAB
posting for 2020’s first five posting sessions.
IFRS asset explorer (0L)
-> Depreciation value posted for ledger “0L” is 500,00 Euros for 5 periods (100,00 Euros per period).
Document for depreciation posted to ledger 0L:
Asset explorer for Local GAAP (2L)
-> Depreciation value posted for ledger “2L” is 250,00 Euros over five periods (50,00 Euros per period).
Document for depreciation filed to Ledger 2L:
7.4 Retirement of Assets
Asset retirement with a 2000 Euro sale price
IFRS accounting principles posting (Ledger 0L)
Gain of €100 for a ledger of €0
Posting to LG acct principles (Ledger 2L)
–> 150 Euros Loss for ledger 2L
-> We have a gain of 100 euros in the IFRS depreciation area and a loss of 150 euros in the LG depreciation region.
We are able to do parallel valuation using the parallel ledgers 0L and 2L in accordance with various accounting principles.
Observations are welcome.