Subsequent Introduction of a Further Accounting Principle in SAP S/4HANA

Simplifying how organizations maintain different accounting principles in SAP S/4HANA

Organizations often have different accounting principles by which they must report and produce financial statements for. They need to maintain multiple sets of books in parallel to satisfy legal requirements accurately, efficiently and effectively.

S/4HANA offers multiple ledger functionality within General Ledger Accounting which enable an entity to maintain and map several ledgers according to different accounting principles.

A leading ledger, parallel ledgers and extension ledgers can be maintained in S/4HANA. The non leading ledgers are fully integrated with the leading ledger and transactions are posted real-time across all ledgers.

To achieve this, S/4HANA differentiates between the different types of ledgers using the concept of leading ledger, parallel ledger (non leading) and extension ledger.

Leading Ledger (0L) represents the main accounting framework used by the organization and is updated in all company codes. Each company code must be assigned to a standard ledger. The leading ledger is integrated with Controlling and thus forms the basis for the actual value flows in Controlling and contains the complete set of line items in the universal journal table.

Non-leading ledger (parallel Ledger) exists alongside the leading ledger. They are managed based on specified accounting principles. When a posting is made to the leading ledger it can be made to all ledgers, to a single ledger or to multiple ledgers. 

Extension ledgers are created with reference to a leading or parallel ledger. They can be used to adjust ledger data without editing the data from the underlying ledger to achieve management reporting for example.

Key changes to S/4HANA parallel ledger functionality

In SAP ECC this business requirement could be achieved through the use of Special Purpose Ledgers that were defined to meet specific business and organizational requirements, for example, in the standard solution, different special purpose ledgers were used to handle profit center accounting, consolidation, and funds management. But there were drawbacks with the solution and it could be complex to set up and maintain. 

The introduction of the ‘New’ General Ledger introduced an improved approach to multiple ledger accounting with the concept of parallel ledgers. Within S/4HANA the introduction of the universal journal and the underlying financial data model changes that accompany S/4HANA enables all financial data to be captured in one place rather than across multiple tables as it was in SAP ECC. This simplifies the database structure and removes the technical barriers that often made parallel accounting difficult in the past.

In S/4HANA the ledger concept is simplified and fully integrated enabling multiple ledgers to be maintained simultaneously.

Once you’ve migrated your system to S/4HANA you can then implement a subsequent accounting principle.

What does that mean for the user?

The changes to General Ledger provide S/4HANA users a simpler, slicker method of producing financial statements according to different accounting principles such as IFRS, US GAAP or local legal requirements. 

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