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10 Best Practices

for Implementing
the New G/L

Aylin Korkmaz
Accenture UK
© 2007 Wellesley Information Services. All rights reserved.
What We’ll Cover …

• What is new General Ledger, and should I implement it?


• 10 best practices for implementing new G/L
• Tips to mitigate migration risks
• Wrap-up

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What is New General Ledger (New G/L)?

• With mySAP ERP 2004, SAP introduced new G/L


• New G/L provides one-stop, integrated reconciliation of
multiple ledgers
Πe.g., the cost-of sales ledger, Profit Center accounting ledger,
and the consolidation staging ledger are combined into a
one-stop ledger
ΠYou no longer have to individually reconcile them

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Comparison of New G/L with Classic G/L

Classic G/L CoGS


Legal Ledger
requirements
New General Ledger supports:

Profit Center Ledger Legal requirements


Management and Mgmt. and Segment reporting
segment reporting Extensibility by industries
Extensibility by customers
Balanced books for any dimension
Parallel sets of books
Special Ledger Fast close
Multi-dimensional, TCO reduction
customer-defined Intl. accounting standards
Compliance & transparency

Industry-Specific
Ledgers
B/S by grant, fund …

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New Features of the New G/L in mySAP ERP 2005
• Migration of existing SAP Data
• Reporting for Line Item Display and Open Item Accounting
• Simulation of the General Ledger View
• Statistical Key Figures
• Comparative Analysis
• Profit Center Derivation
• Archiving
• Local Currency Changeover
• Parallel Valuation Approaches/Transfer Prices for Materials
• Integration with FI-TV (Travel Management), HCM (Human Capital
Management), Public Sector Management-Funds Management
Government (PSM-FM)
ΠCheck the following SAP Notes for release restrictions
f 741821 – Release limitations concerning mySAP ERP 2004
f 852235 – Release restrictions for mySAP ERP 2005
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Should You Migrate to New G/L?

• Does your organization meet any of the following criteria:


ΠAre you planning to use mySAP ERP?
ΠAre you an international company operating in multiple countries and on
multiple continents?
ΠDo you use multiple accounting methods (US GAAP, HGB, IFRS, etc.)?
ΠDo you (have to) perform management reporting by different business
areas, e.g., product lines, line of business?
ΠAre you required to file by segments at period-end according to
SEC guidelines?
ΠDo you produce consolidated financial statements across multiple
legal entities?
ΠDo you spend an exorbitant amount of time reconciling FI and CO during
month-end closing?
Œ Do you wish to reduce the complexity of your organization’s financial
data structure?
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Should You Migrate to New G/L? (cont.)

If you answered “yes” to most of the previous


questions, your company is a good
Solution candidate for new G/L

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New G/L – Additional Key Considerations
• License and upgrade view:
ΠNew customers
f Have a mySAP ERP license. New G/L can be implemented and used.
ΠUpgrade customers
f Have to acquire a mySAP ERP license to implement and use new G/L

• Implementation view:
ΠFinancial processes scope
f Detailed analysis of the target financial processes
f Managing of changes to the financial processes

ΠOrganizational and master data implications


f New master data objects

f Organizational structure mappings

ΠIntegration with other systems


f Outgoing and incoming interface impacts

f Reporting system impact assessment


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What We’ll Cover …

• What is new General Ledger, and should I implement it?


• 10 best practices for implementing new G/L
• Tips to mitigate migration risks
• Wrap-up

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Best Practice 1: Streamline Your Segment Reporting

• Segment reporting is providing financial information by


line of business, or by geographical or management area
• New G/L offers better quality and modeling options for
segment reporting than classic G/L
ΠYou no longer have to wait until period-end close to build your
segments (an expensive and error-prone approach)
ΠSegment information is populated in financial transactions
f Because segment information is stored at the detailed document level,
segment-based balance sheets and P&L statements are available within
standard reporting, saving time and minimizing errors
f Account balances can be reviewed at the segment level, and periodic
activities (e.g., revaluation and balance carry forwards) are
handled with ease

You no longer need to activate a special ledger to show financial


position and performance by segment under company code level
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1 – Streamline Your Segment Reporting (cont.)
• Business Area is also available as an account assignment
field in new G/L
ΠBusiness area can also be used as segment reporting object
Tip
f The business area will be retained in the present form
ΠData and functions will be available in the future
• In the near future, SAP will focus on further developing
functionality based on the Profit Center Entity
• Check SAP Note 321190 for more information on reporting
by Business Area and Profit Center in new G/L
• Fields for Industry Solutions are supported in SAP ECC 6.0

Don't Customer fields can also be introduced for producing


Forget B/S and P&L statements. But only after exploring the
standard fields (Segment, Profit Center, and Business 321190
Area), that can be used.
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1 – Streamline Your Segment Reporting (cont.)

• In new G/L
ΠYou do not activate Profit Center Accounting (EC-PCA)
f Instead, you activate the appropriate Profit Center Scenario
for the corresponding new G/L ledgers
Tip ΠLedger 8A is no longer used
ΠProfit Center Master Data and hierarchies can be used
ΠCheck SAP Note 826357 to learn more about PCA in new G/L

Note 826357

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1 – Streamline Your Segment Reporting (cont.)

• EC-PCA is not active in the corresponding controlling area.


You can still use Profit Center Master Data and hierarchies.
(Transaction code: OKKP) 13
Best Practice 2: Segment Definition and Derivation

• “Segment” is a new cost object which can be used for


segment reporting
ΠSegment information can be populated either manually
or automatically
f Assign segment field in the Profit Center Master Data to
derive segment automatically
f If Profit Center Master Data is not used, custom derivation
rules can be defined with BADI FAGL_DERIVE_SEGMENT
to derive segment automatically
f Manually update segment information at the time of the
financial posting

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2 – Segment Definition and Derivation (cont.)

• It is recommended to populate segment field by


assigning segments to profit centers

Cost Objects Profit


• Cost Centers
Center Segment
• WBS Elements
• Internal Orders

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2 – Segment Definition and Derivation (cont.)

• Segment assignment in the Profit Center Master Data

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2 – Segment Definition and Derivation (cont.)

To Activate Segments:
Solution 1. Define Segments (See next slide).
2. Derive the Segments (i.e., via Profit Center Master Data).
3. Maintain the field status group in the FI accounts. The
Segment field can be found in group Additional Account
assignments (Txn: FBKP).
4. Maintain the field Status of the corresponding posting key
(Txn: FBKP).
5. Maintain scenarios. The segmentation scenario has to be
defined for the corresponding ledger (See next slides).

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2 – Segment Definition and Derivation (cont.)

• Define your segments

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2 – Segment Definition and Derivation (cont.)

• Assign scenarios to ledgers

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2 – Segment Definition and Derivation (cont.)
If Profit Center Master Data is not used, custom derivation
Note rules can be defined with BADI FAGL_DERIVE_SEGMENT

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Best Practice 3: Document Splitting

• Splitting enables line items in the document to be divided


for selected dimensions
Πi.e., segment, Profit Center, and business area
ΠFor example, a vendor invoice posted against multiple expense
lines belonging to different segments
f Vendor and tax lines are split to the corresponding
segments according to the offsetting expense amounts
belonging to each segment

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3 – Document Splitting (cont.)
Document with splitting Document without splitting
PK Segment PC Account Amount
31 SEGMENT 1 PCA1 Vendor 232 PK Segment PC Account Amount
31 SEGMENT 2 PCA2 Vendor 928 31 Vendor 1160
40 SEGMENT 1 PCA1 Postage Expense 200 40 SEGMENT 1 PCA1 Postage Expense 200
40 SEGMENT 2 PCA2 Postage Expense 800 40 SEGMENT 2 PCA2 Postage Expense 800
40 SEGMENT 1 PCA1 Input VAT 32 40 Input VAT 160
40 SEGMENT 2 PCA2 Input VAT 128

Balance Sheet SEGMENT 1 Balance Sheet SEGMENT 1

Assets Liabilities&Capital Assets Liabilities&Capital


Input VAT 32 Vendor 232 Input VAT Vendor

Retained Retained
Earnings (for Earnings (for
expenses) -200 expenses) -200

32 32 0 -200

Balance Sheet SEGMENT 2 Balance Sheet SEGMENT 2

Assets Liabilities&Capital Assets Liabilities&Capital


Input VAT 128 Vendor 928 Input VAT Vendor

Retained Earnings Retained


(for the expense) Earnings (for
-800 expenses) -800

128 128 0 -800 22


3 – Document Splitting (cont.)

• Recommendations on splitting:
ΠDefine your splitting characteristics
f Characteristics that will be used to produce your B/S and
P&L. Define Profit Center and Segment as splitting
characteristics.
ΠZero Balancing Characteristics
f Make sure that you select this option for your splitting
characteristics. Doing so will make sure that a zero balance
is secured in each document.
ΠMandatory Characteristics
f Make sure that you select this option for your splitting
characteristics. Doing so will make sure that the selected
characteristics are populated in each document line.
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3 – Document Splitting (cont.)

• Recommendations on splitting: (cont.)


ΠInheritance РActivate the inheritance
f If no characteristics specified, characteristics will be
inherited from the lines with characteristics
ΠDefault Assignment
f Make sure that you specify a default assignment for cases
where the characteristics cannot be determined
ΠGeneral Ledger Account Assignment to Item Categories
f Revenue, Expense, Balance Sheet accounts have to be
assigned to the right item categories (e.g., 30000, 20000,
and 01000)

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3 – Document Splitting Tip

With ECC 6.0, you can


simulate splitting before
Tip posting the document
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3 – Document Splitting Tip (cont.)

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Best Practice 4: Reporting Functionality

• The extended data structure of new G/L is available in


standard reports
Πe.g., Document view, Line Items report, Balance Sheet report,
Drill-Down reports
• Use Report Painter/Report Writer to create customer new
G/L reports using new G/L table FAGLFLEXT
ΠThere is a new standard report library, 0FL, for new G/L
• Use SAP NetWeaver® BI for more advanced reporting
ΠNew G/L includes a new data source, 0FI_GL_10, for collection
of mySAP ERP data within SAP NetWeaver BI

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4 – Reporting Functionality (cont.)
New General Ledger

Balances for an account are kept by


additional characteristic
(Transaction Code: S_PL0_86000030)

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4 – Reporting Functionality (cont.)
Classic Balance Sheet report also reads from new G/L table

(Transaction Code: S_ALR_87012277)


Use dynamic selections to further
restrict the desired characteristics.
You may need to create various
selection variants to make the
report execution easier.

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Best Practice 5: New G/L Solution for Parallel Accounting

• The need to provide parallel financial statements to


meet the requirements of international accounting
standards is growing with the continued globalization
of capital markets
• Previous SAP releases provided methods to support
parallel accounting, but mySAP ERP offers a new,
simpler approach
• New G/L lets you keep parallel ledgers simultaneously,
according to different accounting standards
Don't SAP considers the ledger solution method equivalent to
Forget the account solution method. They recommend using the
ledger solution method if you have a large number of G/L
accounts. (SAP Note 779251).
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5 – New G/L Solution for Parallel Accounting (cont.)

• Value flow:

Only Specified Ledgers are Updated


All Ledgers Updated Simultaneously New General Ledger ƒ Postings via
new
transactions
0L Leading Ledger FB01L and
FI-AR FB50L
FI-AP ƒ Foreign currency
… Non-Leading Ledger
Valuation
SD Program
MM Non-Leading Ledger FAGL_FC_VALU
PP ATION
PM ƒ FI-AA
… Other Non-Leading Ledgers depreciation
areas

IFRS, US GAAP, Local GAAP


Reports are based on the
corresponding ledger
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Best Practice 6: Set Up Your Ledgers Correctly

• You can define only one leading ledger (0L). Ledger 0L


should be set up as your leading valuation.
Πe.g., US companies should set up 0L as US GAAP ledger,
whereas European companies should use 0L for their IFRS
valuation
• Local Accounting: Normally one ledger is enough for all
countries
ΠNon-leading ledgers are activated for each company code
fParallel ledgers can increase the data volume in tables, so only activate
non-leading ledgers for companies where they are required. (SAP Note
Don't
Forget 820495 – Data Volume and Parallel Ledgers).
f Only postings to the leading ledger flow into the CO module, thus no
postings to sub-ledgers would affect the Controlling ledger.

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6 – Set Up Your Ledgers Correctly: Key Steps
1. Define the non-leading ledger

2. Activate non-leading ledger only for necessary company codes

Non-leading ledgers
can not have currencies
different than the
leading ledger.
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Best Practice 7: Activate Real-Time CO-to-FI Integration

• Once activated, the FI/CO reconciliation program (KALC)


does not need to be run at period-end
ΠOnly activate the objects you need to be transferred back to FI

You can choose which CO


postings will be transferred
back to FI
For example, if a CO posting
crosses a Company Code,
Business Area, Functional
Area, Profit Center, or
Segment, an FI document will
be created

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Best Practice 8: New G/L Allocations

• Use FI allocations for segment and Profit Center


allocations
• Make sure that you have configured allocation settings
prior to setting up these cycles
ΠTransaction codes: GCA6 for Distribution and GCA1 for
Assessments

Do not use FI allocations for Cost Center


allocations if you use the CO module
Warning

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8 – New G/L Allocations (cont.)

• Configure the settings for the segment field in


transaction GCA6 – Field Usage for Distribution
ΠWith these settings, the field segment can be used as the
sender and receiver field in distribution cycles
ΠThe field is hidden in the cycles in the SAP-delivered settings

Allocations in FI generate
only FI documents

Tip
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8 – New G/L Allocations (cont.)
• You need to define a clearing account for allocation in General Ledger Accounting
Don't ΠIf more than 1,000 items are created during an allocation, the system splits up the FI document.
Forget The balance of the document is posted to the clearing account.
• In the master data of the G/L account, define a field selection group that does not include
any required entry fields
• The account is a technical account that cannot be changed in the FI substitution
(substitution call-up point 0002 – line items)

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Best Practice 9: Set Up Your New G/L Scenarios

• These scenarios are new to new G/L. They identify the


fields that are updated in ledgers during the posting.
ΠThe following scenarios are available:
f Segmentation (FIN_SEGM)

f Cost Center Update (FIN_CCA)

f Preparation for Consolidation (FIN_CONS)

f Business Area (FIN_GSBER)

f Profit Center Update (FIN_PCA)

f Cost of Sales Accounting (FIN_UK)

• Only activate the scenarios you need to avoid unnecessary data volume
• Assign scenarios to the relevant ledger only

Tip • Industry-specific scenarios are available for industry solutions


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9 – Set Up Your New G/L Scenarios (cont.)

• Preparation for Consolidation (FIN_CONS)


ΠThis is needed if you use SAP BCS or EC-CS*
• Profit Center Update (FIN_PCA)
ΠOne of the prerequisites to enable B/S and P&L statements in
new G/L for Profit Centers
• Segmentation (FIN_SEGM)
ΠOne of the prerequisites
to enable B/S and P&L
statements in new G/L
for Segments

*EC-CS = Enterprise Controlling -


Consolidations

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Best Practice 10: Leading Valuation in Asset Accounting

• Depreciation Area 01 should represent your leading


valuation

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10 – Leading Valuation in Asset Accounting (cont.)
• In new G/L, unlike classic G/L, only differences are posted to
parallel depreciation area, i.e., Local Accounting area
• You can use a wizard to customize the parallel valuation (Txn:
OADB_WZ)

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What We’ll Cover …

• What is new General Ledger, and should I implement it?


• 10 best practices for implementing new G/L
• Tips to mitigate migration risks
• Wrap-up

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Common Implementation Challenges

• Not enough understanding of the new G/L concept


• Continuing to think in “classic” terms
• Confusion as to which objects to use for
segment reporting
• Rushing to create customer Z fields before fully
exploring the standard fields
• Confusion about parallel ledgers
• Integration of G/L with other modules and reporting
systems (e.g., SAP NetWeaver BI)
• Legacy data conversion or migration requirements

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Tips to Mitigate Migration Risks

• Manifest an agreement between you and SAP for


receiving unlimited and direct support from SAP over the
duration of the project
Πi.e., until the new G/L concept and functionality has been
completely configured, implemented, tested, and validated for
business compliance and production readiness

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Tips to Mitigate Migration Risks (cont.)

• Have a full-time resource on the project to address any


questions, issues, and requests around the new version,
and to accelerate the issue resolution process
Œ i.e., a specialist familiar with new and “classic” G/L
Œ Also someone familiar with the company’s business practices

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Tips to Mitigate Migration Risks (cont.)

• Develop a prototype during initial design and testing to


demonstrate that new G/L is a workable solution
ΠThe prototype should have a clear approach to segment
reporting and parallel accounting
ΠSplitting and Segment updating should be tested for various
financial transactions to make sure that the standard splitting
rules are enough to cover all financial processes and segments
are updated

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What We’ll Cover …

• What is new General Ledger, and should I implement it?


• 10 best practices for implementing new G/L
• Tips to mitigate migration risks
• Wrap-up

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Resources

• SAP Financials Expert


Πwww.ficoexpertonline.com/
f Aylin Korkmaz, “Simplify Segment Reporting with the
New General Ledger” (SAP Financials Expert,
November/December 2005).
f Aylin Korkmaz, “Streamline Your Parallel Accounting with
the New G/L Ledger Solution” (SAP Financials Expert,
April 2006).
f Aylin Korkmaz, “Accelerate Your Closing Process with
mySAP ERP New G/L and New Functions” (SAP Financials
Expert, June 2006).
• http://help.sap.com/saphelp_erp2005/helpdata/en/2d/830e
405c538f5ce10000000a155106/frameset.htm

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7 Key Points to Take Home

• New G/L provides one-stop, integrated reconciliation of


multiple ledgers
• You no longer need to activate a special ledger to track
financial position and performance other than the
company code level
• Design and prove the concept of your management and
financial reporting during the Blueprint phase
ΠMake sure that segment definition/derive is inline with your
reporting and business requirements

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7 Key Points to Take Home (cont.)

• Don’t activate the scenarios if you don’t need them to


avoid unnecessary data volume
• Use splitting functionality to enable line items to be
divided for selected characteristics (to produce financial
statements for the selected characteristics)
• SAP considers ledger solution method equivalent to the
account solution method
ΠIt is recommended to use the ledger solution method if you
have a large number of general ledger accounts
• Don’t use FI allocations for Cost Center allocations if you
use the CO module

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Your Turn!

How to contact me:


Aylin Korkmaz
aylin.korkmaz@accenture.com
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