Accrual Engine

Solution Management
Financials
SAP AG

What Are Accruals?

Simple Example:
Given:
Task:

Value + time interval

Distribute value over time interval

1100

1100

1200
Period 12

800

Period 11

1100

Period 10

1400

Period 9

500

Period 8

Period 4

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1100

Period 7

700

Period 6

1200

Period 5

800

Period 3

Period 1

1000

Period 2

12,000

Simple Posting Example

Accounting: Accruals = Periodic postings

P&L

Accrual

12 000 (1)
1 000 (2)
800 (3)
1 200 (4)

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(2) 1 000
(3)

800

(4) 1 200

Accrual Engine: Where Are Accruals Needed?

Contract business transactions:
Insurance, Leasing etc.

Contract-like business transactions

Bonds with fixed interests,
Magazine Subscriptions etc.

Any periodic postings based on an amount

or value
Provisions for Awards

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Accrual Engine: What it does

Input:
Contract-like information

Accrual
Engine

Output:
Periodic postings

Contract-like data is transferred to the Accrual Engine.

The Accrual Engine makes periodic postings to Accounting based
on this data.
The Accrual Engine is an engine and as such is not visible to the end user
The Accrual Engine is surrounded by applications that define the
business content and use the Accrual Engine. This can be compared
with the engine in a car: The driver works with the car, not with the
engine itself.
Accrual Engine applications are defined and delivered by SAP.
They cannot be defined by customers.
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Accrual Engine: A Generic Tool

Provisions for
Awards

ut
Inp

Manual
Accruals

Real Estate

In p
ut

In
pu
t
SDP
Leasing

Input

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ut
p
In

Accrual
Engine

IBS
Media
(future)

Output:
Periodic postings

Accrual Engine: Some Features

Highly flexible tool
Storage of all relevant data
Input (contract-like information incl. history!)
Output (posted accruals)
Accrual Engine = Accrual sub-ledger
Mass data processing, performance optimized
Parallel processing available (via server group)

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Accrual Engine: Processes

Calling Application

Process B:
Calculateof
Trigger Calculation
and Post
Accruals
Accruals

Accrual
Method

R
R
Accrual Engine

Process A:
Create/
Change
TransferBasis
DataData
to Accrual
Engine

Create/
Change
Basis Data

Periodic:
Calculate Accruals

Build Delta to
already posted
values

Posting

Reporting

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Post
Document

Posted Values
(Accrual Engine Documents)

Basis Data (Accrual Objects)

Calculation

Reporting

Create
Accounting Documents

Accrual Engine: Structure of Basis Data

Accrual Object

Does not carry any information; links accrual sub-objects

Accrual Subobject
Accrual Subobject
...
Header

Start-date and end-date of time interval for accrual

Assignment

Cost center, business area, profit center, ...

Parameters

Customer-defined fields like Product Group, ...

Accrual Subobject

Accrual Item
Accrual Item
Accrual Item
...

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Each combination of
- Accrual Type (costs, revenues,...) and
- Accounting Principle (IAS, US GAAP, ...)
defines an Accrual Item:
The total value to be accrued, the total quantity to
be accrued and the Accrual Method
(linear/periodically, linear/daily) can be entered at
this level.

Accrual Methods
SAP delivers a number of accrual methods:
Linear, periodically
Linear, daily with 365 days
Linear, daily with 360 days
...
Accrual methods are ordinary function modules
Customers can define their own accrual
methods

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Customer-Defined Parameters
Customer-defined parameters are additional fields that can be entered by
users when creating or changing accrual objects
Customer-defined parameters are entered at the accrual sub-object level
The values entered here can be used in

Accrual Methods
The parameters can contain additional information that can be used in
customer-defined accrual methods

Account Determination
The parameters can also be used in Accrual Engine account determination

BAdIs
Parameters can be used in BAdIs for modifying documents before they are
transferred to Accounting.

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Accounting Docs
The accrual engine creates accrual postings: If the corresponding
accrual type is customized accordingly the accrual engine executes
one, several or all of the following type of postings:
Opening postings
The full amount which is to be accrued is posted, usually to an accrual
account. This posting is executed, when the accrual object is created.
Periodic accrual postings
These postings post a certain value which is calculated by the accrual
method. This value is usually a part of full value (which is to be accrued).
It is usually posted from the accrual account to a P&L account. These
postings are executed by the periodic accrual run which is usually
started at the end of each period.
Final postings
If the posting of accrual has to be terminated before the full value has
been (periodically) accrued, then the remaining value is posted to a
certain account.
Other types of postings which are less important

Each posting creates an accrual engine document and this

document is transferred automatically to accounting.

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Account Determination

When posting Accruals, Accrual Engine documents are created in the

Accrual Engine. These documents consist of only one line item without
GL accounts and without CO assignments like cost center etc.
When the Accrual Engine documents are transferred to Accounting
(which is usually done automatically when they are posted), an
Accounting document with two line items is created from the Accrual
Engine document.
At this point in time, the Accrual Engine account determination is
executed to get the following information:
Start account
Target account
Document type

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Parallel Accounting
The Accrual Engine supports parallel accounting in two ways
Parallel accounts
The account determination can be customized in a way that different
accounts are used depending on the accounting principle.
Parallel ledgers (Ledgers in mySAP ERP or Secial Ledgers)
Ledgers are assigned to an accounting principle. Then postings in
accounting will be performed per ledger.

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Accrual Engine: Benefits

Automated periodic calculation of accruals

- No recurring entries with fixed values

Automated periodic posting (self correcting!)
Simulation tools (e.g. future accruals)
Supports multiple GAAPs
Comprehensive reporting tools
Integration with BW (Business Information
Warehouse)

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Applications that use the Accrual Engine

Manual Accruals

Provisions for Awards

Lease Accounting

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Manual Accruals: Overview

Purpose: Post accruals for contract-like data
Create contract data (accrual objects)
manually in the Accrual Engine
SAP also delivers an interface for creating
accrual objects
Start periodic accrual posting runs

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Manual Accruals: Example Insurance Contract

Contract data:
Valid from 01 Jan. 2000 until 31 Dec. 2004 (5 years)
Annual premium (to be paid by customer): 3,600 EUR

Revenues:

Customer pays 5 x 3,600 EUR = 18,000 EUR

Costs:

Salesman gets 6,000 EUR bonus

Costs and revenues must be accrued over 5 years

Monthly revenues: 300 EUR = 18,000 EUR / (5 x 12)
Monthly costs:
100 EUR = 6,000 EUR / (5 x 12)

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Manual Accruals: Application Menu

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Manual Accruals: Application Menu

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Manual Accruals: Create Accrual Object

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Manual Accruals: Create Accrual Object

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Manual Accruals: Opening Postings

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Manual Accruals: Navigation

Place cursor
in COSTS line
and double-click
or
press Transfer
Accrual Item
button

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Manual Accruals: Opening Postings

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Manual Accruals: Documents in FI

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Manual Accruals: Opening Postings

Receivables

Accrued Revenues

(I.1) 18,000

18,000 (I.1)

Payables

6,000 (I.2)

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Accrued Costs
(I.2) 6,000

Manual Accruals: Documents in FI

Receivables

(I.1) 18,000

Revenues

Accrued Revenues

18,000 (I.1)
300 (P.1)

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(P.1) 300

Manual Accruals: Posting Deltas

In each period, the following accruals are calculated:

Revenues (Accrual Type RVNUES):

Costs (Accrual Type COSTS): 100 EUR

300 EUR

In the first period (1/2000) these values were posted correctly.

Now let us assume that by mistake the accrual run in 2/2000 was not carried
out.
The next accrual run is carried out in 3/2000.
The Accrual Engine then calculates that in 3/2000 the accrued values should
be:

Calculated Revenues:

3 x 300 EUR = 900 EUR

Calculated Costs:

3 x 100 EUR = 300 EUR

In 3/2000, the Accrual Engine then posts the difference between the calculated
values and the values already posted:

Posted Revenues:

3 x 300 EUR - 300 EUR = 600 EUR

Posted Costs:

3 x 200 EUR - 100 EUR = 200 EUR

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Manual Accruals:
Example of Derived Accrual Types (1)
Derived accrual types can be used for calculating accruals from
other accruals types.
Example:
Customer gets a discount of 10 %
Discount: 18,000 EUR x 10% = 1,800 EUR
The discount must be treated differently according to IAS and
HGB (German GAAP):

HGB:

Discount is posted once when the contract is

created

US GAAP:

Discount has to be accrued during the life of the

contract. The monthly accrual value is
1,800 EUR / (5 x 12) = 30 EUR

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Manual Accruals:
Example of Derived Accrual Types (2)
According to US GAAP, additional accrual postings have to be made
for the discount.
These additional postings can be made with the help of derived accrual
types using the following rule:
In US GAAP, the discount is calculated by taking 10 % of the revenues
in HGB.
The following activities have to be performed in Accrual Engine
Customizing:

Create the new accrual type DISCNT

The above rule is entered in activity Define Calculation rules for Derived Accrual
Types.

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Provisions for Awards: Overview

A company grants a number of stock options to selected employees
Purpose: Post provisions (= accruals) for the outstanding options.
To do this: Transfer information about outstanding options from HR
system to Accounting system
(Accrual Engine)
Afterwards: Calculate and post provisions using the Accrual Engine
Different calculation (=accrual) methods are possible for calculating the
provisions: SAP delivers two examples as accrual methods:
APB 25
FAS 123

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Provisions based on stock prices

Provisions based on Black & Scholes Model

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