ACCOUNTING PRINCIPLES AND PARALLEL

ACCOUNTING CONFIGURATION IN SAP S/4HANA

KELECHI KELLY ADIELE

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 What is parallel accounting?
Most international companies by legal requirements and standard are required to prepare financial
statements based on different accounting principles (Accounting principles – is an accounting standard,
e.g., IFRS or Local GAAP). This leads to the general question: Why are companies required to file
financial statements with different accounting principles?
This happens when the company belongs to a group of companies. For example, Shoprite in the Nigeria,
and Shoprite in South Africa are separate local branches of one company The Shoprite Group. These
kind of company, that has branches in different countries needs to produce financial statements in
according to the country’s financial regulation:
– one local reposting for this specific location (for example, in the Nigeria – GAAP)
– the second group of reporting (for example South Africa- IFRS)
In this case, we will use parallel accounting.

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 How parallel accounting works
Parallel accounting enables valuation and closing transactions for a company code based on group
accounting principles as well as additional accounting principles such as local accounting principles.
To implement parallel accounting in your system, for example, you can use parallel ledgers. That is, you
prepare financial statements in accordance with local accounting principles and, also per IFRS or US GAAP.

Important to mention here:

• SAP provides two options – parallel accounts and parallel ledgers

• Accounting principles are used for both scenarios

• Ledger (0L) is always used

• If an account-based approach is used, then several accounting principles are assigned to the leading ledger

• If a ledger-based approach is used, then the ratio between ledger and accounting principle is 1: 1

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 Accounting Principles in SAP S/4HANA

Accounting principles are rules for legal accounting and financial statements and govern
how companies record and report their financial data. Accounting standards are collections
of accounting principles, for example, the International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB). In addition, there
are local accounting standards, for example, the United States Generally Accepted
Accounting Principles (US GAAP) or German Commercial Code (Handelsgesetzbuch,
HGB).

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Parallel Accounting in SAP S/4HANA

The ‘Parallel Accounting’ in SAP is achieved by storing and posting data in

various ‘accounting principal’ in separate ledgers, with the data for one
accounting principle stored in the G/L (leading ledger) as the ‘leading’
valuation view. Additional ledgers (non-leading ledgers) are used for each
of the (parallel) accounting principles.

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 What is an account-based approach?
Account-based approach – it is an option of using Parallel Accounting in which Chart of
Accounts creates based on different Accounting principles.
The architecture of the Account-based approach can be based on account logic. For example,
we decided that all accounts with prefix A will be used for IFRS accounting principle, and all
accounts with prefix B will be used for Local GAAP accounting principle.

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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
NLL – Local GAAP
NG – Local Tax
Principle recommended by SAP and mostly used in the industry.

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 Define Accounting Principles
Step 1: Define Accounting Principles: IMG-Financial Accounting (New)> Financial Accounting Global
Setting (New)> Ledgers-Parallel Accounting> Define Accounting Principles
• Click on Add New Entries, to Create new Accounting Principle> SAVE.

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 Assign Accounting Principles to Ledger Groups:

Step 2: Assign Accounting Principles to Ledger Groups: Same SPRO Path> Assign the New Accounting
principles to the Non-Leading Ledger we created > SAVE.

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