SAP FICO AND HANA - by Ashik: UNIT–1 (FICO) CONFIGURATION START

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Labels are done as per the following:
FI - Financial Accounting Basic Concepts
FICO - SAP FICO COnfiguration and Implementation
FICO SUPP - Supporting documents on SAP Configuration
HANA - SAP HANA Tutorial


Sunday, April 20, 2014

UNIT–1 (FICO) CONFIGURATION START

Organizational Units:::

Before Going into SAP COnfiguration, If you are new to SAP then I would request you to go through Posts like Intro in to sap ERP,  Intro to SAP FICO,  requests? and lastly look and feel. Without this introduction, you will not understand most of the things on your SAP screen and tutorials here!!

In SAP Configuration, SAP Consultant must be able to configure a company and organisational units for the client in such a way that, basic financial transactions must be done like customer/vendor and asset transactions as part of minimum work.  let us create and look at terms like client, company code, profit center, segment, company and business area and also look at country-specific settings by looking at whole accounting structure and objects in organization for financial accounting.

Client is the highest level in SAP ERP system hierarchy where all the specifications or data for organisations in SAP ERP applications are entered. This gives us a single time shot on entering the specs.
Company Code is the independent/legal accounting entity. A company will have its own financial statements as per law within any corporate group if it is in.
Lets copy a company code created in SAP and change it to our company code. We need to change much more details when copying company code like


  • Definition
  • Global Parameters
  • Customizing Tables
  • General Ledger Accounts if needed
  • Account determination

  • Company Code - 4 digit alphanumeric

    Business area - 4 digit alphanumeric
    Company - 6digit Alphanumeric(max)
    Segment - 10 digit alphanumeric(max)
    Normally, Easy Access menu is used by End-users to enter master-data
    Goto
    Spro - Enterprise Structure - Financial Accounting - Edit,copy,delete,check company code

    0001 company code is a template and can be used as general company with international chart of accounts. Country installation will not only create country-specific company tem-plate but also country-specific template for controlling areas, plants, purchasing organizations, ales organizations, financial management areas and so on..
    Business area is all about areas of operations like training, consulting, software& development, warehouse management, etc.. Business areas can generate their own financial statements for internal or external reporting purposes.
    Profit Center is like an individual and independent area of company which entitles to the costs and revenue of the company. Its used to analyse profits only internally. From accounting point of view We can create just profit & loss statement(document breakdown not active) or even generate a financial statement (document breakdown active) if needed.


  • One segment can be assigned to 2 or more profit centres.
  • But one profit centre cannot be assigned to 2 or more segment.
  • Segment is higher level than profit center in the organization.
  • Segment is something quite new in SAP to overcome the Business area problems in SAP structure. Business segments are also essential external reporting to be done as part of norms under SEC, USA if company is under investigation. So, all the operating segments will report to management as part of "Management Approach" to accounting and maintaining reporting standards.


    Most of SAP implementation today I found is that most SAP customers are using Profit centers and Business areas for other purposes (for example, I have seen clients using profit centers as cost centers, plants, or Sales areas) and therefore it may be difficult to switch these objects to full financial statement reporting entities. This is particularly relevant in cases where companies have hundreds (or even thousands) of Profit Centers/Business Areas. This is why segments have been introduced so that you can have a brand new object which can be used solely for “Segment” reporting under new accounting standard required.
    From <http://ovigele.com/the-purpose-of-segments-in-sap-general-ledger/>


    For any SAP implementation, its all about how to use organizational objects as part of business process associated with the client.


  • Which financial reporting standard is being used as part of internal or external reporting for my client and how to implement SAP if both are being used
  • How the client's profit & Loss statements are being generated by its auditors?? Either by total costs or cost-of-sales accounting?
  • How is segment reporting being done?
  • What is the consolidated financial statements for my client? Is it needed and how??

  • These are the basis for any designation part of SAP implementation as it carves out complete business case and all the process which will undergo in SAP after implementation. And remember Document Splitting must be activated to make financial statements for Business areas, profit centres or segments.

    Controlling Area:
    Controlling area is imp organizational element in operations to control every part of SAP ERP. More than one company code can be assigned to a single controlling area unless all the company codes in a particular controlling area have save fiscal year variant and same operating chart of accounts.
    Practicals:
    Whenever I say SPRO- click on 'Reference IMG' button to get the whole list of configuration available in your SAP installed.

    Task-1 -- Create Company Code GEM which is you client's company and this company will be exercised for the rest of this course in all topics
    GOTO SPRO - Enterprise Structure - Financial accounting - definition - Edit,copy, delete and check company code

    I selected to copy company code 1010 to GEMS along with this I copied the number ranges. Don't mind about these number ranges now, they will be explained later and don’t mind about errors, just copy as much as you can and finish the copying for now!
    Now Edit the Company code GEM as shown in the figure
    clip_image001[4]

    Task-2:
    Lets say this GEM is a part of a group called as 'GEMS GLOBAL' with company code 'GEMG'
    So Define Company as shown below.. Check the last 'Define Company' just above 'Edit,copy, delete and check company code'
    clip_image002[4]
    Save everytime …

    TASK- 3 :
    Lets study Business area financial statements settings for our company code.
    In the same screen as task -2 we can see a tick box which is described with 'Business area financial setting' try to press F1- help after ticking the box but double click it… we will tick it after doing some more configuration. The below screen appears when F1 is pressed,,
    clip_image003[4]

    Task-4: Can you assign a business area directly to a company code directly?
    Actually, a big NO, it cant be done in that way.. And it is the reason why they are used for external reporting and evaluating the transaction figures of a particular business area beyond the boundaries of company code.

    Task - 5: Assign controlling area GEMB (B for Britain) to company code GEM
    Here copy the controlling area 1000 CO Europe to GEMB and then I want to assign co-code(short form of company code) GEM to controlling area (CO-area) GEMB. Here, I see some problems
    First, whenever you want to copy a controlling area, along with that controlling area , company code must also be copied and this creates a problems as we must not use 0001 company code in any of our configuration purposes(REMEMBER THIS). So, I reverted back from this step and simply went to assign our company code to any controlling area available for European Region.
    Here, I can find co-area 1000 (CO Europe) for which I am gonna assign GEM. SO,
    Goto SPRO - ES(Enterprise Structure) - Controlling - Assignment - Assign company code to co-area
    Here select 1000 CO Europe and click on 'Assignment of companies' folder . You can see a table which shows all the companies which are in this controlling area. Now add GEM, by clicking new entries as shown below
    clip_image004[4]
    Save..


    GENERAL LEDGER(GL) BASIC SETTINGS:

    General Ledger is the basic functional requirement in FICO module of SAP. It holds the accounts of all the things described normally in Profit & Loss account and Balance sheet, both which are required for reporting and also main thing is GL holds the customer,vendor and many other accounts like assets etc.. Which are equally important in daily activities and transactions. So, customizing a GL for our company code is necessary primary step towards fulfilling accounting practice.

    SAP has 2 version of GL, normal GL and new GL. New GL is part of SAP since version ECC5.0 which have much more advanced accounting principles like parallel accounting, document splitting etc.. We will make use of new GL in our customization as normal GL doesn't hold any weight in today's financial reporting standards after 2008 crash. Parallel Valuation approach/parallel accounting is actually a way of using different ledgers as part of our company code. Ledgers will have all the accounts required for any company and so what is the use of parallel accounting?

    In this world we look at the different accounting standards that organizations must adhere to in order to meet local regulatory requirements, for example: European listed companies must report their consolidated financial results according to International Financial Reporting Standards (IFRS), whereas companies listed in the U.S or belonging to a U.S. group of companies are currently required to report according to U.S. Generally Accepted Accounting Principles (U.S. GAAP). IFRS is to become the general standard for all companies across the world, while organizations are transitioning to IFRS, there is a requirement to report in multiple GAAP's (IFRS and local GAAP). This dual reporting period raises additional complications, for example: U.S. GAAP allows organizations to valuate their inventory using the LIFO (last in first out) principle, which is strictly prohibited in IFRS.

    Parallel accounting is the separation of postings and the reporting of financial results based on various regulations. parallel accounting considers different business events one or more times using different accounting rules, currencies, fiscal year calendars and chart of accounts, with the goal not to create multiple accounting representations in the forms of different transactions for a single business event but with same business transaction in different accounting policies. So, if you have to create multiple accounting representations SAP ensures that they are linked and reconcilable by recording each transaction in the system and then splitting it in multiple ways for reporting purposes.

    Parallel accounting can address the below


  • Complex calculations are required to translate financial statements from one reporting standard to another
  • The collection of financial data must occur at the source (for example SAP) for reporting based on other accounting standard
  • New, faster close requirement for organizations create additional risk for errors when developing and executing parallel reports.



  • TO create this effect, we will normally use ledger groups with different ledgers to get different reporting standards in different currencies. Lets say US HQ wants to get live financial report of their branch in Britain, If they get a report in EURO or Pounds(GBP) they couldn't understand it. Getting such financial report in their currency($) is what parallel reporting gives along with meeting the other accounting standards like GAAP while UK company is using a ledger with local currency EUR and IFRS reporting standard.

    Here, each company will have one leading ledger for one accounting standard like IFRS in our example and other non-leading ledgers which will take up other accounting standards like GAAP,(or) local accounting principle etc..
    Before, ECC 5.0, when parallel accounting is not used, parallel accounts approach is used where different valuation approaches and transaction valuations are posted in different accounts in same ledger. Ex, creation of 2 customer records one is for IFRS and other is for GAAP was confusing and while reporting system evaluates which accounts must be reported under which accounting standard. SAP only recommends two types of approach as per the table below details the pros and cons

    Approach Evaluation Parallel Ledger Approach Parallel Accounts Approach
    Availability
  • Available from ECC 5.0 upwards
  • Can be implemented in all SAP releases
  • Recommended scenarios
  • When parallel accounting is likely to have many valuation differences
  • When the number of additional G/L accounts would not be manageable
  • When local GAAP's mandate different fiscal years or there is a discrepancy in parent and subsidiary fiscal years
  • When you are familar with the solution
  • when the number of G/L accounts is manageable
  • when different fiscal years do not need to be supported
  • when there are relatively few valuations differences
  • Pros
  • You maintain a separate ledger for each accounting principle
  • you can maintain fiscal year variants in this scenario
  • the number of accounts is manageable
  • there is no need to change existing G/L accounts
  • the standard reporting structure can be used for both leading and parallel ledgers
  • Data volume does not increase significantly owing to additional accounts
  • Every valuation method supports the parallel accounts method
  • Cons
  • Data volume increases owing to additional posting in ledgers
  • its difficult to generate clean reports satisfying two separate accounting standards from one ledger, unless a nomenclature for account structure is defined
  • requires the definition of a new account structure for easy reporting


  • SCENARIO:??
    A scenario is something which defines what gets updated in the ledger during a posting. Posting is nothing but posting a document(or Entering a transaction into SAP), Document is the end-result of posting which will have the complete details of transaction and it will be saved in SAP server by a document number along with other specifications.. So, documents holds info of a business transaction between accounts in GL. Ex, entering a document for customer invoice where customer asked 100 amount of goods and paid half of the amount now.. So, while posting you will enter transactions for accounts of respective customer, cash journal and sales(If fico is integrated with Sales module) and then it gets saved as document. Remember, here transaction is only half-done as half cash is not yet received from customer, this sort of transaction requires some additional settings to allow such unfinished transactions between this customer and goods accounts in GL. Additional settings are required because, in this transaction when debit and credit side are tallied  balance won't reach zero as amount is not yet dispatched but other side goods are dispatched. This is the situation where 'Dunning' procedure and 'Open Item Management' concepts are used in SAP. (We will discuss Dunning and open item management later in appropriate section)

    You can see senarios in
    Financial Accounting Global Settings (New) → Ledgers → Fields → Display Scenarios for General Ledger Accounting.
    clip_image005[4]
    We will use different scenarios as per the transaction and use the data of document/posting according to planned implementation and reporting structure. You can assign all six scenarios to ledger or none. It depends on the business aspects of mapping general ledger accounting for the client. FAGLFLEXT is a table in sap which is called as totals table and a very important table. For every transaction entered this table will hold the opening balances in fields TSLVT for foreign currency and HSLVT for local currency also there are 16 Fields where 1-12 fields are for months and 13-16 are for special periods(Don't worry if you don't know anything about special periods now, it is discussed in detail below). TSLVT and HSLVT, each of the field will have 16 fields which contain the sum of all transaction of each corresponding period in previous fiscal years. Each transaction in SAP stores at least in two currencies - transaction currency(say EUR) and home currency (say USD), actually there can be more than two currencies. Home currency is the currency of Company Code (see table T001) and TSLVT and HSLVT is the starting balance for a particular record in the table, that is the result of summing up values of all previous fiscal years. 13-16 are special periods for year which are used for error-correction in transaction figures which is professional terms called as 'manual reconciliation' transactions(reconciliation means transactions which are a mismatch and so errors occurred), where an accountant can enter the number of the fiscal period manually.

    In SAP, timing is controlled in a very different way. First, a fiscal year is divided as per company accounting practice into periods. Periods are nothing but each consecutive 30/31 days and they need not be exactly as a normal month, they can start in middle of month if needed. So, for a fiscal year there will be 12 periods corresponding to 12 (30/31) days and also along with them 4 special periods and in total there will be 16 periods in SAP. Even though it is confusing I recommend to read this para again with patience. These 4 special periods are used to change the figures in the transaction if any errors occurred after the transaction like exchange differences, reconciliation etc.. Each period(30/31 days) must be open in SAP Server to allow entering transactions/postings. There is also 'Shortened Fiscal year' where a fiscal year may contain less than 12 periods, it is also possible if needed. I am discussing only theory here, and whole configuration will be discussed in appropriate sections.

     For example, periods 01-12 are closed and thus none of the automatic FI postings can be made (from Sales or Procurement), but periods 13-16 can be opened for manual transactions. Year End Closing Balance in transaction currency is the sum of TSLVT and then TSL01-TSL16. Balance in home currency is the sum of HSLVT and then HSL01-TSL16.
    Now, lets configure the ledgers for GL Accounting. And lets activate them.

    PRACTICE:

    TASK -1 : Check customizing settings to find out the ID of leading ledger also check the totals table where values are saved.
    In SPRO - FA(NEW)- Global settings(NEW) - Ledgers - Ledger - Define Ledgers for General Accounting
    IF you see 0L ledger along with filled details as it’s a leading ledger, totals-table is 'FAGLFLEXT' then don’t worry everything is done.

    TASK-2: Check the scenarios assigned to leading ledger 0L?
    SPRO- FA (NEW) - Global Setings (NEW) - Ledgers - ledger - Assign Scenarios to Ledgers
    Check that FIN_CONS, FIN_GSBER, FIN_PCA, FIN_SEGM and FIN_UKV all these 5 scenarios are assigned and if not just click on 'New entries' and enter the missing scenario.

    TASK -3 : Check whether ledgers L5 and L6 are allowed to our company code GEM,
    SPRO - FA(NEW)- Global SETINGS(NEW) - Ledgers - Ledger - Define and activate non-leading ledgers
    Here let me clarify some important issues, There are 3 levels in SAP implementation




  • Development system - where the whole configuration is done
  • Testing System - where the configuration is tested as per client needs
  • Production system - where the whole configuration after testing is shifted to. So, this system becomes client system or end-user will be using it for their business purpose.


  • In Assigning L5 ledger, you can see GEM in the list as part of task - 3.similarly repeat this step for L6 ledger too. Why our company Code GEM is in the list of L5 and L6 ledger is because we had copied it from other company code 1000. So, there will be some settings predefined but it is better to check once.


    TASK - 4: Now, I want to map segment reporting and P&L statement based cost-of-sales accounting which is a part of L5 ledger. Can this be done?
    SPRO - FA(NEW) - Global Settings (NEW) - Ledgers - ledger - Assign Scenarios and Customer Fields to Ledgers
    Select L5 and double-click on scenarios in structure to see that Segment reporting and cost-of-sales accounting is there in the description already.
     
    LESSION: VARIANTS
    Variants are used in periodicity of the transaction like fiscal years, posting periods, Chart of accounts for GL accounting. SO, variant is nothing but some numbers assigned to some objects and these numbers are needed to record any transaction in SAP.
    We have Fiscal year Variant(FSV) in sap which is required to setup the year and periods according to Accounting practice. There are many types of FSVs defined in the SAP system and we can define our own FSV too. K4 is a type of FSV and we can assign it to any number of companies. Thus, advantage of variants is the way it can be used among several business objects. In same way, We can assign a Chart of Accounts to any number of companies.


    FISCAL YEAR VARIANT(FSV):??

    Fsv is something like a cycle of an year used in SAP and there are many varieties of FSvs predefined in SAP and any one can define their own FSV for their own purpose. As per most of the accounting reporting standard, any company must give its reports to the stock exchange commission of their country once per year. In India, SEBI takes such tasks while in USA, SEC undertakes such tasks. So, every company listed in their local stock exchanges must give annual reports to reporting controller. In some countries, A fiscal year is from April-March and so by April, they will submit their financial reports. In some other countries its from Jan-Dec and so here, by early Jan financial reports will be submitted. For a fiscal year report, companies must give out components of P&L statement and Balance sheet items. If companies are supposed to give such a heavy depth of transactions they must maintain it for each year and such a maintenance of transactions for a particular fiscal year is called fiscal year variant and it’s a cycle obviously.
    Sometimes a company might not need a complete 12 month fiscal year, by the end of 6th month it might be consolidated(means bought by other company) and so a change in FSV as per the FSV of new parent company might be implemented. Or willingly company might give Fiscal reports semi-yearly if it operates only 6 months per year. In whatever the circumstances, Fiscal year practically & generally contains 12 months and we all know that but IN SAP IT IS SLIGHTLY DIFFERENT.
    In sap, FSV contains 12 normal posting(entering the transactions as documents) periods and 4 special periods. So totally FSV contains 16 periods. First 12 periods are exactly same as months If FSV is year dependant(this can be done when defining the FSV) but, the special periods are not same as months and they can be extended for the needs of accounting if needed. If FSV is not Year dependant, then you must define the starting dates and closing dates of each period in defining the FSV. Now, when you post a transaction, you can't post a transaction of previous year and that is illegal, and SAP will not allow to do that as previous year posting periods are closed. You can post the transaction of a period which is opened(means allowed by SAP).
    Coming to 4 Special periods , they are part of last normal period in FSV. In or case 12th period. So when date enters 12th period even special period is opened. Special periods are used to make Balance sheets and P&L statements. Ex, in 1st special period internal auditor make the financial statements according to the whole transactions in SAP for that fiscal year, in 2nd special period, management will sit with their internal auditor and finalise the transaction/assets which give trouble in finding a value to record. 3rd special period is when external auditor will come and verify the reports. This might not be the exact way special periods will be used but it depends on their business scenario and planning. But special periods are not days limited as of normal periods for a calendar dependant FSV. So, they can be kept open upto anytime needed by Departments.


    PRACTICE:

    TASK - 1: Create a FSV and assign it to your company.
    Goto SPRO - FA(NEW) - GLOBAL SETTING(NEW) - Ledgers - Fiscal year and posting periods - Maintain fiscal year
    Enter the details as shown
    clip_image006[4]
    Now save and go back in to SPRO page, click on 'Assign fiscal year variant to co-code'
    Change the GEM FSV as shown below
    clip_image007[4]
    Save and press enter if u get warning to bypass them by pressing enter twice.
     
    Currencies:
    The problem with exchange rate is commonly known if we enter a wrong exchange rate. In SAP, presently we use TCURMNT (T at start means it is a table) to maintain the exchange rates between our base local currency and other currencies. Which will also ease the parallel processing of worklist. Worlklist are nothing but a convenient tool to use for translating any object type or local technical names of objects like currencies which are relevant for translation.

  • Base currency
  • Inversion
  • Exchange rate spread

  • These are some of the tools which are used to maintain the exchange rates in SAP system.

    Each currency in SAP is defined by a Currency Key. So, obviously exchange rate types are also present for different modes like usage like


  • Buying rate (cr)
  • Selling rate
  • Average rate

  • Just type F-62 transaction code and press enter to know the exchange rate in your system and as I said you can change in TCURMNT table




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