preparation for consolidations in sap ecc to meet your epm integration needs

]

COREY PEARSON[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2008

CHAVONE JACOBS[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2003

ALLAN FISHER[ASUG INSTALLATION MEMBER

MEMBER SINCE: 2008

Preparation for Consolidations in SAP ECC to

meet your EPM integration needs

Ross Wilson

Sr. Director, SAP Business Processes

McKesson Pharmaceutical

and

Vish Arunachalam

VP, EPM

Perceptive Technologies

November 4, 2010

ASUG Northern California

Real Experience. Real Advantage.

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Today’s speakers

Ross WilsonSr. Director, SAP Business Processes


[email protected]

www.mckesson.com

Vish Arunachalam VP, EPM


[email protected]

www.perceptinc.com

AdvantageFinance

mailto:[email protected]



[ Contents

Who should attend this session?

SAP Components & Application Integration

Chart of Accounts

Parallel GAAP and Ledgers

Integrated Master Data

Intercompany transactions and Intercompany Reconciliation

Functional Area and Transaction Types

Currencies

Fixed Assets

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[ Who should attend this session?

Existing SAP customers embarking on an SAP New

GL implementation including IFRS or SEC reporting

requirements

Customers who are/would be implementing SAP

consolidations for the first time

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[ SAP Components & Application Integration

EPM Legal and Managerial Consolidations (E.g. BPC NW,

BO-FC, BCS)

BW- Data storage, Infoproviders,

Meta Data and Master Data

ECC - ERP

FI-CO, PS, MM, AA

NonSAP Data

Planning, Analysis and Reporting

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[ Chart of Accounts

Consider mapping Group Chart of Accounts (GCoA) to Operational Chart of Accounts in ECC

Ensures accuracy by mapping at source in ECC

Use condensed form of the ECC operating chart of accounts

Ensure optimal utilization of sub-ledger and minimize number of GL accounts required

Keep in mind level of detail required in Consolidation

Very large group chart of accounts affect EPM performance and are cumbersome to maintain

Design Group Chart of Accounts in ECC similar to Consolidation Chart of accounts in EPM system

Consider synchronizing ECC-GCoA with EPM-CoA via BW

Need alternate chart of accounts for local GAAP?

Be aware, the Consolidation system manages retained earnings and net income for the year as independent value items as opposed to balance amounts as in the FI System, where no postable corresponding accounts are represented

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[ Parallel GAAP in ECC

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Source: SAP AG


[ Ledgers

Check dimensions required for Consolidation (Legal and Management) What views of data do you need supported at the underlying ledger?

Consider system performance implications with adding dimensions?

New GL enables: Multiple ledgers in parallel: During posting, you can have data posted to all ledgers,

to a specified selection of ledgers or to a single ledger

Document Splitting: Real-time document splitting functionality that makes Balance Sheets and P&Ls readily available at lower levels of reporting

Coding block enhancements: Customer defined fields can be added to the general ledger tables giving customers more flexibility

Use parallel ledgers for multi-GAAP requirements Supports different fiscal years

Supports multiple currencies

Same user interface and reporting across all ledgers

Closing activities can be handled separately by ledger

Lead Ledger for IFRS or US GAAP?

Use other ledgers for local GAAP requirements

Activate required ledgers on day one, becomes really complicated post-go-live

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[ IFRS Implications

IFRS = International Financial Reporting Standards

IFRS is the framework from International Accounting Standard Board

Most of the world has adopted IFRS or is in process of or

planning to convert from their local GAAP to IFRS

IFRS has the potential to change business requirements

that can alter how business processes and reporting

need to be executed in multiple ways:

More detail is appropriate (e.g. asset componentization)

Different values are appropriate (e.g. impairments to assets on

the balance sheet)

Different timing of a transaction is appropriate (e.g. the

treatment of revenue recognition under certain scenarios)

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[ Potential areas where IFRS and US GAAP differ

significantly

US GAAP IFRS

Debt/equity classification

Hedging qualification

Employee stock compensation

LIFO

Tax consequences of these differences

Income tax accounting

Allocations

Consolidation

Revenue recognition

R&D capitalization

Impairments

Securitizations/ asset de-recognition

Provisions

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[ Parallel GAAP and IFRS solutions

IFRS Considerations for ECC layer• Parallel Ledger functionality enables segment reporting & alternate fiscal year variants

• PP&E (IAS 16): Avail of multiple depreciation areas in ECC

• Functional Currency (IAS 21): Consider additional currency definition in new GL

• IAS 1R,7,24 – Financial Statement Preparation

– Changes in composition and classification of financial statement

– Classification needed such as operating, investing and financing

– Additional disclosure required need changes to chart of accounts

• Operating Segment (IAS 14 Segment Reporting/ IAS8): Segment functionality in

New GL

– SAP’s recommended functionality to support segment reporting

– Provides standard reporting option for P&L & B/S via doc. splitting

– Lack of flexibility for changes in assignment of profit centers

• Segment functionality may be better addressed using profit center groups functionality

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[ Parallel GAAP and IFRS solutions

IFRS Considerations at Consolidation layer Starter kit for SAP EPM

Predefined IFRS consolidation and other business rules (e.g. full goodwill)

Predefined Chart of Accounts per IFRS

Publishable financial statements as required by IFRS (IAS 27 and IAS 1)

Presentation changes could have a significant impact on existing reporting and

level of detail, additional schedules, sub schedules, disclosures, notes to

accounts etc.

Preconfigured business process flows that would enable the financial group closing

and reporting with IFRS

Audit trails for top side adjustments and parallel GAAP reporting

The starter kit can be leveraged to accelerate implementation of IFRS

solution but requires additional effort to customize to suit specific business

requirements

Stay abreast of emerging IFRS reporting and disclosure norms

SAP’s XBRL Publishing solution supports IFRS compliance

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[ IFRS For Existing SAP customers

What can you be doing now to prepare? Extensive review of existing chart of accounts (especially if you’re using account

based approach and tend to move to parallel ledger)

Clean up company codes if using parallel co. codes or FI-SL or ECC based

consolidation

If you’re using FI-SL for local GAAP, identify local postings that may need to migrate

to a new parallel ledger

Optimize Open-item managed accounts

Reduce and clear high volume open-item managed accounts

Reduce no. of open item managed accounts

Review potential changes to Management Entity hierarchy to address consistency

and close outdated entities

Ability to handle potential changes

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[ Integrated Master Data

EPM

BWECC

Based on business requirements and

application design Master Data can be

maintained in ERP, BW and EPM

Standard processes are available for

sending master data from ECC to BW

Consider use of standard delivered

synchronization programs between

EPM and BW layers when available

Import Master Data and

Hierarchies from SAP BW InfoObject

into EPM application

In some cases, customer may need

to send data directly from ECC to

EPM. E.g. BPC MS version with ECC

Sharing characteristics between ECC,

BW, and EPM can significantly enhance

integration in terms of

understanding, alignment,

interoperability in reporting

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[ Company Code, Trading Partner & Company

“Company code” is the legal structure from which auditable financial

statements are generated

Maximize Inter-Company (IC) capabilities by enforcing that trading partner

data is on every IC record at source in ECC

Identify mapping of Company Code to Company in ECC

Normally a 1:1 relationship for legal entities

Be aware that Company is required for use of trading partner

functionality

Consider validations for manual Intercompany GL accounts (e.g. for two

step I/C transactions) to ensure capture of trading partner

Identify partner mapping for managerial entity (E.g. Profit center, Segment)

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[ Intercompany transactions

Have you identified which GL accounts are intercompany

accounts?

Do you have non-SAP entities for consolidation?

Ensure document currency is uniform in IC transactions

Clearing accounts and confirmation for IC transactions

Consider centralized responsibility for accounting IC

transactions

Trading partner for non-SAP entity feed – BW

consideration

Identify intercompany document types and activate “IC

postings” and “Trading partner” options in ECC

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[ Intercompany Reconciliation

Consider utilizing standard ICR functionality for

GL open items

Non open item managed accounts

Customer/ Vendor open items

Ensures that intercompany documents from accounting

transactions within the corporate group correspond to one

another

Helps maintain constant control and can be run at any time

Documents are reconciled in the transaction currency

Reduces close time as users will be able to reconcile IC

transactions during the month instead of waiting till period end

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Select Assign Reconcile


[ Functional Area

Functional area is a structure used to classify operational

expenses by function such as Administration, Sales and

Distribution, Marketing and Production

Facilitates preparation of cost-of-sales based financial

statements

Ensure functional area feature is adequately utilized

Functional area can be defined in the GL Master (Chart of

Accounts level), Cost Element or CO cost object

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[ Transaction types

Consider utilizing transaction type feature available in ECC

Enables comparison of balance sheet movements and

corresponding P&L activities (e.g. opening balance, acquisitions,

retirements, transfers and closing balance)

Facilitates creation of a cash flow statement as well as

consolidated fixed asset reporting

Degree of manual processing for creating cash flow statement

varies, depends on cash flow statement design

Transaction types for cash flow reporting are different from

Fixed Asset transaction types

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[ Currencies

Enable required currencies for ledger on day one, becomes really complicated post-go-live (i.e. may require SLO*)

Group Currency is the basis for Consolidation reporting

Evaluate FASB 52 compliance related features available in ECC

Evaluate currency translation feature available in ECC compared to SAP EPM tool

Will parallel group currency be used for consolidation?

Identify exchange rate types for consolidation

Where will currency translation be done?

*System Landscape Optimization is a service offered by SAP

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[ Fixed Assets

Check whether multiple GAAP reporting is required

Design Depreciation Areas to handle multiple GAAP

requirements

Determine where Depreciation Area 01 is mapped to (Local

vs. US GAAP/IFRS book)

Avail “transfer variants” and “cross system depreciation area”

functionality for intercompany transactions

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[ Key take aways

SAP offers many standard features at local ledger level and also in the

consolidation layer that you should consider before implementation

Utilize integrated master data and minimize data transformation in the

process of sending data from ECC to EPM layer for consolidation, makes

reporting and reconciliation easier

Start assessing now about the change to IFRS and its potential effects on

your accounting and financial reporting, business systems and processes,

and people

Whatever approach is taken, the financial consolidation process will be

impacted

Quick and easy fixes for IFRS and XBRL available in market, but those may

represent a compliance risk

An effective requirements gathering and planning process can reduce

uncertainty and operational risk around IFRS

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[ Learn more…today’s speakers can be reached at

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Ross WilsonSr. Director, SAP Business Processes


[email protected]

www.mckesson.com

Vish Arunachalam VP, EPM


[email protected]

www.perceptinc.com

AdvantageFinance




[ AdvantageFinance

Perceptive’s AdvantageFinance offers a broad portfolio of EPM

services to help clients achieve effective governance, manage risk and

ensure compliance with evolving regulatory requirements

AdvantageFinance helps maximize the value of your solutions in

these areas:

EPM Evaluation

EPM Implementation

EPM Migration Services

EPM Financial Transformation Services

Visit www.perceptinc.com/adfin

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http://www.perceptinc.com/adfin


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] Thank you for participating. Please remember to complete and return your

evaluation form following this session