- SAP Managed Tags:
Introduction: Why Parallel Accounting Matters Today
Universal Parallel Accounting (UPA) is a functionality introduced in SAP S/4HANA 2022, designed to enhance, and fully integrate SAP’s parallel accounting capabilities in alignment with its broader vision and the One financial framework strategy.
Since the introduction of New G/L in the ECC era, SAP has continuously developed solutions to address parallel accounting requirements. Over time, these capabilities have been refined to ensure compliance with IFRS and other accounting standards.
Universal Parallel Accounting represents the next major advancement in this area and is clearly aligned with the key breakthroughs introduced in S/4HANA. Notably, SAP continues to release new notes on UPA at a steady pace and updates the most critical ones almost weekly. To emphasize this, I will highlight two key SAP Notes that I have referenced throughout this document:
3265275 - Universal Parallel Accounting: FAQ - SAP for Me
3191636 - Universal Parallel Accounting: Scope Information - SAP for Me
SAP offers currently two approaches to implementing Universal Parallel Accounting. See also note: 3191636 - Universal Parallel Accounting: Scope Information - SAP for Me
- Enabling it during a new S/4HANA deployment or
- Migrating to it later. Later migration comes as a separate project and SAP according to its future roadmaps and note will deliver migration tools: 3327778 - Migration to Universal Parallel Accounting (SAP S/4HANA 2023): Scope Information - SAP for....
Activating UPA - like activating any new functionality after a system has already gone live - requires a migration process that can be complex, particularly if the system was not initially designed to support it. See SAP Road Map Explorer
Therefore, it is highly recommended to either activate UPA from the beginning of a new implementation or, at a minimum, ensure the system is well-prepared for a future UPA transition. The subject of preparing a system that is UPA ready is thoroughly explained in the following very good blog: https://community.sap.com/t5/enterprise-resource-planning-blogs-by-sap/readiness-for-universal-paral...
The Shift Toward Universal Parallel Accounting in S/4HANA
The implementation of Universal Parallel Accounting (UPA) in SAP S/4HANA presents a significant opportunity for organizations to enhance both their internal and external financial reporting, as well as their end-to-end financial processes, what is now commonly referred to in the S/4HANA world as the Record-to-Report (R2R) stream.
As discussed throughout this document, UPA is particularly effective in ensuring compliance with multiple accounting standards, such as IFRS and local GAAP. Additionally, it significantly enhances managerial reporting by systemically streamlining parallel valuation capabilities across key balance sheet components, including Fixed Assets and Inventory.
Universal Parallel Accounting enables organizations to:
- Seamlessly integrate multi-GAAP support across all finance functionalities
- Manage up to ten currencies and valuations across both leading and non-leading ledgers, as well as various finance sub-modules
- Overcome existing system limitations by simplifying financial processes, reducing month-end activities especially in the Product costing sub-stream, and improving the overall accuracy and transparency of financial reporting
While UPA brings significant long-term benefits for both Finance and IT departments, its immediate deployment may require additional effort and close collaboration with SAP due to its relatively early stage of development. Several known limitations exist. The following paragraph presents a list of such known constraints.
A critical look at the constraints that Universal Parallel Accounting has
As Universal Parallel Accounting (UPA) is a relatively new SAP product, it is subject to ongoing improvements and capability enhancements. The constraints listed below represent the current state at the time of writing, based on personal experience as well as the key SAP Note 3191636 - Universal Parallel Accounting: Scope Information - SAP for Me
Financial Accounting
- Universal Parallel Accounting currently does not support mixed valuation ledgers, that is, the combination of legal and group valuation currency types within a single ledger (valuation view is left blank in the FINSC_LEDGER settings). I have found this to be a notable limitation of UPA. SAP has acknowledged this constraint and given its broad impact - particularly since many existing implementations have adopted a mixed valuation ledger design - and has indicated plans to address it in the future. From a practical standpoint, it seems inevitable that SAP will need to deliver a solution for UPA to achieve widespread adoption, especially considering how common the mixed-ledger approach is in real-world landscapes. According to note: 3443265 - Ledger Settings for Group/Profit Center Valuation and/or Parallel Cost of Goods Manufactur... : It is planned to offer a transition tool to move to Universal Parallel Accounting in the future that will split the values currently recorded in the multi-valuation ledger to three separate ledgers.
Fixed Asset Accounting
- Integration with Plant Maintenance is not supported. However, a soft link can be used by assigning the Fixed Asset to an Equipment record, allowing for settlement and reporting purposes if needed.
- Integration with Flexible RE-FX is not supported, except for Contract Lifecycle Management, which supports IFRS 16 finance leases.
Controlling
- UPA does not support Classic CO Planning transactions. Planning via SAP Analytics Cloud (SAC) is the recommended approach.
- Overhead Controlling:
- Indirect Activity Allocation is not supported. All CO allocations must be performed using the 'Universal Allocation' Fiori app.
- Investment Controlling:
- Internal orders receive minimal support as investment measures. This constraint is anticipated to have minimal impact, as newer S/4HANA deployments tend to use WBS elements instead of internal orders for investment tracking.
- Line-item settlement is unavailable for investment-related cost objects.
- Product Cost Controlling
- UPA does not support Classic Results Analysis. Event-based Work in Progress (WIP) is utilized, as detailed in the next paragraphs.
Managerial Reporting - COPA
- Combined Profitability Analysis (Account-based and Costing-based) is not supported.
- Costing-based Profitability Analysis is not supported.
Procurement
SAP is in the process of replacing the old Service Procurement functionality (MM-SRV) with a simplified version called 'Lean Services'. All new tools and functionalities will be compatible solely with the Lean Services framework, while existing tools will be transitioned gradually.
Two key legacy tools, Plant Maintenance (PM) and Transportation Management (TM), currently rely on MM-SRV for service procurement, creating a compatibility issue with UPA. See also: SAP Road Map Explorer
Country-Specific SAP Standard Localization Functionalities
Currently, Universal Parallel Accounting supports localization only for a limited number of countries.
SAP’s emphasis on UPA and its development plans suggest these limitations will be resolved soon. This will help ensure a smoother migration and reduce associated risks as UPA continues to mature. However, for a successful transition, it is crucial to consider key principles in the initial system and process design - such as ledger set up and currency configuration - to facilitate future UPA adoption. See also note: 2344012 - Currencies in Universal Journal - SAP for Me
It should be noted that UPA is not enabled by default; activation of the non-reversible business function (FINS_PARALLEL_ACCOUNTING_BF) is required. There will be several SAP note implementations for UPA since it is a new SAP product. See also the key note: 3327778 - Migration to Universal Parallel Accounting (SAP S/4HANA 2023): Scope Information - SAP for...
Here is a key message to keep in mind as you begin the journey toward activating Universal Parallel Accounting:
The Universal Parallel Accounting business functions are only available to authorized customers. As of now, when starting the process in the Switch Framework (transaction code SFW5), you will receive a popup message indicating that you must request activation from SAP.
How we got here and what are the UPA key innovations
As accounting standards move toward a more globalized framework and local standards continue to converge, tax reporting requirements remain complex. Additionally, as organizations expand across multiple jurisdictions, the need for comparative managerial and tax reporting has grown significantly. Traditional accounting systems often struggle to accommodate various accounting standards, such as IFRS and local GAAP. Universal Parallel Accounting (UPA) addresses these challenges by harmonizing valuations and enhancing financial transparency. The following paragraphs will highlight the key innovations that enable this.
- Parallel accounting and valuations
- Multi-currency accounting
- Fixed assets
- Production accounting
- Fiscal year variants
The Evolution of Parallel Accounting in SAP
In the S/4HANA systems without UPA activated and even more so to previous ECC systems, several financial statements items and therefore the underlying financial processes must rely primarily to the figures coming out of the leading ledger while additional month end activities for business users and/or complex system set ups and maintenance activities are required. Here are some parallel valuation challenges:
- In S/4HANA systems without Universal Parallel Accounting, the Material Ledger allows only three different valuations, limiting alignment between the General Ledger and the Material Ledger. This restriction becomes even more significant when Group Valuation is active. Group valuation views have distinct currency types per ledger, limited to two due to Material Ledger integration constraints. 2882025 - Multiple valuation approaches/transfer prices in SAP S/4HANA, on-premise edition - SAP for... A maximum of three currency fields is available for the operational inventory valuation of the materials in the material ledger.
- SAP does not support Activity rate calculation and inventory valuation for non-leading ledgers, when different GAAP depreciation values should be considered from related non-leading depreciation areas. Traditionally, this required the activation of the Parallel Cost of Goods Manufactured (COGM) business function. Universal Parallel Accounting (UPA) eliminates the need for Parallel COGM. UPA enables ledger-level execution of the actual costing program (CKMLCP), allowing accurate revaluation based on actuals per ledger. Obviously, Parallel COGM functionality becomes unnecessary and therefore is unavailable in S/4HANA systems with UPA activated.
- Traditional cost allocation programs historically considered values from the leading ledger unless complex solutions were implemented. However, even in non-UPA S/4HANA systems, the Universal Allocation application supports ledger-specific allocations, an area that expands further with UPA.
- Fixed Asset Valuation Challenges. A common example of this constraint occurs in Fixed Asset acquisitions to Assets Under Construction (AuC) monitored via WBS-based investment measures. In such scenarios, values from the leading ledger are usually copied to non-leading ledgers by default. However, because capitalization rules often vary across countries, fulfilling local requirements usually demands complex configurations or custom solutions—which are both difficult to maintain and costly over time.
Next, we will examine how parallel valuation has become more streamlined and how issues and solutions like the above have been addressed in Universal Parallel accounting:
Fully integrated 10 currencies in both financial and controlling functionalities
Many global SAP customers must maintain accounting records in multiple currencies to meet diverse operational, management, group, statutory, and tax reporting needs. In S/4 HANA systems without Universal Parallel Accounting, up to three currencies can be integrated with sub-modules such as Fixed Asset Accounting, Tax Accounting, and Controlling (CO), including the Material Ledger for inventory valuation. See also notes:
It should be noted that this document does not delve deeply into the technical underpinnings of this limitation, but it is important to highlight the architectural constraint at an abstract level. Specifically, certain finance functionalities still rely on the BSEG table, which inherently supports only three currency fields. Therefore, Fixed Asset Accounting and Material Ledger can only use these three integrated currencies. This limitation is also reflected in the FINSC_LEDGER configuration settings, where only three currencies are defined and supported for full integration within Financial Accounting.
While with the introduction of S/4HANA and the ACDOCA (universal transactional table) up to seven additional parallel currencies can be defined as freely-definable currencies, see note 3476589 - Parallel Currency Transformations in S/4HANA - SAP for Me however, these seven additional currencies are non-integrated as explained above with key financial functionalities and therefore these currency fields eventually can only be used for partial financial statement reporting. From a business standpoint—and to be deliberately bold—based on my experience across multiple implementations, these non-integrated currencies often fall short of delivering real operational value. Without the deeper integration capabilities introduced by Universal Parallel Accounting (UPA), these currency fields risk becoming more of a technical feature than a practical financial tool.
The typical example that best illustrates the limitation of freely-defined currencies in S/4 HANA are end-to-end financial processes such as Fixed Asset acquisitions via investment measure cost objects such as WBS elements as well as the Material ledger which can only support three currency types (fields).
The main issue is that freely-defined currency amounts are re-translated using the spot exchange rate from the V_TCURR table during cost settlement or asset capitalization. This leads to asset capitalizations which are not based on historic costs and unreconcilable depreciation amounts in those currency types.
Now, S/4HANA systems with Universal Parallel Accounting active supports up to ten currencies in subledgers, including the material ledger and asset accounting.
Material ledger and multiple valuations
Universal Parallel Accounting allows for the management of multiple currency types within the Material Ledger. This capability supports various valuation views - such as group valuation and legal valuation - within the same organization, in a more streamlined manner compared to an S/4HANA system without Universal Parallel Accounting. There is no longer a requirement to create valuation profiles or assign currency types to them, as the concept of currency and valuation profiles becomes obsolete with the implementation of UPA.
Universal Parallel Accounting supports up to ten currencies in subledgers, including the Material Ledger, surpassing the traditional limitation of the three BSEG currencies. This enables more comprehensive financial reporting and analysis.
In nutshell, even though in the material ledger types you still can assign up to three currency types (OMX2 transaction code) the material ledger now can support every currency type that you maintain in the ledger set-up (FINSC_LEDGER).
This can be better understood by considering that the overall setup becomes flat, there are no complex or nested ("curly") configurations.
Ledger-Level Capabilities in UPA
- A ledger can have up to 10 currency types
↓ - Standard prices can be calculated at the ledger level
↓ - Actual activity prices can also be calculated at the ledger level
↓ - Revaluation on actuals can be executed at the ledger level
↓ - Each ledger maintains a single view (Legal or Group)
↓ - It becomes possible to Revaluate on actuals (actualization) only in the group view ledger
(including transfer pricing)
↓ - OR/AND revaluation on actuals can be run in the legal view ledger.
All the above become feasible without being affected by the valuation types defined in the Material Ledger settings. Additionally, the concept of currency profile types becomes obsolete under Universal Parallel Accounting. See also note:
In summary, UPA introduces the ability to calculate and apply standard prices at the ledger level, accommodating various accounting principles like IFRS, local GAAP, and other statutory requirements - functionality not available in earlier SAP versions. It also allows for inventory valuation by ledger, enabling actual costing based on local GAAP where required, or across all ledgers and company codes. The material’s standard and actual price can differ by ledger, ensuring accurate financial reporting and legal compliance.
Streamlined Fixed Asset Accounting
Before UPA, to meet multi-GAAP and multi-currency reporting requirements in the Fixed Asset Accounting module, an extensive setup of depreciation areas is necessary. This ensures a consistent value flow of historic acquisition costs throughout an asset’s lifecycle.
As a rule, maintaining a consistent value flow in Fixed Asset Accounting requires a separate depreciation area for each standard ledger and each fully integrated currency type configured in the Financial Accounting module.
For example, in a scenario with three standard ledgers and two integrated currency types per ledger, as proposed in the to-be solution, a minimum of six depreciation areas must be configured. This setup involves multiple depreciation area-specific configuration activities in the Fixed Asset Accounting module, leading to increased implementation and maintenance efforts. The technical limitation is well described in the following notes: 2307443 - Error AC559 or ACC_AA116 with Parallel Areas - SAP for Me
Once Universal Parallel Accounting (UPA) is activated in an S/4HANA system, the Fixed Asset Accounting module configuration can be optimized. This enhancement enables automatic conversion of all parallel currencies across all ledgers based on historical rates, thereby removing the necessity for additional depreciation areas.
With the ledger setting that includes three ledgers—one leading and two non-leading—and a pair of currency types for each, this results in a base setup of only three depreciation areas in a system with Universal Parallel Accounting enabled, compared to the six depreciation areas required in a S/4HANA system without Universal Parallel Accounting activated.
Enhanced Production and Cost Accounting
As part of the month-end procedure, Overhead Calculation allocates costs from cost centers to manufacturing orders. Next, the Work in Process (WIP) program assesses incomplete production to determine the value of WIP for open manufacturing orders.
Variance Calculation follows, identifying differences between actual and planned costs for completed manufacturing orders.
The final step, Settlement, processes these events by generating accounting entries and allocating costs to receiver objects, finalizing production costs for financial reporting.
However, in S/4HANA systems with Universal Parallel Accounting active, the so-called Event-based production order processing in SAP S/4HANA replaces the traditional period-end production accounting approach, offering a more dynamic and real-time method. This process enables parallel valuations of production costs by calculating overheads, Work in Process (WIP), and variances at the ledger level.
As a prerequisite for Universal Parallel Accounting (UPA), the event-based production solution provides real-time insights and streamline period-closing processes. To configure event-based production cost posting, organizations must set up event-based WIP and variance postings.
Upon creation of manufacturing orders, event-based production cost postings are automatically initiated, enabling real-time calculation and posting of WIP and variances. This eliminates the need for period-end WIP calculations, variance calculations, and revaluations, significantly improving the accuracy and efficiency of production cost control and financial reporting.
Alternate Fiscal Year Reporting is possible.
In some jurisdictions, companies are mandated by legal regulations to prepare statutory financial statements reflecting a fiscal year that is distinct from the fiscal year utilized at the group level. Traditionally, the Controlling module in SAP allows the definition of only a single fiscal year variant, which is typically aligned with the group’s reporting calendar. This limitation can lead to differences in areas such as Inventory accounting, Fixed Asset Accounting and Tax accounting, where manual adjustments are necessary at the end of the reporting period to meet local statutory requirements. Universal Parallel Accounting (UPA) ensures that fiscal year variants from all ledgers are identified and implemented uniformly across Financial Accounting, Controlling, and other finance-integrated processes, minimizing the need for manual interventions.
Other capabilities
Furthermore, the new architecture enables future innovations such as transactional carbon accounting, laying the groundwork for sustainability and environmental stewardship reporting.
Conclusion - Epilogue
Universal Parallel Accounting represents a paradigm shift in how SAP S/4HANA supports multi-GAAP, multi-currency, and multi-valuation financial processes. While the functionality is still maturing, it already offers transformative benefits; real-time, ledger-level valuation capabilities across all submodules, flat configuration structures, and enhanced transparency in financial reporting.
In this blog, I have aimed to share my hands-on experience with, yet another breakthrough functionality introduced in the latest S/4HANA releases. I know there are a lot of “next big things” coming out of SAP these days - and sometimes, it can feel overwhelming for organizations or even like just more noise. But Universal Parallel Accounting can genuinely stand out as a foundational shift, not just another technical upgrade - it is likely the future of SAP Finance and the emerging standard for new implementations.
That said, successful adoption demands thoughtful planning, early design decisions, and a readiness to anticipate ongoing SAP updates. It became clear to me that SAP is actively investing in UPA and steadily expanding its scope. A prudent, clear-headed approach is essential for organizations: they should stay open to the strategic potential UPA offers, while also resisting the urge to rush prematurely into implementation. As a practical next step, I recommend that organizations evaluating UPA conduct a pilot assessment sub-project in a sandbox environment, where the main end-to-end scenarios can be tested safely and comprehensively.
References:
Additional to the Notes mentioned above see also
Chowdavarapu, S. (2023). Introducing universal parallel accounting with SAP S/4HANA. SAP Press. https://www.sap-press.com/introducing-universal-parallel-accounting-with-sap-s4hana_5763/
Abrahman, E. (2023). Introducing transfer pricing with SAP S/4HANA (E-Bite). SAP Press. https://www.sap-press.com/introducing-transfer-pricing-with-sap-s4hana_5790/
1 Comment
