
In this blog post, we will look at Universal Parallel Accounting available for On-Premise and Private Cloud since SAP S/4HANA release 2022. Universal Parallel accounting or UPA is a new finance architecture for handling multiple accounting valuations and currencies in parallel. Not only does UPA introduce various functionalities on its own, but it also serves as the foundation for many new or planned innovations within the SAP S/4HANA.
It is crucial to understand that while the UPA offers huge benefits, there are currently some restrictions to be aware of. Certain functionalities, which you may or may not use, become unavailable upon UPA activation. The current release includes support for the following country localizations: USA, Germany, France, Japan, and Romania. You can find more information in SAP Note 3191636 - Universal Parallel Accounting: Scope Information.
So, there may be valid reasons why greenfield customers might decide against activating UPA in their projects. However, even if the activation ultimately proves not feasible, I still believe it's worthwhile to evaluate UPA and incorporate it into your design decision already now, ensuring a smoother transition to UPA in the future.
And this is exactly the focus of this blog – what steps can you take during S/4HANA greenfield implementation to facilitate a seamless migration to UPA later on. Some aspects listed below are obvious and well-known, such as adopting a ledger approach instead of an accounts approach. However, some are less obvious or not widely recognized, such as considering country-specific accounting principles for local GAAPs instead of single generic principle.
The intention of this blog is not to explore the features of UPA or UPA migration scenarios. Numerous sources are already available for this detail:
For any new implementation of S/4HANA it is strongly recommended to go for ledger approach. UPA works only with ledgers. If for whatever reason you decide to go for accounts approach, you would need to migrate to ledger approach even before thinking of UPA, which is basically migration project on its own. Please refer to SAP Note 3042755 - S4TWL - Migration from account solution to ledger solution.
If, besides legal valuation, there is a need for implementing additional views such as Group valuation or Profit Center valuation, you must still select one of the approaches outlined in the SAP Note 2882025 - Multiple valuation approaches/transfer prices in SAP S/4HANA, on-premise edition, which involves setting up a multi-valuation ledger. Universal Parallel Accounting only allows using single valuation ledgers, which means you need separate ledgers for each valuation. For more detailed information, please refer to the blog post “Profit Center Valuation with Universal Parallel Accounting in SAP S/4HANA 2023”
Currently, migrating to UPA from a multi-valuation ledger is not possible, but planned to be enabled in the future according to the roadmap.
In many customer systems, a common setup for parallel accounting involves creation of a single generic accounting principle applicable to all their local GAAPs. Consider a scenario where a company implemented a group valuation under IFRS along with multiple local statutory accounting principles. A typical configuration for multinational company would look something like this:
Ledger | Accounting principle |
0L – leading ledger | IFRS |
1L – non leading ledger | LG (generic local GAAP) |
The similar setup featuring the generic accounting principle LG was also provided as part of the Best Practices content for On-Premise customers up to S/4HANA 1909. In fact, there was no alternative, within the configuration, accounting principles could only be assigned at the ledger level.
Since S/4HANA release 1909, changes have been made in the customizing tables, and now, you can define and assign accounting principles to combinations of ledgers and company codes in the 'Define Settings for Ledgers and Currency Types' activity (transaction code FINSC_LEDGER). For additional information, please refer to SAP Note 3065695 - Accounting Principle customizing in S/4HANA.
To prepare your system for future UPA activation, you must transition to country-specific accounting principles.
Taking our example company into account, the configuration could appear as follows:"
Ledger | Company code | Accounting principle |
0L Leading ledger | 1010 – German | IFRS |
| 1110 - UK | IFRS |
| 1210 - France | IFRS |
| …. | IFRS |
|
|
|
1L Non-leading ledger |
|
|
| 1010 – German | DEAP – German GAAP |
| 1110 - UK | GBAP - UK GAAP |
| 1210 - France | FRAP – French GAAP |
| … | … |
There are several good reasons for adopting this configuration. Firstly, it aligns with business logic and reflects the real-world concept of an accounting principle. When considering an accounting principle as a set of rules that differ from one country to another, it becomes evident that having distinct local GAAPs defined in the system for each country makes a lot of sense.
From a SAP functional point of view, the accounting principle object slowly becomes more central. An example of this can be seen in the new Advanced Valuation processes. Without the country-specific principles, it is not possible to configure distinct valuation rules for each country.
The adoption of country-specific accounting principles is a mandatory requirement for migrating to UPA. Once the system is live, it becomes difficult to alter this setting and a DMLT service would be required. For more information, please consult the SAP Note 3334519 - Migration to Universal Parallel Accounting in SAP S/4HANA: Replacing the Generic Local Acc...
Since the release of S/4HANA 2022, a set of new functionalities for closing valuation runs has been introduced, comprising four main processes:
These new functionalities are designed to replace the "classic" programs, such as Foreign Currency Valuation (t-code FAGL_FCV), Further Valuations (F107), or Provisions for Doubtful Receivables (F103 / F104 or FAGL_104).
It's important to note that classical programs will not work for group and profit center valuation in UPA. Therefore, you may consider activating these new functionalities now. However, if you choose not to, activation can still be done at a later time. Please refer to Switching to Advanced Valuation in Financial Accounting | SAP Help Portal
Results analysis for revenue recognition is not available when UPA is activated. Instead, it is necessary to opt for Event-Based Revenue Recognition. Therefore, if there is a future plan to transition to UPA), you may consider implementing Event-Based Recognition right from the start. Keep in mind that this solution comes with its own set of pre-requisites.
A detailed comparison between these two functionalities can be found in SAP Note 3330305 - "Event Based Revenue Recognition versus Results Analysis.
This is closely connected to the previous point. Event based revenue recognition does not work with internal order. You may consider going for WBS elements instead. Please refer to SAP Note 2865342 - Internal Orders in SAP S/4HANA on-premise edition
UPA works only with Margin Analysis. One more reason not to even start thinking about costing-based CO-PA during S/4HANA implementation.
SAP Analytics Cloud is a strategic and recommended solution for financial planning since many years. But customer still had an option to use classic CO planning transactions even in S/4HANA. With UPA, they will not work anymore. Please refer to blog Financial Planning with Universal Parallel Accounting in SAP S/4HANA 2022
Only universal allocation can be used with UPA. Classic allocations and distributions aren't supported any longer (transactions KSV* and KSU* for actual/plan distributions and actual/plan assessments are blocked) with UPA.
In summary, if you are currently undergoing a new implementation of S/4HANA Private Cloud Edition or On-Premise and want to get seamlessly transition to UPA in the future, there are proactive steps you can take already now. I tried to highlight some of them in this blog. While many of these design decisions may be familiar, such as replacing old solutions with new ones, others are more nuanced, like configuring accounting principles. Please share your insights in the comments section.
Brought to you by the SAP S/4HANA RIG and Customer Care team.
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