- SAP Managed Tags:
Over the course of my career as an SAP consultant, the topic of parallel valuations has come up frequently and always involves a lot of discussion. I’ve seen different ways of handling the requirements of managerial analytics versus those of statutory / financial reporting and keeping these two views of the business reconciled. When I learned about Universal Parallel Accounting, I was excited to present this new solution to customers and colleagues since it addresses some of the key challenges we faced in the past. There are several other good blog postings and training materials already available on the topic. This one is based on presentations I’ve done to introduce the topic in a short time to leaders at the customers I am involved with. It should help answer the key questions that most people have who have only heard about UPA in passing, and need to know what to do about it.
What led to the introduction of Universal Parallel Accounting?
Over the course of the development of SAP ERP solutions, separate parallel accounting concepts arose in different areas of accounting. Fixed Asset Accounting had Depreciation Areas, Overhead Accounting had different Versions, Material Ledger had different Currency Types, and the General Ledger had different Ledgers.
Because there were different ways to manage parallel valuations in the different modules, the overall solution was complex. The values did not flow consistently from one sub-ledger to the next, making it hard to understand and presenting challenges to do end-to-end analysis. With UPA, all areas post into the Universal Journal (ACDOCA table), with a common ledger concept. Using the same ledger and currencies across all modules is easier to follow and understand.
Having a single ledger concept allows the values in one process to flow directly to the next, without the need for conversions or transformations. If we are recording different values in the primary costs, those should flow through to the secondary costs. Parallel depreciation values are inputs to parallel overhead cost valuations. These can then be used to calculate parallel activity prices, feeding into parallel valuations in Product Costing and Production Order settlement. This is depicted in the following diagram:
For further reading, refer to Janet Salmon's Blog on UPA.
What are the gaps that are solved by UPA?
Currencies were not translated consistently in different sub-ledger areas. With Universal Parallel Accounting, up to ten currencies can be calculated and posted in parallel.
Material Ledger currencies were limited to three types, leading to differences in the translation of values to additional currencies in ACDOCA. Cost Allocations and Settlements were not calculated separately in each currency. The calculation would be done in one currency, and the result would then be translated into the other currencies. This could result in different debit and credit values in a currency type that was translated. Now you can run the allocation per currency, so there are no longer any residual exchange differences.
In Fixed Asset Accounting, you could not easily manage different Fiscal Year variants between Group and Local Statutory accounting. The new data structures in UPA are able to support this.
What changes in each of the sub-ledgers?
With UPA, Ledger and currency configuration is done once, centrally, and is removed from the configuration of the other areas. This has impacts on the data model (there are new tables), therefore, a conversion is required. Some programs are redesigned to work with the new data structures, such as Universal Allocations and Production Order Settlement.
Material Ledger, Product Costing
There is no currency profile to configure in the Material Ledger; the Ledger and Currency settings are inherited from the overall Ledger settings. Since you don't have to choose 3 Currency Types ('CTs') to use in Material Ledger, you no longer have to choose between supporting US GAAP or getting better management reporting. All Material Ledger postings are calculated and posted to all the currencies defined in each ledger. You can have CT10 & 30 in one ledger for Legal Valuation and CT11 and 31 in another ledger for Group Valuation. With this structure, you have consistent currency conversion across all valuations.
Standard and actual cost calculations are each done per ledger / valuation. There is a new material price table (FMLT_PRICE) that includes the price type and associates prices to ledgers. Any updates to prices are thereby done on a ledger basis. You will no longer see the additional tax and commercial prices on the Material Master; instead, there are valuation alternatives linked to ledgers.
Production Order values are also posting per ledger with all the currencies defined for your ledgers. You can have different WIP, Overhead and Variances valuations that take into account the upstream and rules you have for legal vs. group valuations.
Cost Center Accounting (Overhead Management)
Other areas in Controlling posted with only 2 currencies; with UPA, these, too, can post in up to 10 currencies. As a result, you will no longer have rounding and conversion differences for the additional currencies beyond the two. These sometimes resulted in residual amounts in additional currencies in allocations.
Fixed Assets
Configuration settings are done per ledger or accounting principle. Each Depreciation Area is handled in all currencies, taking over the currency settings from the ledger. So this simplifies the currency configuration in this area. Each Depreciation Area has different valuation views. You can define specific depreciation keys and useful lives for asset classes in each.
What are some benefits this solution will bring to SAP customers?
As explained in the introduction, UPA provides better support of the requirements of international business flows by addressing key gaps. Once these gaps are filled, there is consistency in the data flows and value chains end to end. As a result, it is easier to understand how upstream processes impact areas downstream, making it easier for accountants and analysts to connect the dots and uncover insights. Simplified and consistent data structures lead to simpler calculations, unlocking automation opportunities. This drives operational efficiencies, accelerating some closing procedures. It also reduces the need for custom solutions, e.g. for inventory adjustments. Since many closing activities can be done per Ledger, it decouples the local closing process from the group close, i.e. you can start China’s close without waiting for other regions to finish. The UPA data structures also provide a basis for better design in other areas. We will be able to build more transparency in logistics with the new sales and stock transfer processes with real-time elimination postings in the group valuation ledger. UPA will foster more innovations and new development as SAP S/4HANA solutions continue to evolve and expand.
What are the considerations for customers when implementing a new SAP S/4HANA system?
Customers should be aware that new development in Finance will be based on the new data structures. Strategic solutions based on UPA have already been rolled out, such as Universal Allocation, Event-Based Revenue Recognition and Margin Analysis. If you want to be able to adopt current and future innovations, UPA will be a prerequisite. On the other hand, there are scope limitations today, listed in detail in SAP Note 3191636. You may have to decide between the benefits that UPA offers and the limitations in other areas until those are replaced with UPA-based functions.
It is important to consider whether you can activate UPA from the beginning because once you have postings in your system, a conversion program will be needed. How complex the conversion will be depends on the ledger and currency design of your current system. If you have a multiple valuation ledger, that will be a more complex migration to UPA than if you have only one single valuation ledger. For more information, see Universal Parallel Accounting Migration.
If your organization has been working with SAP ERP solutions already, you must account for the functional changes for all solution areas that are no longer supported, such as classic assessment/distribution, classic WIP and variance calculation, Results Analysis and costing-based CO-PA. For each of these areas, the new UPA-based solutions will have to be adopted.
What to do next?
Whether you are planning an S/4HANA migration, in the middle of implementing, or already productive, you will have to consider whether and when to adopt UPA in your environment. There are many things that will influence this decision and many things will be impacted by it. The questions you will need to answer include:
- Which benefits will be relevant and important for you?
- When can those benefits be realized? Especially for complex multinational organizations with longer rollout programs, it may be some time before there is enough of end-to-end business volume on the new solution to get the full benefit.
- How will current business practices be impacted?
- How costly will it be to adopt later as compared to sooner? With complex S/4HANA implementation roadmaps, interim solutions come with different costs.
These are not easy questions to answer, but I hope you have understood why they matter and I’ve helped you start on the journey.
2 Comments
