Week-Based (5-4-4) Calendar Year in S/4 HANA New Asset Accounting

[PasupuletiVenuGopal]

Overview: 

In this blog, I aim to provide a comprehensive overview of the week-based calendar year (5-4-4) in SAP. This includes a detailed explanation of its business relevance, configuration steps and end user activities to help you to understand and implement effectively. 

Introduction:

In the world of financial & operational planning, business often follow various fiscal calendar structures to suit their reporting needs. One of the most commonly used fiscal structure is the week-based calendar year and the week-based calendar is classified as below.

1. 4-4-5 ( Four weeks, Four weeks, Five weeks)
2. 4-5-4 ( Four weeks, Five weeks, Four weeks)
3. 5-4-4 (Five weeks, Four weeks, Four weeks)

The 5-4-4 calendar year is commonly used in industries like Retail, Manufacturing and Consumer goods. The traditional Gregorian calendar groups months unevenly, the week-based calendar or 5-4-4 calendar standardizes fiscal periods into consistent pattern.

The 5-4-4 calendar provides a more consistent comparison of weekly sales and operational performance across periods, since each period includes a similar number of business days and weekends. This model helps to avoid the complications of monthly calendar anomalies like varying number of days and differing number of weekends.

In SAP, Most of the standard reporting, financial periods & closing processes are designed around calendar or Non-calendar structures. Introducing a week-based model like 5-4-4 require rethinking of how you define the fiscal year variant, Mapping of posting periods and align with dependent modules. This change require or can have implications on both configurational changes and business process alignment. 

When a week-based calendar year is activated in accounting, Revenue Recognition aligns with the defined fiscal period duration, using a specified fiscal period-end instead of the traditional Gregorian calendar month-end. This process is particularly tailored for the Daily Ratable plan, under which Revenue Recognition calculates the daily revenue of contract and distributes it proportionally across the days within each fiscal period.

Since we're implementing the 5-4-4 calendar year structure for one of our clients, I wanted to share some key insights from the experience. During my research on this structure, I couldn't find much documentation(s) or discussions. To bridge that gap I am sharing my learnings and approach in this blog.

Business Use case: 

If a manufacturing entity runs its production operations, material planning and cost tracking based on weekly schedules. However the organization currently follows a standard month based fiscal year in SAP, which causes several operational disconnects: 

1. Production cost don't align financial periods making it difficult to analyze performance
2. Labor and overhead variances are uneven across months with different week counts.
3. Weekly KPI's are not reconciled properly 

Solution:

By Implementing the week-based calendar year structure in SAP, we were able to help the customer effectively address the challenge outlined above. 

Post Implementation benefits:

1. Cost efficiency in sync with actual weekly activities.
2. Period end closings and reporting become consistent and comparable
3. The business gains better control over cost trends, weekly variances and plant performance

Implementation Approach:

The week-based accounting calendar can be implemented in SAP using one of the two approaches depending on business requirement

1. Beginning of the year 
2. Mid of the year

Mid year: When switching to week-based calendar in the middle of your fiscal year, first configure a shortened fiscal year (to close out the old calendar early)

If you've already posted transactions in the current fiscal year or need to adjust historical data, you need to perform the System Landscape Optimization(SLO) to re-map and migrate existing postings.

As a best practice, it is recommended to implement the week-based calendar year at the start of the fiscal year 

Below are the configurational steps required

1. Create a new Fiscal Year variant - OB29
2. Set the Fiscal year to Short-end Fiscal year (Mid year)
3. Maintain the periods - OB29
4. Assign the Fiscal year to Company code - OB37
5. Adjust the posting periods - OB52 (if require)
6. Create Weightings - OA85
7. Activate period weightings at depreciation level - OAYL

 Configuration walkthrough:

• Create Fiscal Year Variant: OB29

SPRO - Financial Accounting - Financial Accounting & Global settings - Fiscal Year - Maintain Fiscal year variant 

• Create weightings in Asset Accounting : OA85

SPRO - Financial Accounting - Asset Accounting - General Valuation - Fiscal Year Specification - Define weightings of periods - Weight periods in fiscal year version 

• Activate period weightings at depreciation level : OAYL

SPRO - Financial Accounting -  Asset Accounting - General Valuation - Fiscal Year specification - Define Weighting periods - Specify area for individual period weighting  

End user Activities or Testing scenarios:

1. Create Asset Master Record - AS01
2. Post Asset Acquisition - F-90 
3. Run Depreciation (AFAB) or Check the Asset values (AW01N)

Asset explorer: 

The values have been calculated according to the 5-4-4 proportion. For Period 1, the value is 1006.43 for period 2 it is 805.14, for period 3 it s 805.14. These same values apply for periods 4 through 12 as well.

Example:- 

Asset Acquisition = 5000/- 

Useful life = 7 Years

Depreciation value  5000/7  714.2851

To get a new proportion value for period 1 = 714.2857*0.09615  = 68.78

To get a new proportion value for period 2 = 714.2857 *0.07692  = 54.945

To get a new proportion value for period 3 = 714.2857 *0.07692  = 54.945

Same will repeat for the respective periods. 

Weighting Factor  = Weeks in period52 or 53 in case of leap year

For Instance, Weighting Factor  = 5/52 = 0.09615 

Model of 5-4-4 structure:

Note: It is advisable to coordinate with the CO,MM & SD Module teams to ensure the alignment and avoid potential integration issues during or after the fiscal year structure changes. Also, Make sure to check the period end activities & Custom report (if applicable)

Conclusion:

The 5-4-4 calendar brings structure and consistency to financial periods, aligning better with the weekly business operations. with the right setup and co-ordination, it lays the foundation for more streamlined reporting and smarter decision making.