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This series of blogs describes how SAP® Business Planning and Consolidation, starter kit for IFRS on SAP NetWeaver – powered by SAP HANA™ has been configured to meet International Financial Reporting Standards (IFRS). The blogs will help customers achieve legal compliance of IFRS thanks to a detailed explanation of how the main standards listed hereafter have been implemented in the starter kit for IFRS:

•       IAS 1  –  Presentation of Financial Statements

•       IAS 7  –  Statement of Cash Flows

•       IAS 21 – Effect of Changes in Foreign Exchange Rates

•       IAS 28 – Investments in Associates and Joint Ventures

•       IFRS 3 – Business Combinations

•       IFRS 10 – Consolidated Financial Statements

•       IFRS 11 – Joint Arrangements

The first two blogs are dedicated to the Presentation of Financial Statements as required by IAS 1 (blog#2) and IAS7 (blog#3). The following blogs deal with the consolidation process:

  • Translation of foreign entities’ financial statement as set out by IAS 21 (blog #4)
  • Current consolidation procedures (blog #5)
  • First consolidation of an entity (blog #6)
  • Associates and joint ventures (blog #7)
  • Further changes in ownership interests in a subsidiary: loss of control and equity transactions (blog #8)

At the end of the last blog, we will provide a link to the comprehensive document describing standard by standard how IFRS requirements (including standards that are not addressed in this series of blogs) have been taken into account in SAP Business Planning and Consolidation, starter kit for IFRS on SAP NetWeaver – powered by SAP HANA

Introduction to SAP Business Planning and Consolidation, starter kit for IFRS on SAP NetWeaver – powered by SAP HANA

SAP Business Planning and Consolidation is part of SAP enterprise performance management (EPM) solutions. This product address financial consolidation requirements and can be integrated into both SAP and non-SAP software environments and can load data from any general ledger application. 

SAP starter kit for IFRS is a complete configuration on top of SAP Business Planning and Consolidation, version for Netweaver – from data collection to publishing of financial statements – designed to perform, validate and publish a statutory consolidation in accordance with IFRS. Using both product and functional best practices, the starter kit for IFRS ensures optimal performance, better usability and facilitated customer enhancement.

The starter kit for IFRS provides:

•     A chart of accounts

•     Reports for data entry at local level and data retrieval at the group level, including publishable financial statements

•     Controls to validate data entered or loaded into the application

•     A comprehensive set of consolidation rules designed to produce consolidated data

The starter kit for IFRS intends to meet the most common business requirements and, conversely, does not address specific ones. In particular, requirements specific to banking and insurance sector are not included in the starter kit.  This is also the reason why “industry-specific” standards such as IAS 26 (Accounting and Reporting by Retirement Benefit Plans), IAS 41 (Agriculture), IFRS 4 (Insurance Contracts) and IFRS 6 (Exploration for and Evaluation of Mineral Resources) are not dealt with by the starter kit.

The starter kit is provided to our customers at no additional charge and can be downloaded from our SAP Help Portal at http://help.sap.com/bopac. This blog refers to the starter kit delivered in September 2012 (SP3) available for version 10.0 of SAP Business Planning and Consolidation for SAP NetWeaver – powered by SAP HANA.

IFRS in the starter kit

IFRS apply equally to consolidated and separate (individual) financial statements, except for some requirements that specifically address one or the other. For example, IFRS 10 is dedicated to consolidated financial statements whereas IAS 27 only addresses separate financial statements.

In practice, the use of IFRS varies from country to country according to local regulations. For example, in the European Union, EU-endorsed IFRS are mandatory for listed companies’ consolidated statements whereas national GAAP usually still apply to individual statements and the unlisted sector.

In the starter kit for IFRS, local data, as loaded in input form folders[1] or after manual adjustments, are supposed to be IFRS compliant. It means that assets and liabilities, revenues, expenses, gains and losses are measured in accordance with IFRS requirements. Consolidation procedures embedded in the starter kit are compliant with IFRS.

[1] In SAP Business Planning and Consolidation, an input form folder is a comprehensive set of data entry schedules that enables consolidated entities to enter their data (individual accounts) at local level.

To put it simple, starter kit compliance with IFRS is achieved in two ways:

  • Accounting schemes that derive from IFRS requirements should be provided for in the starter kit
  • The consolidation process should comply with IFRS requirements as described in IFRS 10

Regarding accounting schemes, it should be first reminded that no IFRS gives detailed accounting schemes (because there is no IFRS chart of accounts). However, the accounting requirements can – more or less easily – result in accounting schemes.

In the starter kit, providing for accounting schemes means that:

  • Corresponding accounts exist, and
  • Those accounts are linked with appropriate flows in the Account dimension thanks to the Associated_flows property.

Even though starter kit accounting schemes are presented in the form of accounting entries in this document (for a better understanding), it does not mean that corresponding data should be entered using manual journal entries. Most of them have been booked in local statements and are therefore entered in the input form folder at local level. The input forms available in the ACTUAL folder are designed to reflect the accounting schemes embedded in the Account dimension and restrict the data entry to the authorized account/flow cross-over.

What’s next?

In the next two blogs, we will focus on how the Starter kit meets IFRS requirements for the Presentation of Financial Statements, starting with IAS 1