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In this article we will look at how consolidated cash flow statement can be prepared using Business Planning and Consolidation (BPC) Optimized for SAP S/4HANA. The cash flow statement is an important statement that summarizes the amount of cash entering and leaving the organization. The cash flow statement complements the balance sheet and income statement and its an essential part of company’s financial report. The main components of cash flow statement are operating, investing, and financing.

It is important to note that cash flow statement is different from balance sheet and income statement as it does not include amount of future incoming and outgoing cash that has been recorded on credit basis following accrual basis of accounting. Therefore, cash flow is calculated by adjusting net income, assets and liabilities for non-cash items.

There are two method available to prepare cash flow statement, direct and indirect method. The direct method adds up all the various types of cash receipts and payments such as cash paid to suppliers, cash paid to staff and cash received from customers. Under indirect method cash flow from operating activities is calculated by starting with earnings before interest and taxes (EBIT) from income statement and adjusting it for items that affect net income even though no actual cash has yet been receiver or paid against them. In this article we have assumed that it is prepared as per indirect method.

Let us assume that consolidated balance sheet and income statement are prepared for a group of entities (parent entity and subsidiaries) which are using SAP S/4HANA for transactional accounting and Business Planning and Consolidation (BPC) Optimized for S/4HANA for consolidation. Here we will look at how Consolidated Cash Flow Statement can be designed using SAP BPC Optimized for S/4HANA, SAP Semantic Tags and Business Warehouse Query Designer.

HANA Setup for Real Time Consolidation (RTC)

The set-up of S/4HANA financial accounting and BPC Optimized for SAP S/4HANA is pre-requisite. The GL balance from financial accounting module to Consolidation should be seamless without user intervention. This will enable availability of data into consolidation model to process. The consolidation engine can be automated to execute BPC rules thereby producing consolidated trial balance.

The integration between SAP S/4HANA Financial Accounting and BPC should allow flow of general ledger (GL) data in real-time using preliminary consolidation feature.

The BPC Consolidation rules are configured and are available for regular execution via schedule jobs to produce consolidated trial balance. The consolidated trial balance is consumed in calculation and reporting of cash flow statement.

Define Semantic Tags 

The semantic tag reporting functionality is delivered in SAP S/4HANA 1809 release. You can define semantic tags for cash flow structure. There are pre-delivered semantic tags available for use in standard reports / Key Performance Indicator (KPI) calculation. Therefor it is recommended to define custom semantic tag for cash flow purpose. You can create a semantic tag group for cash flow. To define custom semantic tag, enter a semantic tag ID, a semantic tag long name and assign it to cash flow semantic tag group crated for this purpose.

Assign Semantic Tags to General Ledger Accounts

Cash flow line item is calculated with the help of movement in general ledger balance. Therefore, for each semantic tag you assign hierarchy nodes or general ledger accounts from a financial statement version.

Design Cash Flow Report in Query Designer

The cash flow report structure can be defined using the semantic tags defined for it. Each of the semantic tags defined can represent a line item in the cash flow report. A calculation node can be defined to roll-up multiple semantic tags for presentation purpose. The cash flow line-item presentation may require number signage different from accounting signage. This can be achieved using sign reversal in the query design. A GL balance may contain cash and non-cash balance. For cash flow reporting purpose only cash related balance can be filtered using appropriate dimension such as transaction type.

Additional Design Consideration

  • Identification and classification of general ledger accounts from the financial statement version into cash and non-cash relevant. This will help in mapping and calculation of cash flow during the period. Generally, all cash flow relevant general ledger must be considered in cash flow statement.

  • Identify how to general ledger account balance of balance sheet in nature be segregated into opening balance and movements during the period. Generally, transaction type break-down should help in segregating opening balance from the movements.

  • The flow type/transaction type break-down of general ledger design should support the cash flow reporting requirement.

Sample - Consolidated Cash Flow - Indirect Method

The availability of consolidated trial balance in real-time helps to prepare real time consolidated cash flow statement using semantic tags. The semantic tags help defining the cash flow relevant GL and eliminates the need for creating an additional financial statement version for cash flow purpose. The GL assignment to semantic tag is simple and provides necessary flexibility required for calculation of cash flow. The presentation requirement such as lay out and formatting is easily achieved with query designer tools.