SAP GL Document Splitting Part I

As alluded to in my last post, the document splitter plays a crucial part in the derivation of profit center and consequently in the preparation of management financial statements. Now we’ll start to take a deep dive into document splitting.

There are two prerequisites for using the splitter. First, the NewGL must be active in the box. That should be the case of any recent implementation. Second, there should be an understanding of the desired coding block and the business interpretation of the coding block elements.

Document Splitting Characteristics

The first step to configuring document splitting in SAP is to determine which coding block elements that you will want to have as document splitting characteristics. A document splitting characteristic will be acted on by the splitter to derive more detailed postings.

Document Splitting Characteristics 1

The partner field is used for cross-characteristic postings. For instance, in a posting spanning two profit centers A and B, the debit balance on one profit center A has partner profit center B, and the credit balance on profit center B has partner profit center A. It’s very similar to trading partner for those familiar with that concept.

There are two more options for each characteristic. First, whether the field is mandatory – that is it must be populated on all GL line items. Second, whether the field is zero balanced – whether the sum of the postings must equal zero (debits=credits).

For instance (and most common), if the profit center is set as a mandatory zero balancing characteristic, each line item on a posting must have a profit center and the total (debits-credits) of each profit center must be zero.

Configuration Model

The second key to understanding how the splitter is configured is to understand the theoretical model of the configuration. Once these areas are understood, it becomes much easier to guess what the configuration is doing. In the tradition of, I’ve created the informative diagram below (Ha! Ha! Ha!) .

Configuration for the Splitter

The critical information to glean at this step is that each GL account is assigned to an Item Category and each Document Type is assigned to a Business Transaction Variant. Finally, in the Splitting Method, we establish rules for each Business Transaction Variant on how each item category will be derived. This information is confusing, but it’s key to understanding the nature of the splitter. Memorize it if you must.

Next, we’ll walk through different splitting scenarios.

Active Document Split

The pièce de résistance of the NewGL, the active document split is the standard example used by most FICO consultants. In this scenario, an AR item is offset by two revenue items. Each revenue line item has a different profit center. In the GL View, the splitter breaks the AR line item into two line items – one for each profit center. Furthermore, the amounts on each posting is based on the weighted average of the offset line items. Read that twice – it’s tricky.

When we get to the active document splitting configuration, the key to this example is that the AR item category is split by the revenue category.

Active Split


Once you have active split down, inheritance is much easier. The key here is that if a posting has one blank line item and all other line items have the same profit center, then the blank line items will receive the same profit center. In the below example, we have a cash item without a profit center that has two expense items with PC 101. In the GL view, the cash item will receive the same profit center.

Inheritance in the SAP Document SplitterInheritance is turned on by default for all business transactions. You do have the option of turning it off at the rule level, but I’ve never seen a reason to do so.

Passive Split

The third type of splitting, is the passive split. The passive split is simple and it’s used whenever you reverse or clear a document. For reversing a document, the splitter will reverse the posting with the exact same profit center derivation as the document being reversed. This makes intuitive sense. The reversal should reverse out the original posting exactly, regardless of the configuration.

Second, for lines that are being cleared, the clearing line items will receive the same profit center split. This approach also makes intuitive sense. If we have an AR line item with $500 on profit center 101 and $300 on profit center 102, then we would expect the clearing document to wipe away $500 on 101 and $300 on 102.

In the next part of the series, we’ll start looking at the basic configuration.

  1. SPRO->Financial Accounting (New) -> General Ledger Accounting (New) -> Business Transactions -> Document Splitting -> Define Document Splitting Characteristics for General Ledger Accounting []

Profit Center Derivation in SAP

In a ‘normal’ SAP organization structure in the NewGL, the profit center in SAP is the smallest level in which P&L and Balance Sheets can be created for a management entity. Deriving the profit center in SAP is a complicated process. It’s critical to consider the sources of GL postings and how each of those postings will get a profit center. In this post, we’ll examine the most common ways that the PC is derived and start to get a feel for the document splitter.

Manually Assigned Profit Center

The easiest way to assign a PC is to manually assign it in the posting. Here we can see the user keying the profit center onto the entry in FB50.

Profit Center being manually entered 1

Derive the Profit Center from a CO assignment

Second, for entries that have a CO item assigned – such as a  cost center, WBS element, real estate contract, and so forth, the profit center can be derived from the CO object. Below, we have a cost center that is assigned to a profit center.

Cost center creation with profit center assigned 2

When a posting uses the cost center just created, the PC will be automatically derived in the posting.

Using the cost center to derive the PC 3

From the material master

On a material master, the PC is populated on the “Costing 1″ view. The PC on the accounting view will be used on SD & MM flows on their downstream accounting documents.

Profit Center on a Material Master 4

It’s critical that the PC be populated as part of standard material master setup. Otherwise, postings will likely err out.

Defaulting via Configuration

For cash clearing, house bank GL, and a few other accounts, configuration can be done to enable the PC to be derived based on the combination of GL account and company code. This configuration should be used carefully as a default is generally not as detailed as direct assignment would be.

Default Profit Center per CoCd5

Bank accounts and sub accounts tend to use a default profit center since there is no option in either lockbox processing or in electronic bank statement that is easy to populate the profit center. This also makes some sense. Cash is usually held at a corporate level and not in a management division.


For more complex logic on assigning profit center, substitutions can be setup in OBBH and GGBH on the Financial side and Controlling side respectively. Profit center substitutions should be used with care as if they are needlessly complex or used in lieu of more careful configuration and design, they will become unwieldy to maintain and to understand. Here, the profit center is populated with a constant “1″ when GL account 511050 is used.

FI Substitution using OBBH6

Adding the Profit Center through the Document Splitter

Definitely the most tricky and most used method is derivation via the document splitter. The document splitter is a feature of the New General Ledger that ensures that all postings can receive a profit center – including subledger, balance sheet, and so forth. The complete document splitter will be explored in a later series of posts, but I’ll write a few words now.

First, there is entry view and general ledger view. The entry view of a posting is what the user enters and what is used for subledger purposes. The GL view is used for financial statement preparation and reporting. Most users look at the entry view of the posting. Usually only GL accountants care about the GL view.

What makes the splitter powerful is that even subledger postings can receive a profit center, and even more importantly, can receive more than one profit center. That enables the receivable on a sale that is split between two profit centers to receive both profit centers.

In the entry below, we can see that an invoice is being raised with expense items in two different profit centers.

FB60 with Document Splitting 7

When we look at the entry view, there is only a single AP item against the vendor. But when we look at it in GL view, the AP line is split into two line items.

FB03 in Entry View 8

FB03 in GL VIew9

In our following series, we’ll have a look at all of the major ways to configure document splitting. Hold on to your seats!

  1. FB50 []
  2. KS01 []
  3. FB50 []
  4. MM01 []
  5. Financial Accounting (New) -> General Ledger Accounting (New) -> Master Data -> Profit Center -> Assigned Default Profit Center to Accounts []
  6. OBBH []
  7. FB60 []
  8. FB03 []
  9. FB03 []

The three toughest items in the SAP GL for finance users

SAP GL is notoriously difficult to learn, but once users become adept, they begin to appreciate the data model and consistency of transactions. With that said, the learning curve is still quite steep. When preparing a PowerPoint deck for an informative presentation on profit center derivation, I realized how much consultants ask of their users. With all of that said, I see three areas that finance users consistently struggle to understand.

Currency types

Many ERP systems do not have a disciplined model around handling foreign currency transactions. SAP’s GL is different in that it handles multi-currency scenarios with ease, but many users are not accustom to thinking in more than one currency at a time. Thus explaining differences between document, local, and group currencies has been a consistent point in my career.


Intercompany entries tend to give users fits. SAP’s concept of company code and trading partner, along with profit center and partner profit center, is an elegant way to enable eliminations on complex environments that need to support both legal and management eliminations. At the same time, explaining this concept to user ts is challenging, especially when the legacy system only uses GL accounts to segregate intercompany relations.

A second challenge is that intercompany is a tough topic in general. Many seasoned accountants struggle with eliminations. Trying to get both the accounting reality correct while enabling eliminations becomes as challenging as baking a souffle while stir-frying pad thai.

Profit Center Derivation

Perhaps it’s my monotoned explanations, but my users’ eyes glaze over whenever I begin to discuss how profit center is derived. I’ve tried explaining it in terms of the business process. I’ve tried explaining active split vs passive split vs inheritance, and that certainly doesn’t help. My finance users are top-notch, and I like to think that I’m a decent consultant. So I suspect that this area is really that difficult.

Each of these areas in the GL are quite challenging for both consultants and end-users to understand. So it’s critical to have learning materials prepared and to take the time to explain the in-depth details of these topics. In that way, the user will have the information they need to be successful.


Performing GL Conversions (part III)

In the previous two articles on SAP GL conversions, we discussed the process of GL conversions, journal entry flows, and how to handle reconciliation accounts. In this final article, we’ll look at a couple pain points and keys to success that arise in SAP GL conversions.


In the GL, there is usually more than one currency type – say document, local, and group being tracked. See here for more information. While performing conversions, it’s incredibly critical to properly populate each currency type. Usually the local currency is the most critical to have correct as it is feeding consolidations, but other types should be considered.

The group currency tends to create the most trouble. If this value is tracked in the legacy system, then it can be populated in SAP. If the group currency isn’t being tracked, then a useful estimate should be created by populating a blended exchange rate

Account and Management Rollups

As previously mentioned, it’s critical to ensure that how accounts are classified and rolled up in legacy matches that of SAP. For instance, if the legacy system has an account “Rent Income” that is classified in the “Non Operating” section of the P&L, there would be a problem if the Rent Income account is mapped to the “Revenue” section of the P&L in SAP.

A similar issue occurs if profit centers and cost centers are not mapped correctly or if the hierarchies are not properly constructed. For instance, if a profit center A is mapped to division 1 in legacy, then it’s critical to ensure the activity is converted to a profit center in division 1 in SAP.

Correct Cost Objects on Correct Accounts

When the GL is designed, a structured approach is taken to what type of cost objects are valid for each account. For instance, revenue accounts require COPA segments or profit centers, expense accounts require cost centers, and balance sheet accounts require a profit center. It’s important that the conversion mapping respect the GL design and map the correct cost object to the correct account type, otherwise data corruption may result.

Convert Often

Just like a business process or custom development must be tested, likewise, a conversion should be heavily tested. Executing a conversion multiple times into a test environment enables finding errors, mistakes, and bugs prior to the conversion being finalized. That makes the final, production conversion much easier and much more likely to succeed in the given time frame.

Many Eyes

Having more than one person validate conversions will help ensure that the data is correct. Also, be sure to feed the converted data into the consolidation system prior to go-live. Otherwise, unexpected problems will crop up when the data is fed to the consolidation program.

In this series, we covered the process, journal entry flow, and keys to success for performing GL conversion. I hope that you found this series helpful and informative.

House Bank Accounts in SAP FICO

House Bank Accounts (HBAs) in SAP are often configured incorrectly during an implementation. This improper configuration causes problems later when additional sub modules such as Electronic Bank Statement (EBS), Cash Forecasting, and Check Reconciliation are brought into scope. In this article, we explore how House Bank Accounts connect to physical bank accounts, some key settings, and common pitfalls to avoid.

House Bank Account Structure

House Bank Account

A house bank account represents a bank account that the company has opened with a bank. There should not be a house bank account for customer, vendor, or competitor bank accounts. HBAs should only be setup for a company’s own bank accounts. Second, each HBA should represent one single bank account and one bank account should only be represented by one HBA. If there are multiple house bank accounts with the same account number, check clearing and EBS operations will be negatively affected.

It’s also important to note that when a bank account is opened, it is opened by a single legal entity. So if a company with fifty legal entities opens a bank account, the account is still owned by one entity inside that company. We see this relationship in SAP in that a single company code is assigned to the HBA.

House Banks

If a house bank account represents a company’s bank account, then the House Bank (HB) represents the bank that the account is maintained at. So suppose a company has account 523552 at Bank of America with routing number 52389593, then the house bank account will be tied to account 523552 and the house bank will be tied to routing number 52389593. Let’s suppose that you have multiple Bank of America accounts with different routing numbers. Should you have a different HB for each routing number? Yes – SAP only enables one routing number per house bank.

Naming House Bank Accounts

SAP gives us four characters to name each House Bank and each House Bank Account. That of course means that we must be pithy and smart about our naming convention. Most companies only have one or small number of banks that they have accounts with. At the same time, there may be a few routing numbers for the same bank. Thus, multiple house banks may be required for the same bank. With that information, a sensible naming scheme for house banks seems to be AAA# where AAA is an abbreviation for the bank name – such as BOA for Bank of America or FTB for Fifth Third Bank – and # is a sequential number for each routing number at that bank.

Similarly, we must be careful about naming house bank accounts. Best treasury practices suggest that accounts should be segregated to only have one type of activity. So disbursements should be executed out of one account and collections should be in a separate account. Thus, a reasonable practice would be to use an abbreviation for the type of activity  and a sequential number. I would do AA## with AA being the short hand for the activity type and ## being a sequential number.

GL Accounts for House Bank Accounts

Most flows in bank accounting revolve around recording a companies cash activity and then reconciling against how the bank recorded that activity. As part of a monthly close operation, bank statements and internal accounting records should be reconciled against one another.

The standard recipe in SAP for cash accounting flows is that say when a payment is issued, a clearing account tied to the house bank account is credited and the vendor account is debited. Then, when the payment shows up on the bank statement, the clearing account is debited and the G/L tied to the HBA is debited credited. That means that the account tied to the HBA should always represent the reconciled activity (and match the balance per the last statement date), while the clearing accounts represent unreconciled activity.

Usually, there are more than one clearing accounts used depending on how much activity is flowing through the account. If the HBA GL account is 444440, then clearing accounts should be numbered 444441,444442,…,444449. If the account has low volumes, then only a clearing account for incomings and another for outgoings may be required. If the account has high volumes, then a separate account should be used for each type of activity (lockbox, ACH payments, check disbursements, etc).

House Bank Account GL Flow

Configuring House Bank Accounts

First, the house bank must be setup as a bank in FI01. The bank really is just used so that SAP is aware that the bank’s routing number is valid and to have a consistent address for the bank. Often times, a file is prepared and mass loaded with all of the known banks in a country to avoid having do to this step every time.

FI01 Create Bank  ((FI01))

Next, the house bank is setup in FI12. First, we’re prompted for the company code of the house bank. Next, a code is assigned to the house bank as previously detailed. The country should be denoted as well. If there is a need for additional payment settings, these can be entered under the DME section.FI12 Create House Bank  ((FI12))

Once the house bank is created, the house bank account should be configured. Key information here is the Account id, the description, the account number, the GL account, and the currency.

FI12 House Bank Account  ((FI12))

Once all of this information is saved, then the house bank account is ready for use in other cash flows such as lockbox, EBS, cash forecasting, and so on.

Questions? Comments? Please leave feedback!

Configuring Lockbox for Cash Application in SAP FICO

The United States, unlike much of the world, still relies heavily on paper checks for payments. In order to facilitate internal control and to streamline processing, many companies utilize a lockbox service at a bank. In this article, we’ll examine the process flow for cash application via lockbox, discuss a few keys to success, and then examine the configuration and technical details in SAP.

Lockbox Process
  1. A customer orders products from a company. The company sends the products to the customer.
  2. The company invoices the customer. On the invoice, the vendor includes a voucher. The voucher includes the invoice number and customer number.
  3. The customer mails their check with the voucher to the bank that the lockbox is setup with.
  4. The bank deposits the cash. The bank’s staff will capture the information off the customer’s check, possibly the information on the voucher, and possibly an image of the check.
  5. The bank sends the company a file with all of the captured payment information.
  6. The company uses the payment file from the bank in order to apply payments against the customer invoices.
  7. Any errors during step 6 must be manually researched and resolved.
BAI2 Overview for SAP Lockbox

Setting up lockbox processing starts with getting a correctly formatted file. SAP requires the file to be formatted in what it calls the BAI2 format. This is not the BAI2 layout that the rest of the world considers the BAI2 format. It is the BAI2 format for lockboxes. SAP thankfully gives us the layout for the file, but not a lot of detail about what is going on. From the help documentation in FLB2, we see that the layout of the file is contained in tables FLB*

SAP FICO Lockbox record layout

You can view the fields in each of those tables to see what fields should be contained in the file. The lockbox file if a fixed width text file. Even if the field is not being used, spaces should be added to the field. All of the meat of the file is in record types 5, 6, and 4. Record type 5 contains the lockbox information, record type 6 contains the check information as well as any invoice numbers that are being cleared. Record type 4 is an overflow of record type 6 and is used for adding additional invoices if they do not all fit in record type 6.

An example of the layout from the SCN wiki is below. You can see that the record type is the first digit of each line.

BAI2 Lockbox Format Example

This workbook details what each field does in each record type. Note that I had to work this out by reading the ABAP of RFEBLB20, so be aware that it may not be exactly perfect, but it’s a very good start.

Some banks are able to actually send the file in the correct format. Other banks are not able to do so and instead a custom program will need to translate the file out of the bank’s format and into the BAI2 lockbox format that SAP expects.

SAP Lockbox Configuration

The first step in the configuration is to set the control parameters for lockbox processing. This step is usually already done by default in most ECC 6.0 installations, but you should double check the settings.

Lockbox control parameters for SAP FICO 1

The most important setting here control the postings in the lockbox process. The standard set of journal entries are:

Dr Bank Account

Cr Incoming Payments

Dr Incoming Payments

Cr Customer Account

The settings in this config screen will determine how and if the postings are made. Have a look at the help text for each for more in depth discussion. The next screen has the setup for each individual lockbox.

SAP FICO Lockbox Posting Parameters 2

Here, the origin and destination that is coded in the lockbox file is entered. Additional parameters such as GL accounts to use for the bank and clearing accounts, document types, and posting keys can be selected. If you choose to code this activity to a house bank account that you setup in FI12, then it can be connected here.

That should give us enough configuration to process a lockbox file. There are other configuration items such as reason codes in AR, default profit centers in the GL, house banks in cash accounting, and disputes in FSCM Dispute Management that integrate here as well, but these are a separate topic and will make a long post even longer.  Let’s look at the lockbox processing screen:

SAP Lockbox Posting FLB2 3

A couple of key items here that impact processing in a big way. The procedure and format should match what is configured in our first config screen. The field “Invoice Numbers” is incredibly important as it determines how the invoice numbers on the lockbox file will be matched to the FI document numbers.

Any items that do not match an invoice after FLB2 is run will show up in FEBA_LOCKBOX. This screen is used for post processing and fixing errors.

Keys to Success in SAP Lockbox Processing

There are a few critical points in the process to ensure that lockbox cash application has a high hit rate.

  1. Bank Integration: The bank who is providing the lockbox file must be on board with providing enough information. Similarly, the treasury department must be willing to pay the fees to capture the information
  2. Cross CoCd Payments: If the lockbox belongs to one company code and the payments are being received in another, then enhancing a user exit will be necessary.
  3. Updates during post processing: Each time that a payment is applied manually, the customer’s bank information should be updated. This approach requires enhancement.
  4. Routine error handling: All lockbox issues and unapplied cash should be examined on a daily basis. If these problems back up, it can make for an ugly close at month end.

Hopefully this information gives you a decent sense of how to configure lockbox for SAP. Feel free to leave comments or questions.


  1. SPRO->Financial Accounting->Bank Accounting->Business Transactions->Payment Transactions->Lockbox->Define Control Parameters []
  2. SPRO->Financial Accounting->Bank Accounting->Business Transactions->Payment Transactions->Lockbox->Define Posting Data []
  3. FLB2 []

Performing GL Conversions Correctly (part II)

In my previous post, I discussed the basic process for performing GL conversion. In this post, we’ll turn it up a notch and explore the basic journal entry flow as well as examine a few cases of how to handle subledger accounts such as the AP and AR reconciliation accounts.

Journal Entry Flow

One of the defining features of modern accounting is double entry bookkeeping which gives us the core relationship that debits=credits. In order to convert the GL, we take the legacy GL balances and re-inflate them in the new system. Exploiting the fact that debits=credits, then in the new system we can place the original balance in the converted account and then offset that entry to a conversion account. Assuming that all of the balances are converted, then the conversion account should balance to zero.

Take the following legacy trial balance:

Legacy Trial Balance Detail

Pushing the balances into SAP GL, we see that original balances are inflated where they belong, but that the conversion account is zero.

Conversion flow for SAP GL

This flow works well for most accounts. A bit more care is required for GL accounts that are reconciliation accounts. Let’s consider AR and AP first.

Accounts Receivable and Payable

For AR and AP, a straight GL balance does not have enough detail to properly enable the subledger. At the same time, specifically excluding these accounts is a recipe for a mess which will lead to finger pointing and argumentation between the people executing and reconciling each of the conversions. In order to properly delineate the activity from both conversions, we can use the following flow.

From the legacy GL, the AR balance is mapped to an SAP AR conversion GL account. Assuming a debit balance, then our entry debits the AR conversion account and credits the GL conversion account. When the AR conversion occurs, it will zero out the AR conversion account and debit each of the customer accounts and flow through to the AR reconciliation account. Any balance left in the AR conversion account usually indicates unconverted activity or other shenanigans.

Here are the legacy invoices. These are the open invoices.

Legacy AR Invoices for GL Conversion

In the GL conversion, the balance of the AR account is posted into the AR conversion account and offset against the GL conversion account period by period (entries G5-G7). During the AR conversion, each individual invoice must be posted in the go live period to debit the customer account and zero out the AR conversion (entries 1-6).

Converted SAP AR

Accounts Payable is done the exact same way, except the debits and credits are opposite.

Fixed Assets

Fixed assets have a similar but more complicated problem than AR or AP. There are usually many fixed asset accounts that are set as reconciliation accounts. There are accounts possibly for each asset class for the acquisition value (APC) of the asset as well as the accumulated depreciation. In the simplest flow, two conversion accounts can be used: one for converting the APC values and a second for converting the accumulated depreciation on the assets. In a more complex environment, separate APC and accumulated depreciation conversion accounts are used for each asset class.

Using these flows should help ensure that a GL conversion is successful. Other flows will work, but like this one, the flow must be systematic and well thought out. In the next and final article, I’ll discuss some of the challenges that are commonly seen, where they originate, and how they can be overcome.

Performing GL Conversions Correctly (part I)

GL Conversion Process (ETL)

It amazes me that GL conversions go so wrong so often. The recipe is straightforward and if the legacy data is good enough, there is rarely an excuse to have trouble during GL conversions. Yet, I’ve seen quite a few go off track. So in this series of posts, I’d like to talk about the critical points to doing them correctly.

What we’re converting

In general, most GL conversions are done on a period by period basis to ensure that the trial balance, P&L, and balance sheet are correct for the periods in question. Usually line item detail is left behind in the legacy system. So at the end of the conversion process, I should have worksheets that tie out each new account balance drilled down to the relevant cost objects and profit center for each period.

Let’s suppose that we have a GL conversion from a legacy system to our SAP GL that is supposed to span three years of data – 2011, 2012, and 2013 (YTD). We cannot just start with 2011 though. The end balance sheet for 2010 must be loaded to ensure that the starting position is correct. The P&L for 2010 does not necessarily need to be loaded as long as retained earnings is loaded correctly.

The GL conversion process

GL Conversion Process (ETL)

The GL conversion process is usually done in three steps that follows the acronym ETL. First, the existing GL balances are extracted from the legacy system. The balances data is placed into a staging location. This location could be a simple as a flat text file on a file server or as complex as complete database system with a web front end.

Next, the data in the staging table is transformed from the legacy GL characteristics to the new SAP GL characteristics. This step is accomplished with mapping tables that take the legacy value onto the SAP value.  These mapping tables can become exceedingly complex if the logic is ugly.

Third, the transformed data is loaded into the new SAP system. This step is usually done with an LSMW that injects the standard GL posting program, but I’ve also seen other methods such as Idocs and recordings. At this point, all of the GL data should be loaded into the SAP system.

Key checks in a GL conversion

Throughout the GL conversion process, it’s important to ensure that each step succeeds. At the absolute bare minimum, when the data is loaded into the new SAP system, it’s critical to ensure that legacy balances match the new SAP balances per each costing object and period and in each relevant currency. It’s much better though to make checks throughout the process. Often times, a few heuristics will detect problems much earlier. A couple suggestions:

  1. Debits=Credits. If your trial balance doesn’t balance at each step, something is obviously wrong.
  2. P&L matches. The P&L should always match throughout the process. If it doesn’t, something went wrong.
  3. Assets, Liabilities, and Equities match. Each major class should
  4. All values mapped. Once the transformation step is complete, all accounts, company codes, cost objects, etc should be mapped. If any aren’t, the mapping table isn’t complete or there is a bug in the transform logic.

Finally, it’s incredibly important to ensure that the roll-up of the legacy accounts and cost objects matches that of the new SAP system. That means ensuring that an account that is mapped as an asset in the legacy system is still mapped as an asset in the new SAP system. Even more complicated, it means ensuring that a profit center in a management entity is mapped to the same management entity in the new SAP system. Usually the consolidations team will have a lot to say here.

Each mapping of GL accounts should preserve the account group

In our next installment of Performing GL Conversions Correctly, we’ll explore a standard journal entry flow and how to handle sub-ledger accounts.

SAP Fixed Assets Organization Structure

Asset Balances By Class (Excel)

The SAP fixed assets (FI-FA) module has a unique organization structure to enable accurate reporting for multiple purposes. First, each asset must be valued properly for financial reporting purposes. If multiple standards are being used, such as US GAAP and IFRS, then each of these values must be tracked. Second, assets must be valued properly for tax purposes. In the United States, depreciation can be calculated differently for standard US income tax, for the AMT, and for state income tax. So, let’s examine how the organization structure in fixed assets helps with meeting these requirements.

Chart of Depreciation

A chart of depreciation represents are used to enable a common standard of asset valuation requirements across more than one company code. So for instance, all US entities will usually have the same base set of requirements. We don’t want to have to set up asset accounting for each new US company code, so it makes more sense to have a common standard. That’s what the chart of depreciation provides.

Usually, a single chart of depreciation is used for one country. So all US entities are in one chart, all Mexico entities in a second. The reason for this breakdown is that tax rules vary wildly by country, and so having multiple countries covered in one chart is usually a bad idea.

Chart of Depreciation assigned to multiple company codes1

Depreciation Area

Each depreciation area enables an asset to have an alternative valuation. That means that each transaction can be booked against one or more depreciation areas. Even more, each asset can be depreciated differently with different calculations, life, and so on.  Each depreciation area can then be either linked to a ledger in the GL (to enable proper financial reporting) or left standalone (for tax purposes).

For US audiences, book depreciation is usually done differently than tax deprecation. Tax requires the use of MACRS which is an accelerated form of depreciation that is usually not appropriate for book purposes. Thus for US based entities, there will be (at a minimum) one depreciation area for book and a second for the MACRS value. If AMT must be tracked as well, then yet another depreciation area is required.

Multiple depreciation areas in a single chart of depreciation2

Asset valuation in two different depreciation areas3

Asset Class

The asset class is a grouping of like assets. Each chart of depreciation can have one or more asset classes activated in it. An asset class will share the same account determination, the same number range, and the same default depreciation parameters. The key though for asset class is to enable reporting for tax preparation and financial statement preparation. Thus if depreciation on vehicles must be reported individually for tax purposes, than vehicles should be an asset class. Similarly any assets that should be reported in the same GL account can be grouped together in the same asset class or at least in classes with the same account determination.

Configuration of multiple asset classes4

I can’t show a screenshot of the reporting coming off the asset classes since my sandbox is so out of date, but it looks roughly like this:

Asset Balances By Class (Excel)

Here ends our overview of the key org structure objects in asset accounting. This is meant to give a good flavour of the major elements. Certainly in complex environments and those spanning multiple countries, asset accounting can get ugly fast, but SAP provides the tools to properly account for assets for both financial accounting and tax purposes.

  1. SPRO->Financial Accounting New->Asset Accounting->Organizational Structures->Assign Chart of Depreciation to Company Codes []
  2. SPRO->Financial Accounting New->Fixed Assets->Valuation->Depreciation Areas->Define Depreciation Areas []
  3. AS03->Asset Values []
  4. SPRO->Financial Accounting New->Asset Accounting->Organizational Structures->Asset Classes->Define Asset Classes []