Parallel Accounting Method for IFRS

[Former Member]

Hello all,

My company would like to explore the parallel accounting method for IFRS. Currently we are on ECC 6.0 with classic GL.

Currently we have both US GAAP and local GAAP reporting running in the same ledger. We use a similar method (setting up additional H accounts which are used in local GAAP reporting only) to segregate local GAAP from US GAAP as recommended by SAP.

We set up 2 different depreciation areas: 01 (post to US GAAP accounts) and 02 (post to local GAAP accounts). The problem we ran into at year-end is pertaining to Retained Earnings. Because this a complete replacement method (US GAAP reporting will ignore all the H accounts which are set up for local GAAP and visa versa), we can't simply roll all the P/L accounts into one Retained Earnings account. We have to set up 3 Retained Earnings account (one for US GAAP only accounts, one for common accounts and another one for local GAAP accounts).

If we add IFRS into the mix, we will need to set up even more Retained Earnings accounts which is not ideal. Also, we plan on including more countries into our SAP environment which requires us to generate additional local GAAP reporting. So my thinking is that this will become very hard to manage.

Also, this method will fall apart if the common accounts are not the same for any of the reporting requirement (e.g. common accounts for US GAAP and local GAAP are different than IFRS).

My understanding is there are 2 ways to handle parallel accounting: replacement (which is what we are current using) or adjustment methods. Instead of completely replacing the US GAAP accounts, the adjustment method is to post the delta to the additional accounts.

My question is:

1. Giving current situation of my company, what is the best method to handle IFRS and also implement additional local GAAP reporting in the same environment?

2. What is the best practice to handle parallel accounting method? Replacement or adjustment method?

3. Since I'm already in the replacement method, can I easily switch to the adjustment method?

Any guidance will be greatly appreciated.

Regards,

Cassandra Wong

[Former Member · Accepted solution]

Cassandra,

Check out this blog which has info and process map for parallel accounting. Theer's also a link for a recent SAP webinar about how we implemented parallel reporting for our own use.

http://www.sdn.sap.com/irj/scn/weblogs;jsessionid=(J2EE3417400)ID2115139750DB10714505287783485243End...

siva

Edited by: Siva Darivemula on Sep 25, 2009 7:37 PM

[Former Member · Accepted solution]

why i can not open this link?

[Former Member]

Hi,

Maintain common accounts seperately.Also maintain seperate accounts for local gaap and IFRS.This way you can overcome your problem.

Go for Replacement;the above supports this.From Audit point of view you will not have visibility if you pursue "Adjustment".

You can switch from Replacement by reversing the existing journal entries.

Regards

Ramesh

[Former Member]

Hi Ramesh,

Thanks for your prompt response. My biggest concern is that this method will fall apart if the common accounts are not the same for any of the reporting requirement (e.g. common accounts for US GAAP and local GAAP are different than IFRS).

Do you have any insights on this? Is this a valid concern?

Thanks,

Cassandra

[Former Member]

Hi,

Your ERP mapping is with respect to processes.The processes are peculiar to the business and the organization.It has nothing to do with US GAAP,IFRS or else.As much as this,about 90% of your COA will be covered by the common Accounts.Given this there is no need for concern.

My 2 cents

Regards

Ramesh