SAP FINANCIAL CONSOLIDATION 10.0 STARTER KIT FOR IFRS SP5 Simplified Configuration Description 1
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Contents Chapter 1 Foreword... 4 Chapter 2 Data Collection... 5 Data Entry Format... 5 Data Package Configuration... 6 Data Entry Principles... 6 Data Package Validation... 8 Chapter 3 Consolidation Process... 10 Consolidation Definition... 10 Consolidation Processing... 10 Configured Automatic Entries... 11 Chapter 4 Analysis Process... 12 Publishable Financial Statements... 12 Monitoring and Controlling the Consolidation Process... 12 Analysis and Audit Trail... 14 Chapter 5 IFRS Adoption... 17 Data Collection... 17 Analysis and Audit Trail... 17 Chapter 6 Retrieval of Financial Statements... 19 Statement of Financial Position... 19 Statement of Financial Position (continued)... 20 Income Statement... 21 Statement of Other Comprehensive Income... 22 Statement of Cash Flows... 23 Statement of Changes in Equity... 25 3
Foreword Foreword The starter kit for IFRS is a pre-configuration of SAP Financial Consolidation. It is pre-configured with all reports, controls and rules for performing, validating and publishing a statutory consolidation in accordance with IFRS standards. Adopting IFRS is one of the most fundamental challenges that companies in many countries will have to deal with over the next few years. The starter kit for IFRS includes dedicated data entry and analysis reports to help companies manage IFRS adoption. 4
Data Collection Data Collection Data Entry Format Account Typology The chart of accounts of the starter kit for IFRS is based on the IFRS Taxonomy. This chart of accounts enables financial statements to be presented following the requirements of IAS 1: Assets and liabilities are classified according to the current/non-current distinction. In the income statement, expenses are classified by function. This chart of accounts is easy to customize according to the group's requirements. The chart of accounts is presented in appendix 1. Naming Convention for Accounts For financial accounts, the first letter of the code enables you to identify the accounting class: A for asset, E for equity, L for liabilities and P for profit and loss (net income). The first letter for subtotal accounts is T. EXAMPLE: Subtotal Account Code Property, plant end equipment Lands and buildings Lands and buildings, Depreciation TA110 A1110 A1111 5
Data Collection Data Package Configuration The data package is available in English, German and French. It groups together schedules that are used for entering and retrieving data at the reporting unit level. Three types of schedules exist: Summary schedules, used to guide the data entry and control data Data entry schedules that are grouped into books by type of information: balances, securities and shareholdings, movement analysis for balance sheet items, intercompany transactions Data retrieval schedules: Financial statements, flow balances, control statements EXAMPLE: Package contents Data Entry Principles Sign of Indicators Assets are entered as positive amounts except for amortization and depreciation of assets. These are entered as negative amounts. Liabilities and Equity are entered as positive amounts. Expenses are entered as negative amounts and income figures as positive amounts. When the schedule structure allows it, signs are pre-entered to facilitate data entry. 6
Data Collection Order of Package Data Entry A step-by-step approach for entering data is configured in the package thanks to its architecture and the links that have been created between the schedules. The steps are as follows: 1. Enter (manually or importing) the closing balance (balance sheet and income statement) 2. Enter the analysis of securities and shareholding 3. Enter the period movements of the balance sheet items (acquisition, disposal, etc.) 4. Enter intercompany breakdown (reciprocal operations, Internal gains and losses on disposal of assets, dividends, internal provisions) Package summaries Data entry schedules Financial Statements (Data retrieval) Control schedules (Data retrieval) Adjustments to IFRS data entry/control Data entry for equity method companies Breakdown by Flow Flow entries allow you to identify variations in the balance sheet between the opening and closing balance and therefore automatically generate the Statement of Cash Flows. The flows available in the package may be classified into two categories: Flows for current transactions (purchase, increase in depreciation, fair value, etc.) Flows for special transactions (changes in accounting policies, internal merger, etc.) 7
Data Collection Data Package Validation Types of Control There are two types of control: Blocking controls: if these are not valid, the status of the data package cannot be validated. All these controls must be valid. Non-blocking controls: these controls are simply warnings and do not prevent the data package from being validated. (For instance it is possible to enter the number of stocks of investment in subsidiaries and capital in order to generate automatically the portfolio and the scope. This data entry is optional and linked to non bloking controls). Set of Controls The controls are grouped in the package into sets of controls. Two control sets are configured in the starter kit for IFRS, one for subsidiaries and joint-ventures and one for equity method companies. Subsets of Controls In the package, the controls are grouped together into subsets, where each subset of controls corresponds to a book of schedules. Main Types of Controls Aim Check balances Example Assets equal Equity and Liabilities Gross value of assets higher or equal to depreciation and impairment Exhaustive breakdown of investment in subsidiaries by shares Complete analysis of investment in subsidiaries by flows Securities and Shareholdings Complete analysis of net equity by flows Data entry of number of shares in capital and in investiment in subsidiaries Flow analysis Complete analysis of assets and liabilities by flows The transfer flow must balance Intercompany breakdown Exhaustive breakdown of reciprocal accounts, dividends, gains and losses on disposal of assets and provision by partners 8
Data Collection Control Levels Each control is linked to a level. The level of control to be reached is set by the team at the central site when the package is generated. 2 levels of control exist in the starter kit for IFRS: 1 Balance Analysis (Income Statement and Balance Sheet) 2 Flow analysis (Income Statement and Balance Sheet by flows) The control levels check from the minimum level (LEV1: submission of Balance Sheet and Income Statement only) to the maximum level corresponding to a full package (LEV2: complete submission). When level 1 is required to be reached, only the controls attached to level 1 must be valid. 9
Consolidation Process Consolidation Process Overview of the consolidation process in SAP Financial Consolidation Consolidation Definition The settings of a consolidation definition are: A category and a data entry period: selection of the data to be consolidated (for example: Actual, 2011.12) A scope A variant A consolidation currency. The variant parameter is a technical dimension that allows different consolidation settings to be selected for a given category, a given data period and a given currency: Set of rules (monthly conversion / quaterly conversion / year to date conversion) Audit ID filter restriction (IFRS adoption) Scope (pro-forma statements) Exchange rates table (pro-forma statements) Four variants are pre-defined in the starter kit for IFRS: IFRS - YTD, IFRS Periodic, Local GAAP YTD and Local GAAP Periodic. If needed, these variants can be renamed and new variants can be created. Consolidation Processing Two processing modes exist: full processing and incremental processing. During the course of full processing, the software executes the following steps: Read the scope Load data: data of the period (package data and manual journal entries) and the opening balance, if any Convert package data and manual journal entries Run the rules of the selected set of rules (see below). For incremental processing, the software executes the same steps as described above but only for the manual journal entries recorded since the last consolidation. The conversion of data entered in foreign currency is carried out as follows (using the closing rate method): The closing balance of the balance sheet is converted using closing exchange rates, except for net equity which is recorded using historical exchange rates (calculation and booking of the currency translation adjustment) The net income of the period is converted using average exchange rates Balance sheet movements of the period are converted using the average exchange rates of the period. Depending on the set of rule selected in the consolidation definition and the type of conversion rate filled in in the conversion rate table, periodic or year to date conversion will apply. The configuration handles the following methods of consolidation: full consolidation, proportionate consolidation and the equity method. 10
Consolidation Process The scope changes handled by the starter kit for IFRS set of rules are: Acquisitions Loss of control Equity transactions Changes in interest rates of associates and joint-ventures Internal mergers Flows generated during the consolidation process allow you to retrieve changes due to currency translation differences and changes in scope consolidation. These flows makes it possible to automatically produce the following financial statements: Statement of Comprehensive Income Statement of Cash Flows Statement of Changes in Equity Configured Automatic Entries The starter kit for IFRS includes a set of rules that enable you to produce consolidated data using data from the data entry packages. This set of rules can be enhanced in order to meet the group s specific accounting policies. The automatic consolidation entries are: Elimination of internal reciprocal operations Elimination of internal provisions Elimination of internal dividends Elimination of internal gains and losses on disposal of assets Goodwill booking Elimination of investment in subsidiaries Calculation of currency translation adjustments Calculation of non-controlling interests In addition to standard consolidation rules, a number of technical rules have been configured in order to: Calculate and store the subtotal accounts Calculate and store line items for the Statement of Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity Calculate and store segment information 11
Analysis Process Analysis Process Publishable Financial Statements The starter kit for IFRS contains a complete set of financial statements which follow the requirements of IAS1: A Statement of Financial Position in the current/non-current format An income statement with an expense classification by function A Statement of Other Comprehensive Income A Statement of Cash Flows A Statement of Changes in Equity Financial Statements analysed by segment are also available: Revenue by segment Revenue by geographical area Non current assets by geographical area Monitoring and Controlling the Consolidation Process Accounting Reports The accounting reports (balances, general ledgers, debit-credit ledgers) allow for the analysis of consolidated data by drilling down to the original data. 12
Analysis Process Consolidation Analysis The pre-configuration contains schedules that enable you to validate each step of the consolidation process: Check packages Check main balances Check conversion Intercompany reconciliations Transition from local to consolidated figures Net Equity, dividends and goodwills EXAMPLE: Consolidation control dashboard 13
Analysis Process Analysis and Audit Trail The starter kit for IFRS contains schedules that allow for the analysis of consolidated data. Each data item is linked to an audit ID and a journal entry number which makes the audit trail possible. The audit ID allows the accounting origin to be tracked. For instance: The PACK01 Package data audit ID tracks data that has been entered in the packages The ELIM10 audit ID is linked to the elimination of reciprocal transactions EXAMPLE: Transition from local to consolidated figures 14
Analysis Process With analysis schedules, each line of the Statements of Financial Position and of the income statement can be detailed by account, reporting unit or audit ID. EXAMPLE: Analysis of a Statement of Financial Position line by account 15
Analysis Process Each line in the Statement of Other Comprehensive Income, the Statement of Cash Flows and the Statement of Changes in Equity can be analysed via drill down to analyse which account/flow pairs generated the amount. EXAMPLE: Analysis of a Statement of Cash Flows line item (focus on the net cash flows from financing activites): 16
IFRS Adoption IFRS Adoption Data Collection In the starter kit for IFRS, adjustments to IFRS can be entered on dedicated audit IDs directly in package schedules. EXAMPLE: Income Statement by audit ID The starter kit for IFRS also provides the ability to post IFRS specific journal entries on dedicated central audit IDs. Thanks to audit ID filter restrictions used in the consolidation definition, IFRS adjustments can be taken into account in the IFRS consolidation process and not in the local GAAP consolidation process. Analysis and Audit Trail The starter kit for IFRS provides a complete set of pre-configured reports for comparing local GAAP and IFRS: Financial statements for comparing data consolidated according to local GAAP and IFRS Balance reconciliation with an analysis by audit ID of differences between local GAAP and IFRS Analysis schedules for complete audit trail of differences until journal entry number 17
EXAMPLE: Analysis of the differences between local GAAP and IFRS for a Statement of profit or loss line item (detail by account and audit ID) 18
Retrieval of Financial Statements Retrieval of Financial Statements Statement of Financial Position 19
Retrieval of Financial Statements Statement of Financial Position (continued) 20
Retrieval of Financial Statements Statement of profit or loss 21
Retrieval of Financial Statements Statement of Other Comprehensive Income 22
Retrieval of Financial Statements Statement of Cash Flows 23
Retrieval of Financial Statements Statement of Cash Flows (continued) 24
Retrieval of Financial Statements Statement of Changes in Equity 25