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Ledger Setting in HANA 2021.

Multinational companies have to prepare their financial statements as per accounting principles
such as Indian GAP, US GAP and IFRS to name a few. It is also called Parallel books. Below are some
transactions accounted differently as per accounting principles.

 Tax treatment
 Accounting for exchange rate differences
 Capitalization and revaluation of asset
 Depreciation calculation
 R & D expenditure treatment
 Provisional entries
 Gratuity Fund or Gratuity grants
 Revenue or contingent recognition
 Inventory valuation
 Valuation of WIP
 Segmental reporting
 Goodwill
 Prepaid Insurance

We have majorly two approaches to handle parallel books in SAP

1. Account Approach
2. Ledger Approach

1. Account Approach
Account Approach is the traditional Approach. It is supported both in ECC and S/4 HANA.

I. In parallel account approach we can create the separate GL-accounts for each accounting
principles wise for those accounting transactions areas differs from one accounting principle
to another accounting principle.
II. In addition to accounting principle Specific GL accounts, we also create common GL accounts
for those accounting transactions areas treatment of accounts which are same for all
accounting principles.
III. We can prepare the financial statement for specific account principle wise by considering
the common accounts plus separate accounts which are created for specific accounting
principles
IV. The parallel account approach cannot be used where the financial years are different
between parent company and subsidiary company or between Accounting Principles

separate
IFRS FNANCIAL STATEMANT
accounts for
IFRS USGAP FINANCIAL STATEMENT

Separate
common
account for US
accounts
GAP

IAS FINANCIAL STATEMENT

Separate
accounts for IAS
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2. Ledger Approach
Ledger represents one set of Book. Ledger approach supports to maintain parallel books for each
accounting principle wise, where the FY differs between Parent company and Subsidiary companies,
where the FY differs between accounting principles. We can have multiple ledgers to address the
different accounting principles and to address the management reporting purpose.

2.1 Leading Ledger

 Leading ledger is the main ledger and it generally follows the parent company accounting
principle requirements.
 We can define maximum one leading ledger in a client.
 SAP predefined leading ledger is "0L". Although we can define our own leading ledger but it
is highly recommended to use standard leading ledger 0L.
 Leading Ledger "0L" (Zero L) by default assigned to all the Company codes in a client.
 The leading ledger will follow as per parent company fiscal year and posting period variant.
 Leading ledger integrated with CO (Controlling Module) and logistic modules
 Leading ledger is used as per parent company purpose to address consolidation, group
reporting purpose, specific parent company accounting principle requirements.

2.2 Non – Leading Ledger

 Non-Leading Ledgers are used to address the different legal (Accounting principles) and
internal reporting purpose.
 We can have multiple non leading ledgers for a company code.
 We can assign multiple company codes to the single non leading ledgers.
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 Non-leading ledger adopts the first two currency types from Leading Ledger and not possible
to change first two adopted currency types but possible to change reaming 8 currency types
at Non leading ledger level i.e. you can have different 8 currency type at the non-leading
ledger.
 Non-leading ledger can have different financial years and posting period variant.
 Each non leading ledger represents the one set of books.
 Non leading ledger, it’s not integrated with Controlling module and Logistic Module. It
means, we can't post entry directly from CO Module or Logistic modules to the specific Non-
Leading Ledger only. The Data always updates to the Non leading ledger along with Leading
Ledger while posting from CO and Logistic Modules.
 Not possible to post non leading ledger specific entries to Open Item management GLs.
 Not possible clear to non-leading Ledger specific clearing for Open Item management GL
accounts.
 If one wants to post and clear non leading ledger specific then activate “Clearing Specific to
Ledger Group” and do not select open item management.
 It is highly not recommended to create non-leading ledger with special character @, #, $, %,
^, &, *, (,)! It may give dump.

2.3 Extension Ledger

Extension ledger is used to post delta value on top of underlying ledger. Underlying ledger/Base
Ledger should generally be standard ledger (but one extension ledger can also be underlying ledger
to another extension ledger.) This is because a delta posting is meaningful only with combination
with the original posting. We can introduce extension ledgers at any time and not required to
perform any cutover activities to get historical data. There are four types of extension ledger-
Standard Journal Entries, S-Line Items with technical numbers/deletion possible (Simulation Ledger),
P-Line Items with technical numbers/no deletion possible (Predictive & Commitment Ledger), V-
Journal entries for valuation differences.

Below is limitation with extension ledger.

 Extension ledger is not possible to integrate with asset accounting. Separate depreciation
area for extension ledger is not required.
 Extension Ledger currency types by default adopted from underlying/base Ledger and not
able to change it.
 Extension Ledger FY by default adopted from Base Ledger but not possible to keep different
FY.
 Possible to keep different Posting period Variant and accounting principle at Extension
Ledger Level.
 Not possible to create Ledger group by combining both Standard and Extension Ledger. We
can create separate ledger group for extension ledgers only.

2.3.1 Standard Journal Entries

It is used to post manual adjustment entries to address accounting principle and management
reporting requirement. For example- manual tax posting, royalty charges posting. It creates normal
FI Document and not possible to delete FI Document but possible to reverse FI document.
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2.3.2 P-Line Items with technical numbers/no deletion possible

It is also known as predictive ledger. It wouldn’t create FI document. It creates technical document
only (System creates internal document) and not possible to delete technical document but can be
reversed. Purpose of this ledger are cost center budgeting/commitment, Incoming sales order for
margin analysis, Statistical Condition type values updates for Margin Analysis.

2.3.2.1 cost center budgeting/commitment

 Cost center budget and commitment updates to the Predictive Ledgers.

 Possible to control cost center budget i.e., system can trigger either warning or error
messages if expenditure exceeding budget.
 Possible to maintain budget for combination of cost element and cost center combination.
 Possible to record the commitment while placing the Purchase Orders

2.3.2.2 Incoming sales order for margin analysis

 It updates sales order information along with Key figures like Sales Qty, Revenue, Cost of
Sales and any other sales Expenses while creation of Sales Order
 Possible to prepare reports like what is projected revenue, Profitability based on Sales
Orders received.
2.3.2.3 Statistical Condition type values updates for Margin Analysis
Possible to update statistical condition type such as employee sales commission, royalty
charges to Predictive Ledger for Margin analysis purpose in S/4 2021.

2.3.3 S-Line Items with technical numbers/deletion possible (Simulation Ledger)

 We can run FX revaluation multiple times before month end and get to know FX gain or loss.
 Foreign currency revaluation simulation postings to the simulation Ledger.
 Possible to run multiple times with simulation mode and it will get deleted previous
simulation run.
 We can extract financial reports along with foreign currency fluctuations before running
foreign currency revaluation with real mode.

Customizing setting in S4 HANA 2021.

SAP has given predefined four ledgers 1. 0L leading ledger 2. 2L Non – Leading ledger 3. 0E –
predictive ledger for cost center budgeting and commitment and 4. 0C – Predictive ledger
for incoming sales order. Except 0L, one can create many ledgers.
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Company Code Settings for the Ledgers.

Local currency type - it is always taken from company code currency type it is always 10.

Global Currency type – It is always taken from controlling area currency type.

FreeDefCurrency1 to FreeDefCurrency8 – it can be either sap predefined or user defined currency

type.

1st FI currency – it is always Local currency type. It cannot be user defined. It is also known as first
local currency.

2nd FI currency – it is always Global currency type. It cannot be user defined. It is also known as
second local currency in BKPF.

3rd FI currency – it is always first sap predefined currency given in the FreeDefCurrency1 to
FreeDefCurrency8. it will not consider user defined currency type.

Summary:

 While running report for extension ledger it shows balances of base ledger (underlying
ledger) +extension ledger.
 Extension ledger is not integrated with asset accounting.
 If non-leading ledger is having different fiscal year variant than company code’s fiscal year
variant then we need to create additional ledger for asset accounting purpose in our case Y0
and otherwise not needed.
 Representative ledger checks posting period variant opened or not. If the representative
ledger posting period is opened then system allows to post the entry for all the ledger which
belongs to the same ledger group even if other ledger period is closed.
 If representative ledger period is closed then the system it rejects to post the entry for all
the ledgers which belongs to the same ledger group even though other ledger periods are
opened.
 If we select manage posting period option from OBY6 then system checks all the ledgers
posting period opened or not in the ledger group and it ignores the Representative Ledger
functionality.
 If the ledger group is having the leading ledger, then always leading ledger is the
representative ledger for the specific ledger group.
 If the ledger group does not have the leading ledger, then we need to specify if any ledger
following FY similar to Leading Ledger as the representative ledger.

After configuration is done, always run below option for configurations error checking.
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Disclaimer – It is based on my implementation experience and knowledge.

Please contact me for S4 fico training (hariharp13@gmail.com) and I am also looking for S4 FI job
change.