Parallel Ledgers in Asset

PARALLEL LEDGERS IN ASSET
ACCOUNTING
We can use parallel ledgers in asset accounting for different valuations as per different
accounting principles. In our scenario, company code AIPL (Hindustan Mills Ltd) follows two
accounting principles that is US GAAP and Indian GAAP. In General Ledger accounting we have
created ledgers for each GAAP i.e. leading ledger 0L for US GAAP and Non-leading ledger
X1 for Indian GAAP. In asset accounting, we use master area i.e. area 01 for leading ledger
valuation. For valuation of non-leading ledger, we create one separate real depreciation area
and one derived depreciation area for each accounting principle so that the values of Asset
Accounting and General Ledger Accounting can be reconciled. The derived depreciation area
triggers adjustment postings to keep the general ledger and subsidiary ledgers in sync. We have
already created ledger group for each ledger in General Ledger accounting, the same ledger
group will be assigned in depreciation area of each accounting principle in asset accounting. The
following depreciation areas will be created:
Depr Area
Description
Posting in GL
Book depreciation area (Leading

Ledger)
Area posts in Real time
30
Valuation area for Indian GAAP

(Non-Leading ledger)
Area post depr only
55
Delta Depreciation Area
Area Posts Only APC Directly
1. Define Depreciation Areas

Define depreciation area 1 (book depreciation area ) and 30 (depreciation area for Indian GAAP). For
depreciation area 1, system posts value in real time whereas for depreciation area 30, system posts only
depreciation value. Use following menu path or transaction code:
SAP Menu
SPRO-> IMG -> Financial Accounting (New) -> Asset

Accounting -> Valuation -> Depreciation Area->
Define Depreciation Area
Transaction Code
OADB
Using above menu path or T.code we will assign the ledger groups in the respective depreciation area i.e.
ledger group '0L' in area 1 and ledger 'X1' in area 30:
Generated by Jive on 2016-05-26+02:00

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PARALLEL LEDGERS IN ASSET ACCOUNTING
In the above step, we have specified ledger group 0L as target ledger group for master
depreciation area 01 that means asset values of depreciation area 01 will be updated in leading
ledger 0L in General Ledger Accounting. The ledger group which we assign to master area must
contain leading ledger. In the same way we will specify ledger group X1 for depreciation area
30 which we use for parallel valuation for Indian GAAP. The ledger group of the area for parallel
valuation is not allowed to contain the leading ledger. Asset values in area 30 will be posted to
Non-Leading ledger X1, as shown in the below screen:

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Posting control in depreciation area 30 should be set as Area posts Depreciation Only.
We do not have to set up a separate set of GL accounts for this new depreciation areas 30. Instead we use the
same set of GL accounts of the master depreciation area 01. In this scenario, we do not have to create any
new GL accounts in the chart of accounts or in the company code. We also do not have to create a new
financial statement version for different parallel valuations and Ledgers. Depreciation area 30
uses the GL account set of depreciation area 01. Ledger group X1 is not allowed to contain the
leading ledger when we specify X1 as target ledger group in depreciation area.
To enable this setting, we have to select 1 in the field Different Depreciation Area in
depreciation area 30 as shown in the above picture.
2. Setup areas for parallel valuation

Using this wizard, system automatically creates a derived depreciation area that is used for updating the APC
differences in the ledger group of parallel valuation. Posting control in the derived depreciation area is set as
"Area posts only APC directly" while the real depreciation area for parallel valuation posts only depreciation.
Real depreciation area 30 for parallel valuation use the GL accounts of the master depreciation area 01 for
posting values. If the accounts of the master depreciation area are entered as cost elements, then this also
applies to parallel valuation, although there is no update to CO in this general ledger.

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SAP Menu

Accounting -> Valuation -> Depreciation Area-> Set
Up Areas for Parallel Valuation
Transaction Code
OADB_WZ
Follow the steps below:
Click on "Continue" button.

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Enter the real depreciation area 30 for parallel valuation and target ledger group X1 and click on "Continue"
button.

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Since we have not created any derived or delta depreciation area in chart of depreciation ALTM
for company code AIPL, here we will select option Create New Depreciation Area so that system
automatically creates the delta depreciation area for parallel valuation. System shows the
difference between local and parallel valuation in this area and posts these differences in the
ledger group for parallel valuation i.e. X1.

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Click on "Continue" button and complete the setting.

Now see the depreciation area overview (Transaction code OADB)

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Notice that ledger group X1 has assigned in both depreciation area 30, which is for parallel valuation and
depreciation area 55 which is delta depreciation area for area 30 to post the difference between area 1 and 30.
3. Determine Depreciation Areas in the Asset Class

In this IMG activity, we determine the depreciation terms that are used in asset classes.
SAP Menu

Accounting -> Valuation -> Determine Depreciation
Areas in the Asset Class
Transaction Code
OAYZ

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Select asset class 3000 furniture and fittings and double click on Depreciation areas in dialog
structure:
Deselect the check box deactivate for depreciation area 30 so that all the depreciation areas will
appear when we create an asset master under this asset class.

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We have specified useful life 2 years for area 01 and 4 years for area 30.
4. Integration with the General Ledger

In this IMG activity, we specify the balance sheet accounts and the depreciation accounts for master
depreciation area 01 and parallel depreciation area 30. For derived depreciation area 55, account assignment
is not required.
SAP Menu

Accounting -> Integration with the General Ledger ->
Assign G/L Accounts
Transaction Code
AO90
Assign balance sheet GL accounts to depreciation area 1 as follows:

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Similarly assign balance sheet GL accounts to depreciation area 30 and then assign depreciation GL accounts
for depreciation area 1 and 30 as follows:

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Depreciation area 1:
Depreciation area 30:

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5. Specify Document Type for Periodic Posting of Asset Values

In this IMG activity, we specify a default document type for periodic posting of asset balance
sheet values (values other than depreciation). This document type is used only by the periodic
posting program, RAPERB2000. We have created a separate document type SX for this purpose,
the same will assign to company code AIPL in this step as follows:
We have completed the necessary configuration steps for parallel ledgers in asset accounting. Now we will test
the same settings for the business scenario in the following steps:
6. Scenario for parallel ledgers

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Create an asset master for Furniture with straight-line depreciation method with the following
parameter controls:
Depreciation area
Useful life
Depreciation rate per year
01 (For US GAAP)
2 Years
50%
30 (Indian GAAP)
4 Years
25%
Depreciation calculation for asset value 2, 40,000/- for each depreciation area is as under:
Depreciation area
Total Posting periods
Depr amount per period
01 (For US GAAP)
2 x 12 = 24
2,40,000/24 = 10,000
30 (Indian GAAP)
4 x 12 = 48
2,40,000/48 = 5,000
Now, do the asset acquisition for above asset and then run depreciation for one period and finally retirement of
the asset and see the effect in parallel ledgers.
7. Create asset master

Create an asset master for furniture.
SAP Menu
SAP Easy Access-> Accounting -> Financial

Accounting -> Fixed Asset -> Asset -> Create ->
Asset
Transaction Code
AS01

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Click on Deprec.Area tab page and give useful life and depreciatoin key are 1 and 30 as follows:
Now save the data, system has created asset master number 300011 for furniture.

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8. Asset acquisition
Do asset purchase on date 01.03.2013 for amount 240,000 using following menu path or transaction code:
SAP Menu

Accounting -> Fixed Asset -> Posting -> Acquisition > External Acquisition -> With Vendor
Transaction Code
F-90
Asset purchase document has posted as shown in above screen shot.
9. Display asset value in asset explorer

Use the following menu path or transaction code to display the asset value for all depreciation areas for the
asset posted in earlier step:
SAP Menu

Accounting -> Fixed Asset -> Asset -> Asset Explorer
Transaction Code
AW01N

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In the above screenshot, we can see the value in depreciation area 01 (Leading ledger valuation in local
currency).
Now see the comparison value of depreciation area 30 as follows:
In the above picture, for depreciation area 30 (Non-Leading ledger valuation in local currency), system shows
comparisons for four years (2013, 2014, 2015 & 2016) because we have given useful life four years in asset
master 300011 for this depreciation area.

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Note: System also shows value 10, 000 in fifth year i.e. 2017 this is because we have done asset acquisition in
third period of the current year 2013 so in current year system could calculate depreciation only for 10 months
and for remaining 2 periods, depreciation will be posted in year 2017 (5, 000 x 2 = 10,000).
Now display the comparison value of delta depreciation area 55. Here we can see that system shows the
difference value between area 01 and 30 under depreciation area 55.
Example: For the year 2013, ordinary depreciation is 1, 00,000 in depreciation area 01 and for area 30 ordinary
depreciation is 50, 000 in the same year so difference 50,000 (area 01minus area30) has shown under delta
area 55. See the below picture:
10. Display Asset APC general ledger line items

The asset acquisition posting which is made in the leading ledger is automatically posted into the
non-leading ledger also. Display G/L line items for asset Furniture APC account for ledger 01 and
30 and notice that system has updated the same value in both the ledgers.
SAP Menu

Accounting -> General Ledger -> Account -> Display/
Change Items (New)

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Transaction Code
FAGLL03
Choose ledger X1 by clicking on "Choose Ledger" button.
Execute and see the balance:

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Now choose ledger 0L by clicking on "Choose Ledger" button and execute:
11. Run periodic asset depreciation

When we run depreciation program using below menu path or transaction code, system posts
separate documents in each ledgers i.e. ledger 0L and ledger X1 with their respective
depreciation amount according to depreciation key assigned in asset master data for each
depreciation area.

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First execute test run and then update run as follows:
SAP Menu

Accounting -> Fixed Assets -> Periodic processing ->
Depreciation run -> Execute
Transaction Code
AFAB
Execute:

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Notice that system has created two separate depreciation documents with different values for
each depreciation area i.e. area 1 and area 30. Since area 1 is assigned to ledger 0L and area 30
is assigned to ledger X1 in customizing so system will post separate depreciation values to each
ledger.
12.
Display depreciation GL line items
Display book depreciation G/L account line items for the each ledger using following menu path
or transaction code:
SAP Menu

Accounting -> General Ledger -> Account -> Display/
Change Items (New)
Transaction Code
FAGLL03
Display balance for Leading Ledger 0L

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Display balance for Non-Leading Ledger X1
Notice that system has posted depreciation value 10,000 for ledger "0L" and 5,000 for ledger "X1"
Thus depreciation amount of 10, 000 under US GAAP is posted in leading ledger 0L and the
depreciation amount of 5, 000 under Indian GAAP is posted in non-leading ledger X1
13.
Asset retirement postings
We will retire the asset through sale for a value of Rs.2, 33,000 so that in US GAAP depreciation area, there
will be a gain of Rs.3, 000. On the other hand, there will be a loss of Rs. 2, 000 in the Indian GAAP. The
following are the accounting entries which should be updated in each ledger:

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Asset Retirement Posting - 0L

(Area 01)
Furniture & Fixture (APC A/c)
2,40,000.00
Cr
Clearing Asset disposal
2,33,000.00
Dr
Accm Depr-Furniture & Fixture
10,000.00
Dr
Profit on asset Sale
3,000.00
Cr
2,40,000.00
Cr
2,33,000.00
Dr
5,000.00
Dr
Loss on asset Sale
2,000.00
Dr
Asset Retirement Posting - X1

(Area30)
But when we do retirement postings in SAP, system does not post the separate values to each ledger i.e. 0L
and X1 as explained in the above example rather the entries made in the leading ledger is duplicated in the
non-leading ledger. In this case, system will pass the following entry in area 30 (Ledger X1) which is the same
accounting entry updated in area 01 (Ledger 0L):
Asset Retirement Posting

X1 (Area 30)
2,40,000.00
Cr
2,33,000.00
Dr
10,000.00
Dr
3,000.00
Cr
Due to this posting in Indian GAAP area, we can see the following mismatches in Indian GAAP ledger X1:
1. The reverse of accumulated depreciation is more by 5,000 because 10,000 has been reversed instead of
5,000
2. There is no posting for actual loss of 2,000 in this ledger

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3. Instead a gain of 3,000 has been posted.
To correct all these mismatches, the system automatically posts the entries necessary to reflect the correct
position in Indian GAAP (Ledger X1) when we run the periodic asset posting program. This adjustment is done
using the Delta depreciation area.
The following entry will be passed for adjustment using periodic program run:
Asset Adjustment Posting - X1

(Area30)
5,000.00
Cr
3,000.00
Dr
Loss on asset Sale
2,000.00
Dr
Lets see replicate the above scenario in SAP using the following menu path or transaction code to do asset
retirement posting:
SAP Menu

Accounting -> Fixed Asset -> Posting -> Retirement > Asset Sale Without Customer
Transaction Code
ABAON

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Click on "Simulate" button.

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Post the document:
Note: Line item 2 is for accumulated depreciation account in the above screenshot.
Display asset values in asset explorer for each depreciation area after retirement as shown below:

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Depreciation Area 01:
Display Depreciation Area 30:

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Display delta depreciation area 55:
Now display balance for G/L account 30000004 (Profits on asset disposal / sale) after doing asset retirement
and notice that system has posted the same value to both ledger i.e. 0l and X1:
Transaction code: FAGLL03

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Display balance for ledger X1:
In the above two screenshots, we can see that system has updated same value in both ledgers.
Now we need to correct these values and post the adjustment entry in non-leading ledgers using asset periodic
posting as explained earlier in the example, use the following menu path or transaction code:
14. Periodic posting from fixed assets

We use this step to post the adjustment entries to specific ledger since we cannot post directly to reconciliation
G/L. As per the retirement adjustment posting, we need to post to accumulated depreciation G/L account also
which is reconciliation account.
SAP Menu

Accounting -> Fixed Asset -> Periodic processing ->
APC Values Posting
Transaction Code
ASKB

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Give the asset number 300011 in initial screen for which we want to post the adjustment entry.
First execute in test mode and then execute update run as follows:

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In the above screenshot, we can see that system posts this adjustment document to ledger group X1 only.
When we execute the update run, system creates the following document as per accounting entry explained in
the example:
Note: Line item 3 is for accumulated depreciation account in the above screenshot.

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Now after posting this adjustment document through periodic run, display balance for ledger
account 30000004 (Profit on disposal / sale of fixed assets) for Ledger X1 and notice that
system has posted one reverse entry for the amount 3,000 which was posted during asset
retirement:
This way system nullifies the balance of Profit on sale account for ledger X1 and posts to Loss
on sale account, see the below picture:
Finally, after completing the above steps, we will find the GL balances for each ledger as per the accounting
entries given in the example as mentioned below:
Asset Retirement Posting - 0L

(Area 01)

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2,40,000.00
Cr
2,33,000.00
Dr
10,000.00
Dr
3,000.00
Cr
2,40,000.00
Cr
2,33,000.00
Dr
5,000.00
Dr
Loss on asset Sale
2,000.00
Dr
Asset Retirement Posting - X1

(Area30)
=====================================================================================
Thanks for your valuable feedback, advice and suggestions.
Please correct me if I have missed out something
Best Regards,
Ram Kumar Swami

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Parallel Ledgers in Asset

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PARALLEL LEDGERS IN ASSET

Book depreciation area (Leading

Area posts in Real time

Valuation area for Indian GAAP

Area post depr only

Delta Depreciation Area

Area Posts Only APC Directly

1. Define Depreciation Areas

SPRO-> IMG -> Financial Accounting (New) -> Asset

Generated by Jive on 2016-05-26+02:00