SAP BPC Financial ConsolidationAgenda

•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 Accounting Basics 1/11

Account Types
•In order to track money within an organization, different types of accounting categories exist. These categories are used to
denote if the money is owned or owed by the organization.
•three main categories:
•Assets,
•Liabilities,
• Equity

Assets
•An Asset is a property of value owned by a business. Physical objects and intangible rights such as money, accounts
receivable, merchandise, machinery, buildings, and inventories for sale are common examples of business assets as they
have economic value for the owner. Assets Accounts

Debit Increase Credit Decrease

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 Accounting Basics 2/11

•Debt obligations owed to creditors as a result of operations to generate sales revenue. Liabilities represent creditor equity
or claims against the assets of the business entity.

•Forms of liabilties:
•Current or short term : must be paid within 1> year of the balance sheet date.
•Long Term Liabilities: : must be paid within 2 > to more years of the balance sheet date

•Examples current or short term Liability Accounts

•Accounts Payable Debit Increase Credit Decrease
•Sales Tax Payable
•Unearned Revenues
•Short Term Notes Payable
•Payroll Liabilities
•Contingent Liabilities

•Examples long term liabilities

•Loans / Notes Payable / Mortgage Payable
•Bonds Payable

Liabilities
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 Accounting Basics 3/11

Ownership equity represents claims to assets of a business entity.

•There are three basic forms of ownership equity:
1.Proprietorship entity financing provided by a sole owner.
2.Partnership entity financing provided by two or more owners (partners).
3.Corporation a legal entity incorporated under the laws of a state, separate from its owners.

• Capital stock: Financing provided by stockholders (or shareholders) with ownership represented by shares of corporate
stock. Each share of stock represents one ownership claim.
• Retained earnings: Earnings of the corporation that have been kept in the business after dividends are paid.

Shareholders Equity Accounts Dividends Accounts

Debit Decrease Credit Increase Debit Increase Credit Decrease

Equity

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 Accounting Basics 4/11

Depreciation in accounting terms normally means the devaluation of a fixed asset.

•Determining the useful life of a fixed asset is usually much easier then an intangible asset.
•Since the useful life of fixed assets is much easier to determine, depreciation is much more common than amortization.
•Some Examples of fixed assets: Equipment, Computers, Vehicles, Furniture and Buildings.

•There are several methods of devaluating assets. The most common methods are straight-line and double-declining
balance methods.
•Straight-line depreciation :
•Cost of Asset 10,500 , Salvage Value 500 ,
Life 5 years
•Depreciation Expense per year =
10,500 – 500 = 2000
5 Year Cost Depreciation Accumulated Book value
expense depreciation

1 10,500 2000 2000 8,500

2 10,500 2000 4000 6,500
See > IAS 16 3 10,500 2000 6000 4,500
4 10,500 2000 8000 2,500
Fixed Assets and Depreciation 5 10,500 2000 10000 500

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 Basics of Accounting 5/11

•The double-declining balance method ignores salvage value in the initial calculation.
•However, depreciation expense will be limited if the calculated amount would result in the book value dropping below the
salvage value.
•Example : Suppose an asset has a prior book value of $600 and a salvage value of $500. In this case, depreciation expense
is limited to the remaining $100 book value in excess of salvage value.
•Furthermore ,each year comparisons are made between the declining balance rate calculations and straight-line
depreciation of the remaining book value.
•A switch to the straight-line calculation is made in the year in which the straight-line calculation exceeds the declining
balance rate calculation.
DDB rate = 1/Life x 2 = 1/5 x 2 = 40%
Declining balance rate depreciation =
Beginning of period carrying value x DDB rate Year Cost Depreciat Accumulate Book value
ion d
expense depreciatio
Year Declining Balance rate Straight line n
1 10,500 4,200 4,200 6,300
1 10,500 x 40% = 4,200 10,500 - 500)/5 = 2,000
2 10,500 2,520 6,720 3,780
2 6,300 x 40% = 2,520 6,300 - 500)/4 = 1,450
3 3 10,500 1,512 8,232 2,268
Declining3,780 x 40% =depreciation
Balance 1,512 3,780 - 500)/3 = 1,093
4 2,268 x 40% = 907 2,268 - 500)/2 = 884 4 10,500 907 9,139 1,361

5 1,361 x 40% = 544 1,361 - 500)/1 = 861 5 10,500 861 10,000 500
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 Basics of Accounting 6/11
•

• The following is an example of a typical journal asset for depreciation.

General Journal

Date Accounting titles Ref Debit Credit

20xxxx Depreciation expens 1 X
• Jan
Note: X
Asset (fixed or intangible)
• 2
The journal increase of the expense is transferred to the general ledger.
• Expense general ledger totals are then transferred to the income statement at the end of the month
• The result is a decrease to net income (income – expense)
• Since the result is a decrease in net income, this creates a decrease in the tax liability of the company
• The decrease in the asset is transferred to the balance sheet at the end of the month, resulting in a decrease in the
company’s net worth.

In order to understand how amortization and depreciation affects income, it’s important to see how the
transaction is posted to the accounting journal.

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 Basics of Accounting 7/11

•Amortization in accounting terms means the devaluation of an intangible asset.

•An intangible asset is something of value to a business that does not have a physical presence.
•In order to write down an asset, it must have a useful life.
•The useful life of an intangible is often difficult to determine.

•Some examples of intangible assets are: Patents, Goodwill, Contracts, License, Trademarks and Franchise

•When the intangible asset is originally purchased the cost should be debited to an asset account. This cost is then "written
off" or amortized. Generally trough straight line method.

General Journal
See > IAS 16 Date Accounting titles Ref Debit Credit
Intangible Assets and Amortization
20xxxx Amortization Expense – Patents 1 X X
Jan Patents 2

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 Basics of Accounting 8/11

•A system of accounting that recognizes revenue and matches it with the expenses that generated that revenue.

•Unlike other systems of accounting, which recognize revenue and expenses in the order in which they are received, the
accrual accounting convention ignores the function of time and only considers what expenses generate what revenues,
even if payments have not actually been made.

•Some Examples….

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 Basics of Accounting 8/11

1.Accrual Adjustments

•An accrual Expenses involves a future exchange of cash that must be recorded on the income statement before cash is
exchanged
•Adjusting entry
Account titles Debit Credit Position
•Future exchange of cash Expense XXX Income Statement

Liability XXX Balance Sheet

Example: Interest accrued on a Account titles Debit Credit

loan at the end of the month is $650
Liability XXX

Cash XXX

Account titles Debit Credit

Accrued Expenses
Interest Expense 650

Interest Payable 650

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 Basics of Accounting 9/11
•Accrued revenue refers to revenue that has been incurred but not yet received.
•Examples of accrued revenue items might be services you have provided but that have not yet been billed or paid for. The
service industries account for a large number of accrued revenue transactions, since quite often services are provided over
a week, month, or even year, but aren’t billed until the job is complete.

•One of the most basic concepts of accounting involves determining if an item is an asset or a liability.

•Adjusting entry :

Account titles Debit Credit Position

•Future exchange of cash: Receivable XXX Balance Sheet

Revenue XXX Income Statement

Account titles Debit Credit
Cash XXX

Receivable XXX
•Example: Company A has Performed
Account
$500 titles Debit on account.
of services for a customer Credit
Accounts Receivable 500
Accrued Revenues
Revenue 500
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 Basics of Accounting 10/11

Adjusting Journal Entries

1.Deferral Adjustments
• Deferred Expenses

•A deferral involves a past exchange of cash that has initially been recorded on the balance sheet rather than on the income
statement.
•The name deferral comes about because the recording on the income statement is deferred (postponed) to a later time.

•A deferred expense is initially recorded on the balance sheet as an asset than being immediately expensed. An adjusting
entry becomes necessary as the asset is consumed and becomes an expense.
•Example : Short term Assets.
•Past Exchange of Cash. Account titles Debit Credit
Asset XXX XXX
•Adjusting entry necessary as Cash
the asset is consumed
Account titles Debit Credit Position

Expense XXX XXX Income statement

Asset Balance Sheet

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 Basics of Accounting 11/11

•Revenue cannot be recorded until the income has been earned. Cash received in advance of income realization should be
initially recorded in a liability account such as "Unearned Revenue".
•An adjusting entry later becomes necessary as the revenue is earned. The liability should be reduced and the revenue
recorded.

•Past exchange of cash

Account titles Debit Credit

Cash XXX XXX

•Adjusting entry necessary Unearned Revenue
as revenue is earned
Account titles Debit Credit Position
Unearned
•Example: Adams CPA previously received $500Revenue XXX in advance
for bookkeeping services XXXof providing
Balance
the services. Adams has
now earned $300 of the money Revenue Income Statement

Account titles Debit Credit

Deferred Revenues Unearned Revenue 300 300

Revenue
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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 International Financial Reporting Standards
International Financial Reporting Standards (IFRS) are a set of
accounting standards developed by the International
Accounting Standards Board (IASB) that is becoming the global
standard for the preparation of public company financial
statements.
IFRS was developed in the year 2001 by the International
Accounting Standards Board in the public interest to provide a
single set of high quality, understandable and uniform
accounting standards.Need of IFRS

To make a common platform for better

understanding of accounting, internationally.

IFRS Synchronization of accounting standards across the

globe.

To create comparable, reliable, and transparent

financial statements.

To facilitate greater cross-border capital raising and

trade.

To having company-wide one accounting language

which have subsidiaries in different countries

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 International Accounting Standards Board

International
Accounting
Standards Board
(IASB)

Central and
development
Based in London
banks, national
funding regimes

IASB The IASB began

operations in 2001
Private financial
when it succeeded
institutions and
the International
industrial
Accounting
companies
Standards
Committee
It is funded by
contributions from
major accounting
firms:

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 International Financial Reporting Standards
1/2

International
IFRS 6 Exploration
Financial IFRS 2 Share- IFRS 4 Insurance
for and Evaluation
Reporting based Payment Contracts
of Mineral Assets
Standards

IFRS 1 First-time
IFRS 5 Non-
Adoption of
current Assets
International IFRS 3 Business
Held for Sale and
Financial Combinations
Discontinued
Reporting
Operations
Standards

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 International Financial Reporting Standards
2/2

IFRS 7 Financial
IFRS 9 Financial IFRS 11 Joint IFRS 13 Fair Value
Instruments:
Instruments Arrangements Measurement
Disclosures

IFRS 10
IFRS 12 Disclosure
IFRS 8 Operating Consolidated
of Interests in
Segments Financial
Other Entities
Statements

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 Summary of IFRS
Standards 1/13

IFRS 1 First-time Adoption of International Financial Reporting Standards sets out the procedures that an entity must follow when it adopts
IFRSs for the first time as the basis for preparing its general purpose financial statements

An entity can also be a first-time adopter if,

An entity may be a first-time adopter if, in in the preceding year, its financial
the preceding year, it prepared IFRS statements: [IFRS 1.3] asserted compliance
A first-time adopter is an entity that, for the
financial statements for internal with some but not all IFRSs, or included
first time, makes an explicit and unreserved
management use, as long as those IFRS only a reconciliation of selected figures
statement that its general purpose financial
financial statements were not made from previous GAAP to IFRSs. (Previous
statements comply with IFRSs. (IFRS 1.3)
available to owners or external parties such GAAP means the GAAP that an entity
as investors or creditors. followed immediately before adopting to
IFRSs.)

However, an entity is not a first-time adopter if, in the preceding year, its financial statements asserted:

Compliance with IFRSs even if the auditor's report contained a

Compliance with both previous GAAP and IFRSs.
qualification with respect to conformity with IFRSs.

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 Summary of IFRS Standards 2/13
IFRS 2 SHARE-BASED PAYMENT The accounting requirements for the share-
• A share-based payment is a transaction in based payment depend on how the transaction
which the entity receives or acquires goods or will be settled, that is, by the issuance of
services either as consideration for its equity • Equity
instruments or by incurring liabilities for
• cash
amounts based on the price of the entity's
shares or other equity instruments of the • equity or cash
entity.

IFRS 2 applies to all entities. There is no

exemption for private or smaller entities.
Furthermore, subsidiaries using their parent's or
fellow subsidiary's equity as consideration for
goods or services are within the scope of the
Standard.

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 Summary of IFRS Standards 3/13
IFRS 3 BUSINESS COMBINATIONS
• A business combination is a transaction or event in which an acquirer obtains control of one or more businesses.

• A business is defined as an integrated set of activities and assets that is capable of being conducted and managed for the purpose of
providing a return directly to investors or other owners, members or participants.

Accounting Method for Business Combinations Acquisition method

• The acquisition method (called the 'purchase method') is used for all business combinations. (IFRS 3.4)
• Steps in applying the acquisition method are: (IFRS 3.5)
• Identification of the 'acquirer' – the combining entity that obtains control of the acquiree (IFRS 3.7)
• Determination of the 'acquisition date' – the date on which the acquirer obtains control of the acquiree (IFRS 3.8)
• Recognition and measurement of the identifiable assets acquired, the liabilities assumed and any non-controlling interest (NCI, formerly
called minority interest) in the acquiree
• Recognition and measurement of goodwill or a gain from a bargain purchase

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 Summary of IFRS Standards 4/13

(a) limited improvements to

accounting by insurers for
IFRS 4 INSURANCE insurance contracts.
CONTRACTS
(b) disclosure that identifies
and explains the amounts in
an insurer’s financial
statements arising from
insurance contracts and helps
users of those financial
This IFRS requires: statements understand the
amount, timing and
uncertainty of future cash
flows from insurance
contracts
The IFRS applies to all
insurance contracts (including
reinsurance contracts) that an
entity issues and to
The objective of this IFRS is to specify the financial reinsurance contracts that it
reporting for insurance contracts by any entity holds, except for specified
contracts covered by other
that issues such contracts (described in this IFRS IFRSs.
as an insurer) until the Board completes the
second phase of its project on insurance It does not apply to other
contracts. assets and liabilities of an
insurer, such as financial
assets and financial liabilities
within the scope of IAS 39
Financial Instruments:
Recognition and
Measurement. Furthermore, it
does not address accounting
by policyholders.
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 • A 'disposal
group' is a
group of
Summary of IFRS Standards 5/13

assets,
possibly with
some
associated
liabilities,
which an • (a) assets that meet
entity
the criteria to be
intends to
classified as held for
dispose of in
sale to be measured
a single
at the lower of
transaction.
• The carrying amount and
• The fair value less costs
objective of

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measuremen to sell, and
this IFRS is to t basis
specify the depreciation on such
required for assets to cease
accounting non-current
for assets • (b) assets that meet
assets
held for sale, the criteria to be
classified as
and the classified as held for
held for sale
presentation sale to be presented
is applied to
and separately on the
the group as
disclosure of face of the balance
a whole, and
discontinued sheet and the
any resulting
operations. results of
impairment
discontinued
loss reduces
operations to be
the carrying
presented
amount of
separately in the
the non-
income statement .
current
assets in the
disposal
group in the
order of
allocation
required by
IAS 36. (IFRS
5.4)
IFRS 5 Non-current Assets This IFRS Requires
Held for Sale and Disposal Groups
Discontinued Operations
 Summary of IFRS Standards 6/13

IFRS 6 Exploration for and Evaluation of Mineral Resources

Exploration for and

evaluation of mineral
Exploration and evaluation resources is the search for
expenditures are mineral resources, including
expenditures incurred by an minerals, oil, natural gas
The objective of this IFRS is Exploration and evaluation
entity in connection with and similar non-
to specify the financial assets are exploration and
the exploration for and regenerative resources after
reporting for the evaluation expenditures
evaluation of mineral the entity has obtained legal
exploration for and recognized as assets in
resources before the rights to explore in a specific
evaluation of mineral accordance with the entity’s
technical feasibility and area, as well as the
resources. accounting policy
commercial viability of determination of the
extracting a mineral technical feasibility and
resource are demonstrable. commercial viability of
extracting the mineral
resource.

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 Summary of IFRS Standards 7/13
IFRS 7 FINANCIAL INSTRUMENTS: DISCLOSURES
The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable
users to evaluate:

(a) the significance of financial instruments for the entity’s financial position and performance
(b) the nature and extent of risks arising from financial instruments to which the entity is exposed during the
period and at the reporting date, and how the entity manages those risks.
The qualitative disclosures describe management’s objectives, policies and processes for managing those risks.
The quantitative disclosures provide information about the extent to which the entity is exposed to risk, based on
information provided internally to the entity's key management personnel. Together, these disclosures provide an
overview of the entity's use of financial instruments and the exposures to risks they create.

The IFRS 7 applies to all entities, including ;

Entities that have few financial instruments (eg a manufacturer whose only financial instruments are accounts
receivable and accounts payable)
Entities that have many financial instruments (eg a financial institution most of whose assets and liabilities are
financial instruments).

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 Summary of IFRS Standards 8/13

(b) the
(a) the separate
consolidated
IFRS 8 or individual
This IFRS financial
Operating financial
applies to: statements of a
Segments statements of
group with a
an entity:
parent:

• (i) whose debt or equity

• (i) whose debt or equity instruments are traded in a
instruments are traded in a public market (a domestic or
public market (a domestic or foreign stock exchange or an
• The objective of this IFRS is foreign stock exchange or an over-the-counter market,
that an entity shall disclose over-the-counter market, including local and regional
information to enable users including local and regional markets), or
of its financial statements to markets), or • (ii) that files, or is in the
evaluate the nature and • (ii) that files, or is in the process of filing, the
financial effects of the process of filing, its financial consolidated financial
business activities in which it statements with a securities statements with a securities
engages and the economic commission or other commission or other
environments in which it regulatory organization for regulatory organization for
operates. the purpose of issuing any the purpose of issuing any
class of instruments in a class of instruments in a
public market. public market.

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 Summary of IFRS Standards 9/13
IFRS 9 Financial Instruments IFRS 9 contains guidance for:
• The objective of IFRS 9 is to establish • Recognizing and derecognizing
principles for the financial reporting of financial instruments;
financial instruments that will present • Classifying and measuring financial
relevant and useful information to users assets;
of financial statements for their • Classifying and measuring financial
assessment of amounts, timing and liabilities.
uncertainty of the entity’s future cash
flows.

•
•IFRS 9 Is a
'Work in
Progress'
and Will
Eventually
Replace IAS
39 in its
Entirety
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 Summary of IFRS Standards 10/13

• The objective of IFRS 10 is to establish

principles for the presentation and preparation of
consolidated financial statements when an entity
controls one or more other entities.
• The Standard:

• Requires a parent entity (an entity that controls

one or more other entities) to present
consolidated financial statements
• Defines the principle of control, and establishes
control as the basis for consolidation
• Set out how to apply the principle of control to

IFRS 10 CONSOLIDATED FINANCIAL identify whether an investor controls an investee

and therefore must consolidate the investee

STATEMENTS • Sets out the accounting requirements for the

preparation of consolidated financial statements.
• Consolidated financial statements
• The financial statements of a group in which the
assets, liabilities, equity, income, expenses and
cash flows of the parent and its subsidiaries are
presented as those of a single economic entity
• Control of an investee
• An investor controls an investee when the investor is
exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to
affect those returns through its power over the
investee

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 Summary of IFRS Standards 11/13
•

• Joint arrangements
• A joint arrangement is an arrangement of
which two or more parties have joint
control.
• characteristics joint arrangement
• The parties are bound by a contractual
arrangement.
The IASB (International • The contractual arrangement gives two
or more of those parties joint control of
Accounting Standards the arrangement.
• Joint arrangements are either joint
Board) recently issued operations or joint ventures.
IFRS 11 Joint • A joint operation is a joint arrangement
whereby the parties that have joint
Arrangements that
eliminates proportionate
IFRS 11 JOINT ARRANGEMENTS control of the arrangement have rights to
the assets, and obligations for the
liabilities, relating to the arrangement.
consolidation as a Those parties are called joint operators.
method to account for •The Objective of IFRS 11 is
Types of joint
arrangements that a party to a joint
joint ventures.!! arrangement determines the
type of joint arrangement in
A joint venture is a joint arrangement which it is involved by
whereby the parties that have joint assessing its rights and
control of the arrangement have
obligations and accounts for
rights to the net assets of the
arrangement. Those parties are called those rights and obligations
joint ventures. in accordance with that type
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of joint arrangement.
 Summary of IFRS Standards 11/13

Before assessing whether an

entity has joint control over
an arrangement, an entity
first assesses whether the
parties, or a group of the
Joint control parties, control the
arrangement (in accordance
with the definition of control
in IFRS 10 Consolidated
Financial Statements)

Joint control is the

contractually agreed sharing
of control of an
arrangement, which exists
only when decisions about
the relevant activities
require the unanimous
consent of the parties
sharing control.

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 Summary of IFRS Standards 11/13

Main changes introduced by IFRS 11

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 Summary of IFRS Standards 12/13

• The objective of IFRS 12 is to require the disclosure of

information that enables users of financial statements to
evaluate:
IFRS 12 • The nature of, and risks associated with, its interests in other
DISCLOSURE OF entities

INTERESTS IN • The effects of those interests on its financial position,

financial performance and cash flows.
OTHER ENTITIES • IFRS 12 is required to be applied by an entity that has an
interest in any of the following:
• subsidiaries
• joint arrangements (joint operations or joint ventures)
• associates
• unconsolidated structured entities

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 Summary of IFRS Standards 13/13

• Objective IFRS 13 :
• defines fair value
• sets out in a single IFRS a framework for measuring fair value
• requires disclosures about fair value measurements.
• IFRS 13 applies when another IFRS requires or permits fair value
measurements or disclosures about fair value measurements
(and measurements, such as fair value less costs to sell, based on
IFRS 13 FAIR VALUE fair value or disclosures about those measurements)
• Except for:
MEASUREMENT • share-based payment transactions within the scope of IFRS
2 Share-based Payment
• leasing transactions within the scope of IAS 17 Leases
• measurements that have some similarities to fair value but that
are not fair value, such as net realizable value in IAS
2 Inventories or value in use in IAS 36 Impairment of Assets.
• Fair value
• The price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date

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 Approaches to IFRS Adoption

Three Approaches to IFRS Adoption

Adoption. This approach directly adopts IFRS standards as the accounting norm for
preparing financial statements. India, for example, plans to take this approach.
Convergence. This approach adapts local accounting standards so they align with IFRS.
Local standards remain the preferred reporting accounting norm, though they might be
Endorsement.updated
This approach allows
to reflect IFRS.local governing
Australia bodies
is taking thistoapproach.
incorporate individual
IFRS standards into local accounting or GAAP standards. A country using this approach
endorses the use of applicable IFRS standards, but keeps local standards as the norm,
without necessarily updating them. This is the approach of the United States

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 2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
commonly used set of standards.
In 2002, the IASB and FASB signed the ‘Norwalk’ agreement, expressing their desire to converge their accounting standards into one
The Securities and Exchange Commission (SEC) designated the FASB as the organization responsible for setting accounting standards for
public companies in the U.S.
The Financial Accounting Standards Board (FASB) is a private, not-for-profit organization who developed generally accepted accounting
principles (GAAP) within the United States in the public's interest.
Established by FASB
governments.
non-profit organizations,
privately held companies,
publicly traded,
In the U.S. Generally Accepted Accounting Principles are accounting rules used to prepare ,present, and report financial statements for a
wide variety of entities, including:
(US GAAP & SEC)
Principles and Security Exchange Commission
United States Generally Accepted Accounting
 Major differences lies in the conceptual
approach:

IFRS is principle-based whereas U.S. GAAP is

rule-based.

Principles-based accounting standards refer to a

system of financial reporting that is based
primarily on the fundamentals of accounting.

Rules-based accounting is basically a list of

detailed rules that must be followed when
preparing financial statements.

The difference between these two approaches is

on the methodology to assess an accounting
treatment.

Under U.S. GAAP, the research is more focused

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on the literature.

Under IFRS, the review of the facts pattern is

more thorough.

However, IFRS include positions and guidance

that can easily be considered as sets of rules
instead of sets of principles. At the time of the
IFRS adoption, this led English observers to
Principles Based vs Rules Based

comment that international standards were

really rule-based compared to U.K. GAAP that
were much more principle-based.
 The Strengths
of Principle-Based Standards

Principles-based
standards provide a
Rules-based comprehensive basis
accounting standards and have the
add unnecessary flexibility to deal
complexity. with new and
Principles-based different situations
accounting standards
need a clear hierarchy
of overarching
concepts with limited
Complete additional guidance.
comparability is
never possible in
accounting,
therefore one Resulting from differences
should emphasize In a principles-based system, in jurisdiction and
Principles- on explaining key more responsibility for different cultures around
based judgments being judgments and explaining the world, convergence
accounting made. judgments of preparers cannot be achieved if the
standards can (CFOs) and auditors is basis is a rules-based
serve the needs
necessary. approach, since this will be
for business
and public difficult to implement.
interest.
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 The Weaknesses/limitation of Principle-Based
Standards

A third limitation of
principles-based
An example of an accounting standards
inconsistency is that is the ability to use
‘highly reliable its flexibility for
information may have opportunistic
Secondly, several behavior.
little relevance to
authors determine an
users, such as
inconsistency between
unamortized
the CF and accounting
acquisition,
standards, which will
Since financial exploration and
hamper a principles-
accounting theory development costs,
based approach.
lacks an
unambiguously
clear elaboration of Finally, Since
the concept of Since there are no strict principles-based
The first profit and the goals descriptions, CFOs may standards lack clear
limitation is they are aiming at, use more aggressive application guidance,
that limited lacking guidance interpretations of their proving the
guidance may will harm earnings evidence for measuring incorrectness of CFOs
lead to quality.
enforcement an accounting event assessment is
difficulties. relatively hard.

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 The Strengths
of Rules-Based Standards
As a rules-based system
provides more additional
guidance, financial reports
become more comparable

No requirement for a very

By including rules, both
strong ‘professional
clarity and verifiability
judgment’ on the part of
improves
accountants and auditors.

Reduced opportunities for

Rules-based standards
earnings management
have a strong
through judgments
enforceability and are
(compared to a principles-
authoritative
based system)

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 The Weaknesses/limitation of Rules-Based
Standards
Rules might be arbitrary
and the result of a political
process, causing annual
If an accounting standard reports that deviate from
is inappropriately strict, their economic reality. On the ‘cookbook’ (Rules
financial reports of Based ) point of view,
different companies show companies may structure
exactly comparable transactions to meet the
approaches, whereas the specific requirements of
day-to-day operations the accounting standards.
differ enormously

Final Limitation of rules-

Rules-based accounting
based accounting
standards cause an
standards is the effect of
enormous increase in
creating ‘seemingly’
complexity to apply in
comparable financial
practice.
reports
Can drastically depart from
the underlying principle.

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 Summary principles based & rules based
Types of accounting standards Principles-based Rules-based
General description Specific description (cookbook) Detailed
methods for (almost) all
Fundamental objectives accounting problems
Exactly clear when and how to apply

Consistent with CF Substance-over-form Form-over-substance

True and fair view override
Main characteristics

More professional judgment Represent Increased comparability Increased

economic reality Reduced opportunities for verifiability Reduced opportunities for
earnings management through earnings management through
transaction decisions accounting decisions
More flexibility to cope with new
environmental conditions Improved communication

Enforceable and authoritative

Advantages

Enforcement difficulties Arbitrary

Inconsistency with application guidance Inconsistent with conceptual framework

(Ab)use of flexibility
Foster creative accounting Seemingly
Lack
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GAAP.
Development costs — These costs can be capitalized under IFRS if certain criteria are met, while it is considered as “expenses” under U.S.
Earning-per-Share — Under IFRS, the earning-per-share calculation does not average the individual interim period calculations, whereas
under U.S. GAAP the computation averages the individual interim period incremental shares.
Inventory — Under IFRS, LIFO (a historical method of recording the value of inventory, a firm records the last units purchased as the first
units sold) cannot be used while under U.S. GAAP, companies have the choice between LIFO and FIFO (is a common method for recording the
value of inventory).
Statement of Income — Under IFRS, extraordinary items are not segregated in the income statement, while, under US GAAP, they are
shown below the net income.
Consolidation — IFRS favors a control model whereas U.S. GAAP prefers a risks-and-rewards model. Some entities consolidated in
accordance with FIN 46(R) may have to be shown separately under IFRS.
U.S. GAAP
Some general differences between IFRS and
 IFRS Adoption Around the World

IFRS Adoption Around the World 2011

Approximately 120 nations and reporting jurisdictions permit or require IFRS for domestic listed companies.

•Approximately 90 countries have fully conformed with IFRS as promulgated by the IASB and include a statement
acknowledging such conformity in audit reports.

IFRS permitted or required

Convergence plans

U.S. GAAP and/

or convergence intended

No/unknown convergence plans

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 What are the advantages of converting to
IFRS?

By adopting IFRS, a business can

present its financial statements
on the same basis as its foreign
competitors, making
comparisons easier.

Furthermore, companies with

Companies may also benefit subsidiaries in countries that
by using IFRS if they wish to require or permit IFRS may be
raise capital abroad. able to use one accounting
language company-wide.

Companies also may need to

convert to IFRS if they are a
subsidiary of a foreign company
that must use IFRS, or if they
have a foreign investor that must
use IFRS.

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 What could be the disadvantages of
converting to IFRS?

Despite a belief by some of the

inevitability of the global
acceptance of IFRS, others believe
that U.S. GAAP is the gold
standard, and that a certain level
of quality will be lost with full
acceptance of IFRS.

Certain U.S. issuers without

significant customers or
Because they may believe that the operations outside the United
significant costs associated with States may resist IFRS because
adopting IFRS outweigh the they may not have a market
benefits. incentive to prepare IFRS financial
statements.

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 Summary IFRS and Impact
International Financial Reporting Standards
• Methodologies and disclosure requirements for the preparation and presentation of
financial statements.
• Set by the International Accounting Standards Board (IASB)

Global adoption of IFRS

• 100+ jurisdictions already require or permit IFRS
• Including Europe, Russia, Australia, New Zealand,and China (via Hong Kong stock exchange)
• Extended to UK public sector from 2010
• Canada, India, Thailand and Korea from 2011
• Malaysia and Mexico from 2012 Taiwan expected 2012-2014, Japan expected 2016

Major impact in North America

• US SEC has already started accepting IFRS-based filings from foreign issuers
• Timelines for US adoption range from 2013 to 2015
• Ongoing work to refine and align US GAAP with IFRS
• Canada is mandated from 2011

Differing philosophies
• IFRS is principles-based (2,500 pages)
• US GAAP is rules-based (>25,000 pages)

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC Financial Consolidation
SAP BusinessObjects EMP 10

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 SAP BPC Financial Consolidation
SAP BCP 10 NW

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 SAP BPC Financial Consolidation
Harmonize

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 SAP BPC Financial Consolidation
SAP BPC 10 Harmonize 1/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Harmonize 2/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Harmonize 3/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Harmonize 4/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Harmonize 5/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Harmonize 6/6

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 SAP BPC Financial Consolidation
Connect

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 SAP BPC Financial Consolidation
SAP BPC 10 Connect 1/2

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 SAP BPC Financial Consolidation
SAP BPC 10 Connect 2/2

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 SAP BPC Financial Consolidation
Extend

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 SAP BPC Financial Consolidation
SAP BPC 10 Extend 1/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Extend 2/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Extend 3/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Extend 4/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Extend 5/6

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 SAP BPC Financial Consolidation
SAP BPC 10 Extend 6/6

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC Financial Consolidation
Business Process flow BPC 10 1/3

dssd

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 SAP BPC Financial Consolidation
Business Process flow BPC 10 2/3

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 SAP BPC Financial Consolidation
Business Process flow BPC 10 3/3

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC 10 Consolidation Framework 1/29
Legal Consolidation Requirements

In SAP BPC, a consolidation environment requires at least 3 models:

• Legal Consolidation
• Main model containing all financial data
• Also contains non-financial data like headcounts, …

• Ownership
• Used to manage the organization structure (scopes and sub-scopes)

• Rate
• Contains all currency exchange rates

• Intercompany (optional)
• Used for Intercompany Matching process (balance level)

Note : Models names are not mandatory

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 SAP BPC 10 Consolidation Framework 2/29

•To create a consolidation environment, add the following minimum models for Consolidation, Rate, and Ownership. Select
model options to expose the delivered consolidation relevant functions:

Application Types
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 SAP BPC 10 Consolidation Framework 3/29

To activate business rules :

Go to Administration Rules Business Rules
Select the appropriate model
Click on Add/Remove Rule Types
Check the appropriate Rule Types

Business Rules
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 SAP BPC 10 Consolidation Framework 4/29
As specific model options are activated, business rules and script logic files are made
available in each of the applications. A list of all delivered functionality is as follows:

Business Rules and Script Logic Content

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 SAP BPC 10 Consolidation Framework 5/29

The following parameters must be set after creating an environment. Most of them are not required for a consolidation,
but are a generic system requirement for any new environment. In the Administration console, select Manage All
Environments :

Set Template Version => defines

the current version number of the
dynamic templates in your
application set

Change Status = controls

whether the system is offline or
not ; you can also type in the
message displayed to users who
try to access an model that is
offline

Environment Parameters

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 SAP BPC 10 Consolidation Framework 6/29

Purpose of the LEGAL CONSOLIDATION Model:

defines journal template
 stores the initial (pre-consolidated) trial balance records
 launches balance carry forward processes
 ensures data consistency with controls
 launches currency conversion and consolidation processes
 reporting for pre/post consolidation financial reports

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 SAP BPC 10 Consolidation Framework 7/29

Legal Consolidation Model – Dimensions

A minimum of 9 dimensions are required for the Legal Consolidation model:

1.C_Account (A) – Chart of accounts

2.Category (C) - Typical categories would be Budget, Actual, Forecast
3.AuditTrail (D) - Tracks the source of data (input, journal adjustments, eliminations…)
4.Flow (S) - identifies balance sheet movements (opening, additions, decreases, transfers
… and ending balances)
5.RptCurrency (R) - Identifies Transaction Currency and Local Currency.
6.Scope(G) - Consolidation groups / scopes
7.Entity (E)
8.Interco (I) - Provides partner information for intercompany eliminations
9.Time (T)

Note : Dimensions names are not mandatory

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 SAP BPC 10 Consolidation Framework 8/29

Rates Model – Dimensions

The RATES model contains currency exchange rates

• A minimum of 5 dimensions are required for a Rate-Type model :

• 1. R_Account (A): This details the different types of rate (Average, End-of-Period, Historical,etc.)
• 2.R_Entity (E): This stores multiple tables of rates, if required; otherwise the R_Entity dimension may just be limited to
a unique member, typically named GLOBAL
• 3.InputCurrency (R): This stores each applicable local currency (CAN, USD, EUR, etc)
• 4.Category (C): – same as Legal Consolidation model
• 5.Time (T) : – same as Legal Consolidation model

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 SAP BPC 10 Consolidation Framework 9/29

Ownership Model
•Purpose of the OWNERSHIP model:
•Stores a time dependent representation of the organization structure of the parent company in transactional data records
by directly interfacing with the Dynamic HierarchyEditor functionality.
•Stores the consolidation method (METHOD) to use as well as the percentage of consolidation (PCON) , percentage of
control (PCTRL) for each of the entities.
•Stores the percentage of ownership i.e. POWN.

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 SAP BPC 10 Consolidation Framework 10/29

Ownership Model – Dimensions

• The OWNERSHIP model stores ownership details. A minimum of 6 dimensions are required:
• 1.O_Account (A) – provides information on ownership type such as PGROUP, POWN, PCON,
• and PCTRL
• 2.Category (C) – same as Legal Consolidation model
• 3.Entity (E) – same as Legal Consolidation model
• 4.Time (T) – same as Legal Consolidation model
• 5.Interco (I) – same as Legal Consolidation model
• 6.Scope (G) – same as Legal Consolidation model

Note : Dimensions names are not mandatory

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 SAP BPC 10 Consolidation Framework 11/29

Ownership - Model General Settings

Settings Description
- Parent/Child property This parameter is used with dynamic hierarchy for legal applications when defining
used for hierarchy of consolidation hierarchies. The value set here must match the name of property in
groups GROUPS dimension in the legal consolidation application to store the ownership
data.
Value should be PARENT_GROUP.
- Non-interco Member in This parameter should be a member ID in the INTERCO dimension in the ownership
Ownership model if you are using dynamic hierarchies.
For example: I_NONE or ThirdParty

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 SAP BPC 10 Consolidation Framework 12/29

Dimensions – Summary
The following dimensions are used in the relevant models:

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 SAP BPC 10 Consolidation Framework 13/29

Dimension Types

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 SAP BPC 10 Consolidation Framework 14/29

• Dimension – C_Account Relevant to

Main Properties Consolidation activities

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 SAP BPC 10 Consolidation Framework 15/29

• Dimension – Flow Relevant to

Main Properties Consolidation activities

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 SAP BPC 10 Consolidation Framework 16/29

• Dimension – Entity Relevant to

Consolidation activities

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 SAP BPC 10 Consolidation Framework 17/29

• Dimension – Interco Relevant to

Consolidation activities

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 SAP BPC 10 Consolidation Framework 18/29

• Dimension – AuditTrail Relevant to

Consolidation activities
Property

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 SAP BPC 10 Consolidation Framework 19/29

Dimension – Category 1/2

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 SAP BPC 10 Consolidation Framework 20/29

Dimension – Category 2/2

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 SAP BPC 10 Consolidation Framework 21/29

Dimension – Groups / Consolidation Scopes

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 SAP BPC 10 Consolidation Framework 22/29

Dimension – Reporting Currency

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 SAP BPC 10 Consolidation Framework 23/29

Dimension – Time

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 SAP BPC 10 Consolidation Framework 24/29

Ownership Manager

•Purpose :
•Provides a web based interface to allow the business user to set up time dependent relationships between various
subsidiaries and organizational units.
•Each hierarchy is keyed to a specific combination of Category and Time dimension member values.
•Provides a convenient table entry to define the consolidation METHOD, PCTRL, POWN and PCON of each individual unit.
•The dynamic hierarchy is stored in the Ownership application as transactional records.

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 SAP BPC 10 Consolidation Framework 25/29

FAQ – Consolidation Framework 1/4

•How to setup the consolidation framework in order to keep the investment details like no of shares,
investment details also in the BPC system ?
Add the relevant accounts in the O_account dimension : number of issued shares, number of owned shares,
with and without voting rights
Create the corresponding data entry schedule in order to enable users to enter the number of shares owned
(using the interco dimension) – data can also be loaded using a flat file, BW cube…
Set up the calculation of ownership percentage based on data entered on owned and issued shares

•What is the difference between PCON, PCTRL and POWN

Percent control represents the percentage of an entity based on voting shares that
other entities own, directly or indirectly. It is used to determine the consolidation
method
Percent ownership (also known as the interest percetange) represents the percentage of an entity’s
nonvoting shares that other entities own, directly or indirectly
Percent consolidation is the percentage of an entity’s values that consolidate to its parent
Direct percent ownership is the percentage of regular nonvoting shares of stock owned by each entity
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 SAP BPC 10 Consolidation Framework 26/29

FAQ – Consolidation Framework 2/4

•What is the difference between PCON, PCTRL and POWN ?

M
• Control percentages : M controls F at 80% ; M controls G at 60%,
80%
through F&G, M controls H at 30%.
F • Ownership percentages : M owns F at 80%, M owns G at 48% (80% *
60%), M owns H at 14% (80% * 60% * 30%)
60%
G

30%
H

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 SAP BPC 10 Consolidation Framework 27/29

FAQ – Consolidation Framework 3/4

•What is the difference between elimination entity and consolidation entity? Are they the same?

Elimination entity will only store eliminations generated by US elimination

business rules while the consolidation entity is the entity storing the consolidated results for
each group/sub-group

What happens when we use different entities in place consolidation entity?

It allows to secure only the entity dimension instead of securing both entity and scope
dimensions in case sub-consolidors need to access sub-consolidated Data

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 SAP BPC 10 Consolidation Framework 28/29

FAQ – Consolidation Framework 3/4

•What is the use of the new properties for Entity – Control_Level and Ctrl_currency_not_LC ?
Thanks to the Control Level. So when the controls are executed, only the controls
below or equal to the level associated to the entity will be run.
property, the administrator can associate a level of required control for each entity
The Ctrl_currency_not_LC enables the controls execution for those entities were data entry are
performed directly on a currency, and not on the LC member in the currency dimension

Can we execute the controls at the group level ?

No, controls can only be launched on base entities.

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 SAP BPC 10 Consolidation Framework

Rules: Controls
Summary

You should now be able to:

• Identify and create the required models in order to set up a consolidation Environment
• Identify and create the required dimensions in each consolidation model
• Identify and fill the required properties for each dimension
• Identify useful scripts, business rules and data manager packages
• Understand the basics of the Ownership Manager

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC 10 Consolidation Monitor 1/19

Feature or Task Introduction

Consolidation Monitor

This feature provides an overview of the whole consolidation process in

one single screen. The monitor tracks the following items:

• Status of the controls

• Work Status
• Execution status for currency conversion
• Execution status for consolidation

This feature will be very useful for all the users that need to monitor the progress of the consolidation process (at a
group or at a local level), as they have all the information they need on one single screen.

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 SAP BPC 10 Consolidation Monitor 2/19

Consolidation Monitor
Benefits

Benefits of this feature include:

•Overview of the controls, work status and execution status for currency conversion and consolidation on one single screen
•Overview of the progress in the consolidation process for:
- Individual entities
- Consolidation groups
•Currency Conversion and Consolidation can be triggered from that samescreen

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 SAP BPC 10 Consolidation Monitor 3/19

Consolidation Monitor
Prerequisites

The Consolidation Monitor has the following prerequisites:

• Usage of a Consolidation type Model

• Definition of the ownership structure for that period
• Definition of work status (for work status display)
• Definition of controls (for control display)
• Assignment of relevant task profiles

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 SAP BPC 10 Consolidation Monitor 4/19

Consolidation Monitor
Security

There are two security tasks related to the Consolidation Monitor:

•View Consolidation Monitor – provides access to the Consolidation Monitor
•Run Consolidation Tasks – provides permission to run the Currency Conversion and the Consolidation
from the monitor

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 SAP BPC 10 Consolidation Monitor 5/19

Consolidation Monitor
Starting Page

The starting page can be divided into 3 sections

• Context: Selection of Model, Category, Entity and Consolidation Group
• Actions List of possible actions
• Status: Details of the status for the selected context

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 SAP BPC 10 Consolidation Monitor 6/19

Consolidation Monitor
Actions

The following Actions are available (some actions may be grayed out if no entity
or a node level is selected)

• Work Status: Open the screen to update work status for the selection
• Translate: Runs currency conversion
• Consolidate: Runs consolidation
• Display Running Processes: Opens a window that shows which processes are
• currently running
• Reset: Resets execution status for Currency Translation and Consolidation
• Refresh: Refreshes the current screen
• Show Description: Shows description instead of ID
• View Select between a hierarchical and flat view

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 SAP BPC 10 Consolidation Monitor 7/19

Consolidation Monitor
Work Status

This screen allows one to update the work status for the selected entity

This currently only works on base level entities; work status cannot be set on parent levels
using the Consolidation Monitor

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 SAP BPC 10 Consolidation Monitor 8/19

Consolidation Monito
Running Currency Conversion 1/2

The following steps need to be performed in order to execute Currency

Conversion
1.In Consolidation Central Consolidation Monitor, in the scope context area, select the
Category, Time and Group dimension members for which you want to run the currency translation.

2. Select the row for the Group or Entity you require and click Translate.

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 SAP BPC 10 Consolidation Monitor 9/19

Consolidation Monito
Running Currency Conversion 2/2

3. In the Translate dialog box, verify the selected dimension members and choose whether to run
Full or Incremental Translation.

4. Click OK.

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 SAP BPC 10 Consolidation Monitor 10/19

Consolidation Monitor
Running Currency Conversion (Cont’d)

When executing Currency Conversion on a group level (node), the screen shown on the previous
slide is displayed. This performs a conversion into group currencies.
When Currency Conversion is executed on an Entity level, the following screen is displayed.

This performs a currency conversion into the selected reporting currency. It is

also possible to select which Rate Entity to use for this conversion.
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 SAP BPC 10 Consolidation Monitor 11/19

Consolidation Monitor
Running Consolidation

The following steps need to be performed in order to execute Consolidation

1. In Consolidation Central Consolidation Monitor, in the scope context area, select the Category, Time
and Group dimension members for which you want to run the consolidation

2. Select the row for the Group or Entity you require and click Consolidate.

3.In the Consolidation dialog box, verify the selected

dimension members and choose whether to run
a full or incremental consolidation

4. Click OK.

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 SAP BPC 10 Consolidation Monitor 12/19

Consolidation Monitor
Currency Conversion and Consolidation

Please note the following points:

Member in the Entity type dimension of the Rate application needs to be called GLOBAL (in upper case) for the
conversion to group currencies to work properly

The respective programs for currency conversion and consolidation are called directly. No logic script is called,
therefore no custom calculations can be executed.

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 SAP BPC 10 Consolidation Monitor 13/19

Consolidation Monitor
Incremental vs. Full

The Currency Conversion and Consolidation programs can be executed in incremental or full mode. The
incremental mode will only execute the program for those entities that were changed since the last execution
of the program (this is of course much faster than executing the program for all entities)
The process works the following way:
- Every time data is written-back to the system, a timestamp is written to a separate table to keep track of
when the data of an entity has last been updated

- When a program runs in incremental mode, it will check which entity has been modified
since it’s last execution and only perform the calculation for those entities, which
significantly speeds up the process.

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 SAP BPC 10 Consolidation Monitor 14/19

Consolidation Monitor
Incremental vs. Full (Cont’d)

The incremental mode only works when data has been updated, it does
not work in the following cases:

• Rates were changed

• Ownership information was changed
• Business Rules were changed

The program needs to be run in full mode if one of the cases mentioned
above has occurred.

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 SAP BPC 10 Consolidation Monitor 15/19

Consolidation Monitor
Display Running Processes

This screen displays the currently running processes and shows the progress of each
process (you can select whether you want to see all processes or only your own ones)

If a process has failed, opening this screen will allow this process to be reset (after a
certain period), so that it can be executed again.

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Consolidation Monitor
Reset

Highlight a group or entity and click the Reset button, this will display a screen with the
current selection

The Currency Conversion and Consolidation status are then set back to “To be executed”

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Consolidation Monitor
Status

This screen displays the controls, work status and execution status for Currency
Translation and Consolidation

The status is set to Done once the programs were successfully executed.
The Currency Translation and Consolidation status are set back to To Be Executed if data
is entered (for the Entity were data has been entered)

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 SAP BPC 10 Consolidation Monitor 18/19

Consolidation Monitor
Status Roll-up

The status on the parent level (for controls, work status, currency translation and
consolidation) is based on the lowest status of the children. There is no status that is stored
on the node levels, they are computed when the monitor is displayed.
In the example below, one entity has the status set to To Be Executed and the parent
Corporate shows that same status, as it is the lowest status of all it’s children.

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 SAP BPC 10 Consolidation Monitor 19/19

Rules: Controls
Summary

You should now be able to:

• Navigate the Consolidation monitor functions and features
• Explain the status information displayed in the monitor
• Execute Currency translation and Consolidation
• Describe incremental consolidation

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC 10 Controls Administration 1/19

Controls

A Control is the individual check of data accuracy and

consistency.

Controls replaces the Validation Business rules used in

prior version (BPC 7.5). Available only in the NW
version. Controls are enabled or disabled at model
level.

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 SAP BPC 10 Controls Administration 2/19

Business Example

They are mainly used to control

Controls are an essential part of the consistency of financial data
every consolidation application
and they might also be useful in (for example that a Balance Sheet
planning application. is balanced or that flow
movements are
matching the with the closing
balance)

Controls can be enforced (blocking

controls) or just displayed as
warnings, to inform users of
potential problems.

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 SAP BPC 10 Controls Administration 3/19

Controls
Benefits

Benefits of this feature include:

• Consistency of data
• Flexibility
• Different level of controls can be defined by entity
• Control sets are assigned by Category and Time

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 SAP BPC 10 Controls Administration 4/19

Process Overview

The following steps are required to define controls

1.Assign Security Tasks related to Controls
2.Enable Controls
3.Create individual controls (and definition of the level for each control)
4.Create Sets of controls (group of controls)
5.Assign a set of controls by category and time

On top of that, two more attributes need to be set in the Entity type dimension

1. Define for each entity the level of control that should be applied
2. Possibility to bypass controls in Local Currency (if data are loaded in reporting currency
directly)

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 SAP BPC 10 Controls Administration 5/19

Pre-Requisites
The following two attributes are required in the Entity type dimension:
– CONTROL_LEVEL (1)
– CTRL_CURRENCY_NOT_LC (1)

CONTROL_LEVEL
• This property controls which level of control is applied for each entity. The following four values are available:
• 1 : Basic
• 2 : Standard
• 3 : Advanced
• 4 : Comprehensive
• The default value (blank) is equivalent to “4”

CTRL_CURRENCY_NOT_LC
– This property controls whether controls should be executed in the reporting currency instead of LC.
The following two values are available:
o N : Controls are executed in Local Currency
o Y : Controls are executed in the currency defined in the Currency property of the Entity
– The default value (blank) is equivalent to “N”

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 SAP BPC 10 Controls Administration 6/19

Controls - Security

The following two take tasks are related to Controls from an administration point of view:
•Edit Controls definition
•View Controls definition

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Accessing and Enabling Controls

In the Administration module, expand Rules and select the Controls items

Before Controls can be used, they need to be enabled from the Controls Administration screen

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 SAP BPC 10 Controls Administration 8/19

Navigation

From the Controls Main Page, you can access the different components by clicking on the
numbers

When a specific component is open, there is always a link on the top right of the
screen for the next step
• In Controls
• In Control Sets
• In Assignments

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 SAP BPC 10 Controls Administration 9/19

Controls – Main Screen

The Main screen for controls can be used to add New controls, Edit or Delete existing controls.

The drop-down box allows to display all controls or to filter them by a Set of controls

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 SAP BPC 10 Controls Administration 10/19

Controls – Control Editing (1)

The control definition screen can be split in 2 main sections:

•The top of the screen contains the buttons to Save, Close and Validate the control
•The header section : specifies the type of control, the threshold and the break-down dimensions
•The detail section : specifies which members are compared

Top

Header

Details

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 SAP BPC 10 Controls Administration 11/19

Controls – Control Editing (2)

The header section
• ID : id for the control, no space allowed
• Type : Blocking / Warning. All blocking controls must pass before the work status can be changed
• Equation type : type of comparison using the equal, different, bigger and smaller operators
• Control Level : Level of this control, linked to the “Control_Level” property of the Entity dimension
• Tolerance Threshold
o In value : absolute value
o In % : percentage is calculated based on the value of the top part
• Breakdown Dimension(s)
o Up to 2 dimensions can be specified as break-down dimensions
o The control will be executed separately for each member of the break-down dimension. In the
example of a break-down by Audit on the member ALL_INPUT, the control will be executed for each
member below ALL_INPUT (INPUT and INPUT11) in this example
o For a breakdown, the same member must be specified in the top and in the bottom part

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 SAP BPC 10 Controls Administration 12/19

Controls – Control Editing (3)

The detailed section

• Top
Part

o Sign: + or -
o Account Member from the Account dimension (parent or base level)
o Flow Member from the Flow dimension (parent or base level)
o Interco: Member from the Interco dimension (parent or base level)
o AuditID Member from the AuditID dimension (parent or base level)
o Multiply select multiply or divide (for the Value specified)
o Value: value to multiply or divide by
• Bottom Part

o Same column as top part

o Year Offset use a different year. Values can be a year (2010) or an offset (+1,-1)
o Period: use a different period. Values can be a period (1) or an offset (+1,-1)
o Category: use a different category (enter ID of category to use)

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 SAP BPC 10 Controls Administration 13/19

Controls - Documents

A document (report or input schedule) can be linked to each control. This will
provide a hyperlink for the user, so that when a control fails, the user can open that
document to understand where the issues is coming from

• To set this up, you need to select the document tab

• Then click the Add button and select the type of document, finally select which document to add

• The document then show up in a list

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 SAP BPC 10 Controls Administration 14/19

Controls - Example

Below is an example of a control that checks that a Balance Sheet is balanced

(with a tolerance of 1) with a breakdown by AuditId (for all AuditId below ALL_INPUT)

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 SAP BPC 10 Controls Administration 15/19

Sets of Controls (1)

From the Control Sets screen, click New to create a new set

Enter an ID for the Set (no space allowed)

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 SAP BPC 10 Controls Administration 16/19

Sets of Controls (2)

Add or remove controls into your set and click OK to close the window

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 SAP BPC 10 Controls Administration 17/19

Assignment of Controls (1)

There are two views available to assign the controls:

• Categories by Time
• Control Sets by Time

Categories by Time
Click Category and Time to select members (you can select more than one member at a time)
• Click Show
• Click Edit (on the top left)
• Double click to select the cell you want to define controls sets and click once more to display the
dropdown list with all the available control sets and select the appropriate one

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 SAP BPC 10 Controls Administration 18/19

Assignment of Controls (2)

Control Sets by Time

• Click Control Sets, Category and Time (you can select more than one member at a time)

• Click Show
• Click Edit (on the top left)
• Tick the checkbox to decide which controls should be assigned for a Category and Time

• Click Save

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 SAP BPC 10 Controls Administration 19/19

Rules: Controls
Summary

You should now be able to:

• Understanding the new Controls functionality.
• Define controls.
• Define control sets and assign controls.
• Create and maintain control assignments.

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC 10 Controls Monitor – Executing
Controls 1/20

Controls

A Control is the individual check of data accuracy and consistency.

Controls replaces the Validation Business rules used in prior version (BPC 7.5).

Available only in the NW version.

Controls are enabled or disabled at model level.

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 SAP BPC 10 Controls Monitor – Executing
Controls 2/20

Business Example

End-users run controls to check their

data quality and allow them to fix
their data. The level of controls might
Controls are an important be different by entities and time
component mainly in periods.
consolidation application
to ensure proper data quality.

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 SAP BPC 10 Controls Monitor – Executing
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Controls
Prerequisites

To use the Controls feature from the end-user point of view, the following needs to be defined:
• Controls need to be defined and assigned in the Administration module
• For Consolidation type application, ownership structure need to be Maintained
• Work Status need to be defined in the Administration Module

Controls replace the validations that were used in the SBOP PC 7.5 release

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 SAP BPC 10 Controls Monitor – Executing
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Controls
Security

The following four tasks are related to Controls from an end-user point of view:
• Reset Control Dismissal
• Dismiss Blocking Controls
• View Control
• Run Controls

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 SAP BPC 10 Controls Monitor – Executing
Controls 5/20

Process Overview

3. Identify
1. Run 2. Review 4. Correct 5. Re-run
issues in
Controls Controls Data Controls
data

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Controls
Set Context

The selection of the context will define which Category, Time and Groups/Entities
are displayed in the Control Monitor. Depending on the type of application, the third
selection box will:
• For Consolidation type application, display the Group type dimension (user selects a group and will get all
the sub-groups and entities displayed, according to the definition in the Ownership Manager)

• For Planning type application, display the Entity type dimension (user selects an Entity and will get the
selected Entity and all its descendants, according to the hierarchy of the Entity dimension)

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Controls
Controls Monitor

Controls Monitor indicates for each entity:

• Control Set: Control set that has been assigned for this category and period
• Status: Displays status of current control
• Level: Level of control applicable for that entity (linked to the CONTROL_LEVEL property)
• Number of Blocking: How many blocking controls have failed
• Number of Warnings: How many warning controls have failed

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Controls
Status and Type of Controls

The following statuses exist:

• To be executed: Control needs to be run (has not been executed yet or data have changed since last execution)
• Passed: Control passed successfully
• Failed: Control has failed, data needs to be corrected
• Dismissed: Control was forced to pass

There are two types of controls

• Blocking: All blocking controls must pass (or be dismissed) in order to allow a change of the work
status. These controls are mandatory.
• Warning: These controls are provided for information only, but they do not block the process.

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Controls
Levels

There are four level of controls that can be assigned to an entity. An entity uses all the controls
that have been assigned to that level (and above).

1: Basic

Control 2: Standard

Levels 3: Advanced

4: Comprehensive
(Default)

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Controls
Controls Monitor

Depending on the type of application, the entities are organized according to the:
• Setup in the Ownership Manager for Consolidation applications
• Hierarchy of the Entity dimension for Planning applications

The View drop-down box in the top right corner allows you to select between a hierarchy and a
flat view

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 SAP BPC 10 Controls Monitor – Executing
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Controls
Execute Controls

To execute controls, highlight the entity or node and click the Run Controls button

Check the settings for the dimensions, they should be correct as they are taken over from the
context

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 SAP BPC 10 Controls Monitor – Executing
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Controls
Review Controls (1)

After the execution, the status and the number of blockings and warnings are updated

Status for node levels are calculated on the fly, the node level will always show the lowest
status of all its children.

Highlighting an entity in the top part of the screen displays a list of the failed controls in the
bottom part of the screen (details for S000 in this example).

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 SAP BPC 10 Controls Monitor – Executing
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Controls
Review Controls (2)

To get a detailed view of all controls, select the Entity and click the Open Control Results button

This opens a new tab that contains the details

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 SAP BPC 10 Controls Monitor – Executing
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Controls Results
Overview

Context
Actions

Document Details
links

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Controls Results
Actions

The drop-down box at the top allows to select which controls should be displayed based on their
status.

Controls can be run by clicking the Run Controls button and refreshed with the Refresh button.

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Controls Results
Details

This view contains the detail about all the controls, a drill down can be done on a control by
clicking the arrow on the left of the screen

• The breakdown members indicate which member of the break-down dimension is displayed if break-down
has been defined for that control

• The Equation and Result columns show the calculation that are performed and the result that is calculated

• The Threshold column indicates the threshold that was defined for that period

• The Type column indicates whether the control is Blocking or Warning

• The Status column indicates if the control has passed, failed or has been dismissed

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Controls
Linked Documents (1)

If linked documents has been defined for a control, they can be accessed with the hyperlink at
the bottom of the screen.

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Controls
Linked Documents (2)

This will start the EPM add-in and open the selected report. Please note that only the Category,
Entity, and Time dimensions are passed to the report, the rest of the
dimension need to be set manually in the report itself.

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 SAP BPC 10 Controls Monitor – Executing
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Controls
Dismissing Controls

There are cases were blocking controls need to be passed, although the data is failing

For example, when there are some last minute corrections and the figures
need to be published, although all the controls are not passed. For this exceptional case, there is
the possibility to force a control to pass by dismissing it.

A blocking control that has failed can be forced to pass, by highlighting the control
and clicking the Dismiss block button.

The control then receives the status Dismissed.

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Rules: Controls
Summary

You should now be able to:

•Navigate the Controls monitor functions and features
•Execute Controls
•Explain the status information displayed
•Describe linked documents

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 SAP BPC 10 Journals 1/29

The new Journal Template and

Features
Accessing the Journal Template
• The journal template is accessed via the web interface and is located in the Administration
interface within the Features section:

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 SAP BPC 10 Journals 2/29

Accessing the Journal Template (1)

A new journal template can be defined in this Administration section:

An existing journal template can be deleted in this Administration section, but only after all
journals entries using that template have been deleted as well:

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 SAP BPC 10 Journals 3/29

Accessing the Journal Template

(2)
All existing journal entries can be deleted in this Administration section:

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 SAP BPC 10 Journals 4/29

Accessing the Journal Template

(3)
Journal parameters can be configured for all journal entries associated with the
defined template:

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 SAP BPC 10 Journals 5/29

Journal Template Features

(1)
Click on the Journal Template name and a new tab opens, revealing the template configuration
options:

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 SAP BPC 10 Journals 6/29

Journal Template Features

(2)
Select journal header dimension by highlighting the desired dimension on the
Members screen (left side) and using the arrow buttons to add/remove the
dimension into the “Detail Column for Header”(right side):

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 SAP BPC 10 Journals 7/29

Journal Template Features

(3)
The journal template can define how the journal entries will be displayed.
•By checking the Balance by Entity option, the journal entries will be sub totaled and checked for
balance across each Entity the Balance by Currency works in a similar fashion).
•By checking off both “Balance by Entity” and “Balance by Currency”, all combinations of
Entity/Currency will be subtotaled and displayed.

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 SAP BPC 10 Journals 8/29

Journal Template Features

(4)
Additional header fields can be added into a journal header by selecting the Additional Headers
option.
Adding a new additional header object causes a popup to open that allows for the definition of
the new header filed which can be text or date specific:

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 SAP BPC 10 Journals 9/29

Journal Template Features

(5)
Define Reopen rules for journals on the “Reopen Rule” tab.

•The reopen rule allows you to identify specific Account(s) (and account properties), Flows, and
Interco dimension values to determine source journal entries to be reopened (Source).

•The filtering property on the account Source dimension can be selected from the dropdown list
provided.
Once reopened, the journal entries can be reposted to a new (Destination) Account, Flow,
Interco dimension entry. Sign reversal of the value upon reopening is also available.System
validates all entries when attempting to save.

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 SAP BPC 10 Journals 10/29

Journal Landing Page (1)

The journal landing page keeps track of how many journal entries have been made
using the template, if there were any additional journal header items entered, and
the availability of reopen logic for the template.

You may have only one template defined for a selected model:

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 SAP BPC 10 Journals 11/29

Journal Landing Page (2)

Journals entries can be enter via the web interface or via the EPM 10 Add in for
Excel. When entering a journal via the web interface, navigate to Consolidation
Central >Journals > New:

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 SAP BPC 10 Journals 12/29

Journal Entries (1)

Journals entries can previewed from the Journal Landing Page. Click on any journal entry and its
preview is displayed at the bottom:

PREVIEW

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 SAP BPC 10 Journals 13/29

Journal Queries:

Two methods available to allow viewing a specific set of journals:

• The context bar: allows the selection either a base member or a node (all leaves will implicitly
be used as a filter in that case), or

• Advanced query: which provides to ability to set a detailed filters on any of the
journal fields (such as posted date, status, etc…)

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 SAP BPC 10 Journals 14/29

Advanced query for Journal Entries

Advanced query: files can be +/- from the query definition, values can be included/excluded, and
journal properties can be access via the advanced query tool.

Advanced Query allows end-users to define criteria making it faster and easier to display specific
journals
All dimensions and journal options can be used as filters
Filter on text fields “Beginning with…”, “Containing…”, “In List” as well as on
Dates : “From… To…”

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 SAP BPC 10 Journals 15/29

Journal Entries (2)

Journal statuses can be viewed on the journal landing page, as well as date of posting, who
posted the document, and modified date/time:

USER

Individual Journals can be opened in separate tabs for easy viewing:

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 SAP BPC 10 Journals 16/29

Journal Entries (3)

Access to the Posting/UnPosting, Open/Re-Open, Lock/Unlock functions are all
controlled by the current status of the Journal

For example, a Saved journal:

For example a Locked journal:

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 SAP BPC 10 Journals 17/29

Journal Security

The ability to view, edit, post/unpost, reopen, lock/unlock are all controlled by
specific tasks assignments in BPC security:

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 SAP BPC 10 Journals 18/29

Journal Group Management

Journals created via multiple headers are automatically grouped together under a common
group id:

Grouped journals can be ungrouped and separated into independent journals.

Actions taken (such as Posting) on one group member will be taken on all group
members.

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 SAP BPC 10 Journals 19/29

Journal Creation (1)

Journals can be created in multiple ways:

• Single journal entry
• Using multiple headers to generate a group of individual journal entries
• Using multiple values for various dimension selections in the journal body

Single journal entry has the Multiple Headers and Multiple Value check boxes unchecked:

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 SAP BPC 10 Journals 20/29

Journal Creation (2)

Using multiple headers will generate a group of individual journal entries with common values
but different header selections:

• After checking the Multiple Headers checkbox, select the dimension that will contain the multiple
selections.

• A member selection popup box will appear, select one or several dimension members…each member
selection will create a separate, but grouped, journal entry upon saving the journal.

• In the example shown, this journal definition will create three grouped journal entries for 2010.JAN,
2010.FEB, and 2010.MAR.

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 SAP BPC 10 Journals 21/29

Journal Creation (3)

Using multiple values expands the journal entry screen based upon the dimension selected for
multiple entry:

The result is an expanded journal entry section allowing separate entries for each of the selected
dimension members:

Using multiple values will generate a group of individual journal entries with potentially different
values but the same header selection.

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 SAP BPC 10 Journals 22/29

Journal Creation – Creating Journal Entries (1)

The journal tab consists of a context menu, option selections, and a three tab
journal entry for data input.

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 SAP BPC 10 Journals 23/29

Journal Creation – Creating Journal Entries (2)

The Journal Entry sub-tab allows the user to directly input journal postings, the system
automatically provides a running summary of the accumulated values entered

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 SAP BPC 10 Journals 24/29

Journal Creation – Creating Journal Entries (3)

The Additional Properties sub-tab allows the user to enter and additional property fields defined
in the template (See the entry for “Ldate” in the example below)

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 SAP BPC 10 Journals 25/29

Journal Creation – Creating Journal Entries (4)

The Additional Properties date entry option is especially useful in the Banking industry:

DATE SELECT POPUP

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 SAP BPC 10 Journals 26/29

Journal Creation – Status

Journals can have one of the following status assignments:

• Saved - journal has been saved but journal entries have not been committed to database
• Deleted – journal has been deleted, the system retains this information to prevent any subsequent reuse
of journal ids.
• Posted - journal entries have been committed to database
• Unposted - - journal entries previously committed to database have been reversed with offsetting
postings made in the database
• Locked – journal entries have been posted and the data is locked from any additional changes. Journals
cannot be unposted or deleted with a Locked status.
• Unlocked – A locked journal can be unlocked by an administrator with the Lock/Unlock security task
assignment. Unlocking a journal sets its status to posted.

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 SAP BPC 10 Journals 27/29

Journal BAdIs (Business Add Ins)

When journal entries are being Saved or Posted, an ABAP based BAdI can be
triggered to create additional calculated records.

This journal specific BAdI allows can perform calculations on the journal entries and
can create new records which will be stored and displayed within the journal itself.
The BAdI is delivered empty but can be customized by clients.
A typical BAdI implementation will be able to leverage fields that the journal.lgf
logic does not access (additional items, date fields, etc…)

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 SAP BPC 10 Journals 28/29

Advanced Journal Balancing

Journal entries are checked dynamically, if an out of balance condition occurs the system will
color code the problem area in red highlights:

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 SAP BPC 10 Journals 29/29

Rules: Controls
Summary

You should now be able to:

•View and create Journal Templates
•View and create Journal entries
•Use advanced journal query to locate a journal
•Understand the automatic balancing features of journals
•Create and manage journal groups
•Understand journal statuses

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 Ownership Manager 1/22

What is the Ownership Manager?

The Ownership Manager (formally known as

the Dynamic Hierarchy Editor in earlier Time, and Scope. This allows multiple
versions of BPC) is a transaction data based organizational structures to be created to
representation of an organizational support dynamic ownership situations (such as
hierarchy as well as defining consolidation acquisitions, divestitures, changes
parameters. in existing positions, etc.).
The hierarchies created by OM are identified with three
keys dimensions: Category,

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 Ownership Manager 2/22

Ownership Manager - Prerequisites

The ownership manager requires an Ownership model to be defined that is of the
technical model type “ownership”
Model definition:

The Ownership model must include the following dimensions:

1.Dimension type “A” – provides information on ownership type such as PGROUP, POWN, PCON, and PCTRL

2.Dimension type “C” *

3.Dimension type “E” * *must be the same dimension as used within the Legal
4.Dimension type “T” * (Consolidation) application
5.Dimension type “I” *
6.Dimension type “G”*

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 Ownership Manager 3/22

Ownership Manager Security

Tasks
Access to the ownership manager (formally known as the Dynamic Hierarchy Editor
in earlier versions of BPC) is controlled via the following three security tasks:

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 Ownership Manager 4/22

Accessing the Ownership Manager (1)

The ownership manager (formally known as the Dynamic Hierarchy Editor in earlier versions of BPC) is
accessed via the web interface and is located on the Start Page within the Consolidation Central
node :

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 Ownership Manager 5/22

Accessing the Ownership Manager (2)

Click on the Ownership Manager access link in Consolidation Central to display the ownership
definition in the right context screen

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 Ownership Manager 6/22

Accessing the Ownership Manager (3)

The ownership definition screen includes an overview display of the ownership hierarchy, and for
each node the “Generated” and/or “Current” consolidation method, the Consolidation Rate
(formally PCON), and the Financial Interest Rate (formally POWN) rates to be employed for the
selected node :

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 Ownership Manager 7/22

Accessing the Ownership Manager (4)

However, the Ownership Manager uses terms such as “Consolidation Rate” and
“Financial Interest Rate”, the data is stored with the same data modeling as in previous
versions.
For example, Consolidation Rates are stored as PCON values and Financial Interest Rates are
stored as POWN values in the database:

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 Ownership Manager 8/22

Editing the Ownership Hierarchy (1)

Editing opens a new tab titled “Edit Ownership (selected context for Category, Time, and Group)”:

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 Ownership Manager 9/22

Editing the Ownership Hierarchy (2)

Access existing ,or create new, versions of ownership hierarchies by changing the context
selections for the Category, Time, and Group dimensions.

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 Ownership Manager 10/22

Editing the Ownership Hierarchy (3)

Add/Remove individual Entity values from the Group hierarchy

Context menu provides same functions as in tool bar:

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 Ownership Manager 11/22

Editing the Ownership Hierarchy (4)

Click on top group node to view summary of all entities entered

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 Ownership Manager 12/22

Editing the Ownership Hierarchy (5)

Double Click on “current” cells to modify settings:

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 Ownership Manager 13/22

Editing the Ownership Hierarchy (6)

Ownership hierarchies can be saved

Ownership hierarchies can be copied into

a different context:

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 Ownership Manager 14/22

Editing the Ownership Hierarchy (7)

Click on :Calculate to run internal program that determines the “generated” values for
Consolidation Rate and Financial Interests:

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 Ownership Manager 15/22

Ownership Manager – Calculation Prerequisites (1)

METHOD business rule definitions

2
1
2
3
PCTRL_SYS generated
3
by the Ownership
Copied into Calculation is
Copied into
METHOD_SYS compared to these
PCON_SYS
ranges to determine
METHOD_SYS and
PCON_SYS
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 Ownership Manager 16/22

Ownership Manager – Calculation Prerequisites (2)

Cross Ownership Data: Must be
G_NONE

PCTRL is
used to
generate
PCTRL_SYS
which is used
in BR Share
Range lookup

POWN is used
to generate
Direct Share or Group Share calculation POWN_SYS
method determines how these percentages which is used
are combined to generate PCTRL_SYS and to fill the
POWN_SYS (Direct Share method: no Generated
modification; Group Share method: Financial
multiply the rates through the hierarchy), Interest Rate

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 Ownership Manager 17/22

Ownership Manager - Prerequisites

Ownership Manager Display:

METHOD_SYS METHOD PCON_SYS PCON POWN_SYS POWN

METHOD_SYS PCON_SYS is POWN_SYS is derived

is derived from derived from the from the ultimate
the BR share BR share range ownership percentage
range lookup lookup calculation using the
selected share
method (Direct/Group)
and the POWN values
entered in the Cross
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 Ownership Manager 18/22

Ownership Manager
Putting it all together Ownership Manager

Metho
d PCON POWN
Method_s POWN_sys
ys
PCON_sys

Business Rule

PCTRL_sys

Cross Ownership Data

PCTRL
Optional step
POWN
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 Ownership Manager 19/22

Direct Share Vs. Group Share

(1)Example
Consolidation units US, DE, and IN are assigned to consolidation group World for a certain period
and category.

Parent unit US holds 60% of the shares in consolidation unit DE and controls the voting rights
60%
Consolidation unit DE holds 80% of the shares in consolidation unit IN and controls the voting
rights 80%.

In group World, the Parent unit US is the holding company of unit DE and although US does
not directly hold the unit IN, in reality US has control of IN through an “indirect” control via
unit DE

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 Ownership Manager 20/22

Direct Share Vs. Group Share

(2)Group Share
Calculation with group share, which only captures the group part of the ownership (in this case
the UPO using group share in World for unit IN is 48% (equal to “ 60%” , % of DE owned by US
multiplied by “80%” , “% of IN Owned by DE")

Group Share = 60% * 80% = 48%

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 Ownership Manager 21/22

Direct Share Vs. Group Share

(3)Direct Share
UPO with direct share in this case should be inherited based on the DIRECT %
of control between the direct parent (US) and the child unit (IN) as the ultimate parent of Group
World (US) controls the parent DE.

The UPO with direct share value, in this case for CG1,is 80% NOT 48%.
Direct Share = 80%

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 Ownership Manager 22/22

Ownership Manager
Summary

You should now be able to:

•Understand the new Ownership Manager interface
•Navigate the Ownership Manager functions and features
•Create and maintain Ownership hierarchies
•Execute Ownership calculations

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 SAP BPC Financial ConsolidationAgenda
•
• Advanced Accounting
• Introduction IRS
• BPC 10
• Business Process Flow BPC 10
• Consolidation Framework
• Consolidation Monitor
• Controls Administration
• Controls Monitor – Executing Controls
• Journals
• Ownership Manager
• Configuration: Business Rules, Methods and
Consolidation of Investments
Accounting Basics

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 Configuration: Business Rules, Methods and
Consolidation of Investments
Why consolidated statements?

Consolidated instead of separate financial statements for fair presentation.

The purpose of consolidated financial statements is ;

•To present, primarily for the benefit of the owners and creditors of the parent, the results of operations and the
financial position of a parent company and all its subsidiaries as if the consolidated group were a single economic
entity with one or more branches or divisions

•There is a presumption that consolidated financial statements are more meaningful than separate financial
statements and that they are usually necessary for a fair presentation.
•For instance, when one of the entities in the consolidated group directly or indirectly has a controlling financial
interest in the other entities”

•(FAS 160)
(IFRS 10)

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 Configuration: Business Rules, Methods and
Consolidation of Investments
Stock investments—investor Accounting and Reporting

Reporting methods

•GAAP & IFRS recognized three Methods Based on Level of Investment

1.Fair value method (FAS 115) (IFRS 13)

2. Equity method (APB 18) (IAS 28)3. Consolidated Financial Statements (ARB 51) (IFRS 10)
- Acquisition Method (FAS 114R effective 2009)
- Purchase method (FAS 141 through 2008)
- Pooling of interests method (APB 16 through 6/30/02)

Investor Ownership of the Investee’s

Shares Outstanding
Fair Value Equity Method Consolidated Financial Statements

0% 20% 50% 100%

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 Configuration: Business Rules, Methods and
Consolidation of Investments
Fair value method (FAS 115) (IFRS 13)

•Three categories of investment:

1. “Held-to-maturity” debt securities
2. “Trading” debt or equity securities
3. “Available-for-sale” debt or equity securities
•Investments that are either for re-sale (“held-to-maturity” or “trading”) or that are held (“available-for-sale”) with
unrecognized gains in losses reported as separate equity item (under other comprehensive income) Dividends
recognized as income

•Example journal entries:

Account titles Debit Credit

Available-for-sale investment XXX XXX
Cash

Account titles Debit Credit

Cash XXX XXX
Dividend income

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 Configuration: Business Rules, Methods and
Consolidation of Investments
Equity method (APB 18) (IAS 28)

A method of accounting by which an equity investment is initially recorded at cost and subsequently adjusted to
reflect the investor's share of the net assets of the associate (investee).

•Investments where investor has ability to “significantly influence” investee (APB 18) (IAS 28)
•Investor recognizes its share of the earnings or losses of an investee in the periods for which they are reported
•Share of the earnings or losses adjusts parent investment and reports the recognized earnings or losses in
income.
•Cash dividends reduces reversed to avoid double counting

Example journal entries:

Account titles Debit Credit

Investment in Investee XXX XXX
Cash

Accounts titles Debit Credit

Cash XXX XXX
Investment in investee (for
cash dividends)
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 Configuration: Business Rules, Methods and
Consolidation of Investments
Consolidated Financial Statements (ARB 51) (IFRS 10 )

•Financial statements are combined between parent and subsidiaries in a common reporting currency (FAS 52)
•Intercompany items are eliminated to avoid double counting
•Various methods can be used to combine financial statements into one consolidated one such as:
1. “Proportional Method” (IFRS)
2. “Pooling of Interests” Account titles Debit Credit
3. “Purchase Method” Goodwill XXX XXX
4. “Acquisition Method”
Investment in
investee
•Under acquisition method, investment is eliminated against equity and the portion of equity not attributable to
parent is created in the equity section as non-controlling interest (FAS 160).
Example journal entries:

Account titles Debit Credit

Capital Stock XXX XXX

Retained Earnings XXX

Non-Controlling
(Minority) Interest

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 Configuration: Business Rules, Methods and
Consolidation of Investments
Influence, control and ownership

•APB Opinion 18 states “The equity method tends to be most appropriate if an investment enables the investor to
influence the operating or financial decisions of the investee…Influence tends to be more effective as the investor’s
percent of ownership in the voting stock of the investee increases”.
• ARB 51 was originally based on majority ownership of voting shares. After Enron FIN 46R, the basis for consolidation
was expanded to any enterprise that controls the economic risks and rewards of an investee, regardless of ownership.

Fair Value Equity Method Consolidated Financial Statement

0% ??? ??? 100%

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Which methods do we care about in SAP BPC?

US GAAP reporting methods
GAAP recognized three Methods Based on Level of Investment
1.Fair value method (FAS 115) (IFRS 13)
2. Equity method (APB 18) (IAS 28)3. Consolidated Financial Statements (ARB 51) (IFRS 10)
1. Acquisition Method (FAS 114R effective 2009)
2. Purchase method (FAS 141 through 2008)
3. Pooling of interests method (APB 16 through 6/30/02)

Handled in Handled in
General Ledger General Ledger

Fair Equity Method Consolidated Financial

Value Statements

0% 20% 50% 100%

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 Configuration: Business Rules, Methods and
Consolidation of Investments

POWN, PCON versus PCTRL

Percent ownership, percent consolidation versus percent control

• Can flexibly define consolidation on either percent control (PCTRL) or percent ownership (PCON)
• Percent consolidation (PCON) is primarily for proportional consolidations (NEW IFRS 11 Joint
Arrangement elimenates proportional consolidation)
• Exercises are based on percent ownership (PCON)

Fair Equity Method Consolidated Financial

Value Statements
0% ??? ??? 100%
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 Configuration: Business Rules, Methods and
Consolidation of Investments

Consolidation method codes

How consolidation method codes are coded to method types

Method codes are freely configurable but must be assigned to one of the
predefined method types:

1. ‘H’ for parent investors or holding entities

2. ‘G’ for subsidiaries that are to be financially consolidated with parent
3. ‘E’ for equity method investees

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 Configuration: Business Rules, Methods and
Consolidation of Investments

How to navigate there

Path to consolidation method types

Navigate to > Administration > Rules > Business Rules > Methods

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Equity method versus consolidated statements

Difference between equity method and consolidated financial statements

Equity method does not combine balance sheet and income statements with parent but rather
recognizes share of investee income

Investee
Income
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 Configuration: Business Rules, Methods and
Consolidation of Investments

Equity method business rules

Using the equity adjustment type

To reverse equity method investee financial statements a special Adjustment Type in Business
Rules is used

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 Configuration: Business Rules, Methods and
Consolidation of Investments

How to navigate there

How to navigate to business rules

Navigate to > Administration > Rules > Business Rules > Eliminations and Adjustments

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 Configuration: Business Rules, Methods and
Consolidation of Investments

How to configure business rules

Configuring the header of an equity method business rule

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Understanding intercompany eliminations

IFRS Starter Kit examples of intercompany eliminations

Eliminations are posted against an elimination clearing account for automatic adjustment rules
within their own data source

1 2 2

3 1 3

1
2
3
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 Configuration: Business Rules, Methods and
Consolidation of Investments

Understanding intercompany eliminations (1)

Three types of inter-entity eliminations

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Understanding intercompany eliminations (2)

Three types of inter-entity eliminations

Business Rule Approach Differences

Contribution model approach Eliminates trading partner
(intercompany
Automatic Adjustments dimension) pairs and also
handles
consolidation of investments
Elimination entity or “first Eliminates trading partner
common parent” combinations
US eliminations approach on a common elimination
entity
Subsidiary reconciliation For reconciliation reporting,
approach copies trading
Intercompany Bookings partner details onto each
entity for
secured reporting purposes

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Understanding IC matching
How to accelerate financial consolidation with peer-to-peer matching

• Designed to enable subsidiaries to do their own intercompany reconciliation with peers to

expedite corporate reconciliation
• Copies the trading partner side of eliminations onto the receiving entity for secured reporting
purposes
• Designed as a separate application with specific data sources to facilitate intercompany
reconciliation
• Consider a separate application for IC matching; facilitates adding additional transaction
currency dimension and having separate work status definitions

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Understanding consolidation of investments

IFRS Starter Kit example of consolidation of investment

Elimination and adjustments also handle

consolidation of investments where
investments are eliminated against equity

A different configuration of elimination

that takes
into account noncontrolling interest (FAS
160)

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Business Scenario Example for Exercise

Acquisition and equity method example scenarios

Organizational structure consisting of acquisition/purchase method (fair value and book value assumed to be
same) in Europe (German parent owning 80% of UK subsidiary) and equity method in Asia (Japanese parent
owning 30% of Australian associate)

Consolidated financial statements that take into account:

1. Europe and Asia is EUR and USD but currency S_World

translation exercise is focused on Europe in EUR (where
UK subsidiary is in GBP)
S_Europe S_AisaPac
1. Intercompany eliminations of receivables and payables
and revenue and expenses within Europe as well
DE 100% UK 80% JP 100% AU 30%

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 Configuration: Business Rules, Methods and
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Currency Translation
Cumulative translation adjustment example (1)

Financial statements of UK subsidiary is combined with German parent

•Balance sheet is translated and month-end spot
• Income statement translated at average rate
•Retained earnings translated at both historical and average rates causing the balance sheet to be out-of-
balance and necessitating an equity plug (i.e. “CTA” or “Currency Translation Adjustment”)

In the exercise, currency translation adjustment is created by one account, Retained Earnings

• Opening retained earnings balance is at an “As-Is” historical rate (group reporting currency values are
loaded into the system so the balance is not translated
• Current period retained earnings is translated at an average rate consistent with the income statement
(since current period retained earnings of associate equals the earnings or losses of that investee)
• The implied or effective rate of the “As-Is” historical rate just happens to be the same as month-end spot
rate (to simplify the exercise example)
• As a result, out-of-balance result is further isolated to current period retained earnings

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Currency Translation
Cumulative translation adjustment example (2)

CTA calculation is as follows

• Current period retained earnings of 5 is translated at an average rate of 1.5 (equaling 7.50)
instead of a closing rate of 1.25 (which would have been 6.25 to keep balance sheet in balance)
creating a CTA difference of 1.25 (7.50 – 6.25) for the equity plug

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Consolidation of investments
Example T-Accounts for a hypothetical consolidation of investments

T-accounts highlighting business rules-based investment eliminations with non-controlling interest split

Illustrative example of the flexibility of rules-based financial consolidation where goodwill is written off to
reserves

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Equity Method – First Consolidation

Cost over book value purchase of equity method company

When cost is in excess of book value purchased, the difference must be accounted for in one of
two ways:
1. Assets that are undervalued on the investee’s books must amortize fair value differences
over the remaining useful life of the asset (lest the assetlife is indefinite)

1. Goodwill remains without adjustment until the investment is disposed or impaired according
to FAS 142 (effective Dec 15, 2001 and later)
The exercise scenario illustrates the second approach under 30% ownership
1. Investment in associate of 250
2. Associate equity of 800
3. Proportionate book value of 240 (800 * 30%)
4. Cost over book value goodwill of 10 (250 – 240)
Debit Credit
Example journal entries GoodwillInvestment in investee X X

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 Configuration: Business Rules, Methods and
Consolidation of Investments

Key inputs to consolidationRates and ownership stored in separate models

Exchanged rates and Ownership Manager data are stored and referenced via separate models

Reporting model

Drivers and Rates Model

Consolidation
model

Rates Ownership

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
 Configuration: Business Rules, Methods and
Consolidation of Investments

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
 Configuration: Business Rules, Methods and
Consolidation of Investments

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
 Configuration: Business Rules, Methods and
Consolidation of Investments

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
 Configuration: Business Rules, Methods and
Consolidation of Investments

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
 Configuration: Business Rules, Methods and
Consolidation of Investments

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846
 Configuration: Business Rules, Methods and
Consolidation of Investments

2013 ZaranTech LLC. All rights reserved. Contact: Email- [email protected], Phone: 515-309-7846