ASUG Northern California

Preparation for Consolidations in SAP ECC to meet your EPM integration needs
Ross Wilson Sr. Director, SAP Business Processes McKesson Pharmaceutical and Vish Arunachalam VP, EPM Perceptive Technologies November 4, 2010

[ CHAVONE JACOBS

ASUG INSTALLATION MEMBER MEMBER SINCE: 2003

[ ALLAN FISHER

[ COREY PEARSON

ASUG INSTALLATION MEMBER MEMBER SINCE: 2008

ASUG INSTALLATION MEMBER MEMBER SINCE: 2008

[ Todays speakers
Ross Wilson
Sr. Director, SAP Business Processes

Vish Arunachalam
VP, EPM

McKesson Pharmaceutical Ross.Wilson@mckesson.com www.mckesson.com

Perceptive Technologies vish@perceptinc.com www.perceptinc.com

AdvantageFinance

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[ Contents
Who should attend this session? SAP Components & Application Integration Chart of Accounts Parallel GAAP and Ledgers Integrated Master Data Intercompany transactions and Intercompany Reconciliation Functional Area and Transaction Types Currencies Fixed Assets

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[ Who should attend this session?

Existing SAP customers embarking on an SAP New GL implementation including IFRS or SEC reporting requirements Customers who are/would be implementing SAP consolidations for the first time

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[ SAP Components & Application Integration

EPM Legal and Managerial Consolidations (E.g. BPC NW, BO-FC, BCS)
BW- Data storage, Infoproviders, Meta Data and Master Data
ECC - ERP FI-CO, PS, MM, AA
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Planning, Analysis and Reporting

NonSAP Data

[ Chart of Accounts
Consider mapping Group Chart of Accounts (GCoA) to Operational Chart of Accounts in ECC Ensures accuracy by mapping at source in ECC Use condensed form of the ECC operating chart of accounts Ensure optimal utilization of sub-ledger and minimize number of GL accounts required Keep in mind level of detail required in Consolidation Very large group chart of accounts affect EPM performance and are cumbersome to maintain Design Group Chart of Accounts in ECC similar to Consolidation Chart of accounts in EPM system Consider synchronizing ECC-GCoA with EPM-CoA via BW Need alternate chart of accounts for local GAAP? Be aware, the Consolidation system manages retained earnings and net income for the year as independent value items as opposed to balance amounts as in the FI System, where no postable corresponding accounts are represented
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[ Parallel GAAP in ECC

Source: SAP AG
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[ Ledgers
Check dimensions required for Consolidation (Legal and Management)
What views of data do you need supported at the underlying ledger? Consider system performance implications with adding dimensions?

New GL enables:
Multiple ledgers in parallel: During posting, you can have data posted to all ledgers, to a specified selection of ledgers or to a single ledger Document Splitting: Real-time document splitting functionality that makes Balance Sheets and P&Ls readily available at lower levels of reporting Coding block enhancements: Customer defined fields can be added to the general ledger tables giving customers more flexibility

Use parallel ledgers for multi-GAAP requirements

Supports different fiscal years Supports multiple currencies Same user interface and reporting across all ledgers Closing activities can be handled separately by ledger

Lead Ledger for IFRS or US GAAP? Use other ledgers for local GAAP requirements Activate required ledgers on day one, becomes really complicated post-go-live

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[ IFRS Implications
IFRS = International Financial Reporting Standards
IFRS is the framework from International Accounting Standard Board

Most of the world has adopted IFRS or is in process of or planning to convert from their local GAAP to IFRS IFRS has the potential to change business requirements that can alter how business processes and reporting need to be executed in multiple ways:
More detail is appropriate (e.g. asset componentization) Different values are appropriate (e.g. impairments to assets on the balance sheet) Different timing of a transaction is appropriate (e.g. the treatment of revenue recognition under certain scenarios)

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[ Potential areas where IFRS and US GAAP differ

significantly
Debt/equity classification Hedging qualification Employee stock compensation LIFO Tax consequences of these differences Income tax accounting Allocations Consolidation Revenue recognition R&D capitalization Impairments Securitizations/ asset de-recognition Provisions

US GAAP

IFRS

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[ Parallel GAAP and IFRS solutions

IFRS Considerations for ECC layer
Parallel Ledger functionality enables segment reporting & alternate fiscal year variants PP&E (IAS 16): Avail of multiple depreciation areas in ECC Functional Currency (IAS 21): Consider additional currency definition in new GL IAS 1R,7,24 Financial Statement Preparation Changes in composition and classification of financial statement Classification needed such as operating, investing and financing Additional disclosure required need changes to chart of accounts Operating Segment (IAS 14 Segment Reporting/ IAS8): Segment functionality in New GL SAPs recommended functionality to support segment reporting Provides standard reporting option for P&L & B/S via doc. splitting Lack of flexibility for changes in assignment of profit centers Segment functionality may be better addressed using profit center groups functionality

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[ Parallel GAAP and IFRS solutions

IFRS Considerations at Consolidation layer
Starter kit for SAP EPM Predefined IFRS consolidation and other business rules (e.g. full goodwill) Predefined Chart of Accounts per IFRS Publishable financial statements as required by IFRS (IAS 27 and IAS 1) Presentation changes could have a significant impact on existing reporting and level of detail, additional schedules, sub schedules, disclosures, notes to accounts etc. Preconfigured business process flows that would enable the financial group closing and reporting with IFRS Audit trails for top side adjustments and parallel GAAP reporting The starter kit can be leveraged to accelerate implementation of IFRS solution but requires additional effort to customize to suit specific business requirements Stay abreast of emerging IFRS reporting and disclosure norms SAPs XBRL Publishing solution supports IFRS compliance

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[ IFRS For Existing SAP customers

What can you be doing now to prepare?
Extensive review of existing chart of accounts (especially if youre using account based approach and tend to move to parallel ledger) Clean up company codes if using parallel co. codes or FI-SL or ECC based consolidation If youre using FI-SL for local GAAP, identify local postings that may need to migrate to a new parallel ledger Optimize Open-item managed accounts Reduce and clear high volume open-item managed accounts Reduce no. of open item managed accounts Review potential changes to Management Entity hierarchy to address consistency and close outdated entities Ability to handle potential changes

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[ Integrated Master Data EPM

ECC BW
Based on business requirements and application design Master Data can be maintained in ERP, BW and EPM Standard processes are available for
sending master data from ECC to BW Consider use of standard delivered synchronization programs between EPM and BW layers when available Import Master Data and Hierarchies from SAP BW InfoObject into EPM application In some cases, customer may need to send data directly from ECC to EPM. E.g. BPC MS version with ECC

Sharing characteristics between ECC, BW, and EPM can significantly enhance integration in terms of understanding, alignment, interoperability in reporting

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[ Company Code, Trading Partner & Company

Company code is the legal structure from which auditable financial statements are generated Maximize Inter-Company (IC) capabilities by enforcing that trading partner data is on every IC record at source in ECC Identify mapping of Company Code to Company in ECC Normally a 1:1 relationship for legal entities Be aware that Company is required for use of trading partner functionality Consider validations for manual Intercompany GL accounts (e.g. for two step I/C transactions) to ensure capture of trading partner Identify partner mapping for managerial entity (E.g. Profit center, Segment)

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[ Intercompany transactions
Have you identified which GL accounts are intercompany accounts? Do you have non-SAP entities for consolidation? Ensure document currency is uniform in IC transactions Clearing accounts and confirmation for IC transactions Consider centralized responsibility for accounting IC transactions Trading partner for non-SAP entity feed BW consideration Identify intercompany document types and activate IC postings and Trading partner options in ECC

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[ Intercompany Reconciliation

Select

Assign

Reconcile

Consider utilizing standard ICR functionality for

GL open items Non open item managed accounts Customer/ Vendor open items Ensures that intercompany documents from accounting transactions within the corporate group correspond to one another Helps maintain constant control and can be run at any time Documents are reconciled in the transaction currency Reduces close time as users will be able to reconcile IC transactions during the month instead of waiting till period end
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[ Functional Area
Functional area is a structure used to classify operational expenses by function such as Administration, Sales and Distribution, Marketing and Production Facilitates preparation of cost-of-sales based financial statements Ensure functional area feature is adequately utilized Functional area can be defined in the GL Master (Chart of Accounts level), Cost Element or CO cost object

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[ Transaction types
Consider utilizing transaction type feature available in ECC
Enables comparison of balance sheet movements and corresponding P&L activities (e.g. opening balance, acquisitions, retirements, transfers and closing balance) Facilitates creation of a cash flow statement as well as consolidated fixed asset reporting

Degree of manual processing for creating cash flow statement varies, depends on cash flow statement design Transaction types for cash flow reporting are different from Fixed Asset transaction types

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[ Currencies
Enable required currencies for ledger on day one, becomes really complicated post-go-live (i.e. may require SLO*) Group Currency is the basis for Consolidation reporting Evaluate FASB 52 compliance related features available in ECC Evaluate currency translation feature available in ECC compared to SAP EPM tool Will parallel group currency be used for consolidation? Identify exchange rate types for consolidation Where will currency translation be done?

*System Landscape Optimization is a service offered by SAP

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[ Fixed Assets
Check whether multiple GAAP reporting is required Design Depreciation Areas to handle multiple GAAP requirements Determine where Depreciation Area 01 is mapped to (Local vs. US GAAP/IFRS book) Avail transfer variants and cross system depreciation area functionality for intercompany transactions

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[ Key take aways

SAP offers many standard features at local ledger level and also in the consolidation layer that you should consider before implementation Utilize integrated master data and minimize data transformation in the process of sending data from ECC to EPM layer for consolidation, makes reporting and reconciliation easier Start assessing now about the change to IFRS and its potential effects on your accounting and financial reporting, business systems and processes, and people Whatever approach is taken, the financial consolidation process will be impacted Quick and easy fixes for IFRS and XBRL available in market, but those may represent a compliance risk An effective requirements gathering and planning process can reduce uncertainty and operational risk around IFRS

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[ Learn moretodays speakers can be reached at

Ross Wilson
Sr. Director, SAP Business Processes

Vish Arunachalam
VP, EPM

McKesson Pharmaceutical Ross.Wilson@mckesson.com www.mckesson.com

Perceptive Technologies vish@perceptinc.com www.perceptinc.com

AdvantageFinance

Real Experience. Real Advantage.

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[ AdvantageFinance
Perceptives AdvantageFinance offers a broad portfolio of EPM services to help clients achieve effective governance, manage risk and ensure compliance with evolving regulatory requirements AdvantageFinance helps maximize the value of your solutions in these areas: EPM Evaluation EPM Implementation EPM Migration Services EPM Financial Transformation Services

Visit www.perceptinc.com/adfin
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Thank you for participating.

Please remember to complete and return your evaluation form following this session

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