Performing Shareholding Management (5WF)

A shareholding represents a share in the equity capital of a company. In addition to other rights, the investors usually also receive a right of entitlement to profits, assets and liquidation proceeds.

The Shareholding Management process consists mainly of the shareholding purchase, the activities during the term and finally the sale of the investment.

According to the accounting policy of a company and depending on the accounting principle a defined valuation method is applied to the shareholding investment.

There will be further insight into the topic of the valuation areas and valuation classes, position management procedures and update types to facilitate the accounting of the underlying shareholdings.

Before actually investing in securities (for the first time) some prerequisites must be fulfilled. The steps would include:

• Creating the class data for your securities
• Creating an asset securities account
• Specifying the position indicator

One of the prerequisites to be maintained for the shareholding management is the company relationship in the Business Partner data.

Select the app Maintain Business Partner and pick the Business Partner involved. Maintain the role TR0150 - Issuer for this Business Partner.

Navigate to the Company Code data and look up the tab Reporting Data in Company Code.

Here the Comp. Relation should be set to Shareholding.

The security class data includes all the structure characteristics of a security. Make use of the app Manage Securities Classes to portray stocks using the product type 16A Shareholdings delivered with the system.

Before you can process a securities financial transaction in transaction management, you must first enter the following master data:

• Business partner data (issuer, counterparty)
• Class Data
• Securities account data / futures account data
• Position indicator

When you create an order to buy or sell a security or to issue a bond, the system copies the securities class data needed. You add the specific transaction data (such as the amount or price of a stock purchased) to this data.

The system uses the details of the class conditions and specific transaction details (such as the nominal value and price) to calculate the cash flow of the transaction.

For shareholdings proceed to the Basic Data tab. Enter the shareholding type (affiliate, associate, joint-venture, subsidiary) and the shareholding structure (holding structure, indirect holding).

If you want to purchase or sell a security or issue a bond, you must have a securities account. The securities account usually corresponds to actual securities accounts at a bank.

The security account also acts as a differentiation criterion for security positions and can be created with the app Manage Securities Accounts.

Make settings for the Depository Bank, the Securities Account Number and enter the payment instructions (for the different currencies).

Use the app Manage Position Indicator to display and change the position indicator of a subledger position.

Define or check the Position Management Procedure of the position indicator.

After the prerequisites are fulfilled the purchase transaction for investment in stocks can be recorded.

Create the securities transaction by opening the Create Securities Transaction app on the SAP Fiori Launchpad.

Enter the company code, security class ID number, transaction type, and the business partner. For the stock investment pick the product type 16A and the transaction type 100 (Purchase).

Fill the information about the position, amounts (e.g. number of units and the price) and the trading data on the structure tab.

This example should showcase the Equity Method through IAS 28. Accordingly the General Valuation Class is set to 61 - Equity Method.

Differentiation terms are used to determine how the positions are created. Some differentiation terms are defined by the system for each product group, and others can be selected additionally. The differentiation SEC. ACCOUNT is defined and assigned for all company codes and valuation areas that don't have a specific differentiation assignment. For Securities the following is predefined:

• Valuation area
• Special valuation class
• Accounting code
• Security class ID number
• Securities account

In addition to that you can define and assign your own differentiation in the Define and Assign Differentiation configuration activity. This enables you to use account assignments of other areas, such as Cost Center, Profit Center, WBS Element, and Functional Area, to differentiate treasury positions in Treasury and Risk Management. When the flows are posted to Financial Accounting, the account assignment values for a treasury position are also transferred to Financial Accounting.

With the app Process Security Transactions - Collective Processing you can display and process several securities transactions at once.

The collective processing app enables you to process your security transactions. Besides functions that allow you to select and display transactions, you can also go to the individual screens for processing the financial transactions.

When you settle a transaction, you check the security transaction and add any missing data. When you save the transaction, the transaction flows are assigned the status Flagged for Posting.

After the transaction has been settled the treasury flows, per valuation area, can be posted to the Financial Accounting General Ledger Accounts. The task is performed with the app Post Flows.

Filter flows that are relevant for posting, with parameters such as company code, transaction, product type, and so on.

Post the flows that you select with the following options:

• With the Pay Only option, you can start the payment process.
• With the Post Operational Only option, you can fix and post flows for the paying valuation area and start the payment process, if necessary.
• With the Post All Valuation Areas option, you can fix and post flows for all valuation area.

For the Equity Method in IFRS valuation area 002 the G/L account 12044100 - Investment in Associate or Joint Venture is debited, and the Other Considerations Clearing Account is credited through the Post Flows transaction.

During the term of the shareholding investment there are several actions needed which are explained in more detail below.

For the month-end closing the securities are being valuated. For the equity method in IFRS the e.g. increase in the equity is directly posted in the app Manual Posting on the Fiori Launchpad.

New update types for the shareholding management are available in the SAP S/4HANA Cloud system to cover for these processes. The update type SAM9012 - Equity Method: Income increase (VA 002) can be used to perform the manual posting.

The derived posting from the update type SAM9012 debits the investment account and credits the gain from equity method general ledger account in Financial Accounting.

In order to post the Cash Dividend for the shareholding investment use the app Manual Posting. After entering the Securities Class ID and Securities Account provide the date details for the flows.

Use update type SAM8132 - Cash Dividend: Reduce equity method investment (VA002) for the IFRS valuation area to post the according amounts for your shareholding.

The manual posting of the cash dividend for the IFRS valuation area is done as a reduction of equity. Therefore, the posting involves the Treasury Technical Clearing Account and the actual investment account on the credit side.

After the cash dividend has been recorded on the shareholding investment the incoming payment must be reflected in Financial Accounting.

The app Create Manual Posting is available to facilitate this process step. Yet another update type is used to portray the incoming dividend cash payment. Applicable to all valuation areas the update type in doubt is SAM8110 - Cash Dividend: Receive Payment (All VAs).

The posting clears the Treasury Technical Clearing Account and posts the incoming funds on the bank account.

With this feature, you can transfer your securities positions at their book values from one securities account to another using the Execute Securities Account Transfer app. The securities account transfer can affect the general ledger as well as the subledger since, by changing the securities account for a position (= change in the subledger accounting), you can change both the valuation class and the account assignment reference if the target securities account has a different account assignment reference in the position indicator to that of the source securities account (= changes in the general ledger accounts).

You can reverse the securities account transfer using the Reverse Securities Account Transfer app.

The securities account transfer takes the transfer amount at book value from the source securities account and posts it to the target securities account. The system generates the associated flows depending on the position management procedure.

You can display the quantities of the security ID number in the source and target securities account before the securities account transfer.

You can display the source and target securities account cash flows including the securities account transfer.

Note

There cannot be any fixed, condition-based transactions (such as repayment) after the key date of the securities account transfer for the positions involved.

With this feature, you can transfer the units/nominals of a treasury position to another position with different account assignments (such as cost center, WBS element, functional area, profit center). In this internal transfer, the position component values are transferred proportionally according to the transfer category of the target position management procedure.

If you have activated Public Sector Management and use the fund and grant account assignments as differentiation criteria for your treasury positions, the account assignment transfer can also be used to transfer a treasury position from one fund to another or from one grant to another.

To complete the lifecycle the final step in the stocks process is the sale of the securities.

Create the sale transaction for the securities using transaction type 200 (Shareholding - Sale) in Create Securities Transaction app.

Settle and post the transaction. Payment-relevant flows, such as costs, are paid according to your payment process.

This version of the Shareholding Management document is designed around the German GAAP principles for strictly lower-case valuation on security investments.

To apply the lower-case principle the equity method is used. In the month-end closing a security price is entered where upon this the valuation of the investment is performed.

Valuation is performed without reset. Cash dividends are recorded via manual postings for the shareholding investment.

Before actually investing in securities (for the first time) some prerequisites must be fulfilled. The steps would include:

• Creating the class data for your securities
• Creating an asset securities account
• Specifying the position indicator

One of the prerequisites to be maintained for the shareholding management is the company relationship in the Business Partner data.

Select the app Maintain Business Partner and pick the Business Partner involved. Maintain the role TR0150 - Issuer for this Business Partner.

Navigate to the Company Code data and look up the tab Reporting Data in Company Code.

Here the Comp. Relation should be set to Shareholding.

The security class data includes all the structure characteristics of a security. Make use of the app Manage Securities Classes to portray stocks using the product type 16A Shareholdings delivered with the system.

Before you can process a securities financial transaction in transaction management, you must first enter the following master data:

• Business partner data (issuer, counterparty)
• Class Data
• Securities account data / futures account data
• Position indicator

When you create an order to buy or sell a security or to issue a bond, the system copies the securities class data needed. You add the specific transaction data (such as the amount or price of a stock purchased) to this data.

The system uses the details of the class conditions and specific transaction details (such as the nominal value and price) to calculate the cash flow of the transaction.

For shareholdings proceed to the Basic Data tab. Enter the shareholding type (affiliate, associate, joint-venture, subsidiary) and the shareholding structure (holding structure, indirect holding).

If you want to purchase or sell a security or issue a bond, you must have a securities account. The securities account usually corresponds to actual securities accounts at a bank.

The security account also acts as a differentiation criterion for security positions and can be created with the app Manage Securities Accounts.

Make settings for the Depository Bank, the Securities Account Number and enter the payment instructions (for the different currencies).

Use the app Manage Position Indicator to display and change the position indicator of a subledger position.

Define or check the Position Management Procedure of the position indicator. In the example the German local GAAP (HGB): Strictly lower of cost or fair value is maintained for the valuation area DE0.

After the prerequisites are fulfilled the purchase transaction for investment in stocks can be recorded.

Create the securities transaction by opening the Create Securities Transaction app on the SAP Fiori Launchpad.

Enter the company code, security class ID number, transaction type, and the business partner. For the stock investment pick the product type 16A and the transaction type 100 (Purchase).

Fill the information about the position, amounts (e.g. number of units and the price) and the trading data on the structure tab.

This example should showcase the Equity Method with German GAAP. Accordingly, the General Valuation Class is set to 61 - Equity Method.

Differentiation terms are used to determine how the positions are created. Some differentiation terms are defined by the system for each product group, and others can be selected additionally. The differentiation SEC. ACCOUNT is defined and assigned for all company codes and valuation areas that don't have a specific differentiation assignment. For Securities the following is predefined:

• Valuation area
• Special valuation class
• Accounting code
• Security class ID number
• Securities account

In addition to that you can define and assign your own differentiation in the Define and Assign Differentiation configuration activity. This enables you to use account assignments of other areas, such as Cost Center, Profit Center, WBS Element, and Functional Area, to differentiate treasury positions in Treasury and Risk Management. When the flows are posted to Financial Accounting, the account assignment values for a treasury position are also transferred to Financial Accounting.

With the app Process Security Transactions - Collective Processing you can display and process several securities transactions at once.

The collective processing app enables you to process your security transactions. Besides functions that allow you to select and display transactions, you can also go to the individual screens for processing the financial transactions.

When you settle a transaction, you check the security transaction and add any missing data. When you save the transaction, the transaction flows are assigned the status Flagged for Posting.

After the transaction has been settled the treasury flows, per valuation area, can be posted to the Financial Accounting General Ledger Accounts. The task is performed with the app Post Flows.

Filter flows that are relevant for posting, with parameters such as company code, transaction, product type, and so on.

Post the flows that you select with the following options:

• With the Pay Only option, you can start the payment process.
• With the Post Operational Only option, you can fix and post flows for the paying valuation area and start the payment process, if necessary.
• With the Post All Valuation Areas option, you can fix and post flows for all valuation area.

For the Equity Method in German GAAP valuation area DE0 the G/L account 12044100 - Investment in Associate or Joint Venture is debited, and the Other Considerations Clearing Account is credited through the Post Flows transaction.

During the term of the shareholding investment there are several actions needed which are explained in more detail below.

For the month-end closing the securities are being valuated. As a prerequisite for the equity method in German GAAP the security price must be maintained in the SAP S/4HANA Cloud system.

Use the app Enter Securities Prices to set the updated price at month-end (here lower than acquisition).

After the security price is set the valuation run can be started for the accounting principle German GAAP (DE0).

Use the app Run Valuation to perform this task. Set the Valuation Area DE0 and the respective fields for transaction or security class and security account.

In the lower price principle use the Mid-Year Valuation without Reset. The system is posting the difference in the valuation (in the example the market price dropped from 100€ to 99€ for the 10.000 units) to the account for loss on price adjustment and credits the investment account.

In order to post the Cash Dividend for the shareholding investment use the app Manual Posting. After entering the Securities Class ID and Securities Account provide the date details for the flows.

Use update type SAM8141 - Cash Dividend: Recognized Revenue (local VAs) for the German GAAP valuation area to post the according amounts for your shareholding.

After the cash dividend has been recorded on the shareholding investment the incoming payment must be reflected in Financial Accounting.

The app Create Manual Posting is available to facilitate this process step. Yet another update type is used to portray the incoming dividend cash payment. Applicable to all valuation areas the update type in doubt is SAM8110 - Cash Dividend: Receive Payment (All VAs).

The posting clears the Treasury Technical Clearing Account and posts the incoming funds on the bank account.

With this feature, you can transfer your securities positions at their book values from one securities account to another using the Execute Securities Account Transfer app. The securities account transfer can affect the general ledger as well as the subledger since, by changing the securities account for a position (= change in the subledger accounting), you can change both the valuation class and the account assignment reference if the target securities account has a different account assignment reference in the position indicator to that of the source securities account (= changes in the general ledger accounts).

You can reverse the securities account transfer using the Reverse Securities Account Transfer app.

The securities account transfer takes the transfer amount at book value from the source securities account and posts it to the target securities account. The system generates the associated flows depending on the position management procedure.

You can display the quantities of the security ID number in the source and target securities account before the securities account transfer.

You can display the source and target securities account cash flows including the securities account transfer.

Note

There cannot be any fixed, condition-based transactions (such as repayment) after the key date of the securities account transfer for the positions involved.

With this feature, you can transfer the units/nominals of a treasury position to another position with different account assignments (such as cost center, WBS element, functional area, profit center). In this internal transfer, the position component values are transferred proportionally according to the transfer category of the target position management procedure.

If you have activated Public Sector Management and use the fund and grant account assignments as differentiation criteria for your treasury positions, the account assignment transfer can also be used to transfer a treasury position from one fund to another or from one grant to another.

To complete the lifecycle the final step in the stocks process is the sale of the securities.

Create the sale transaction for the securities using transaction type 200 (Shareholding - Sale) in Create Securities Transaction app.

Settle and post the transaction. Payment-relevant flows, such as costs, are paid according to your payment process.