Defining and Using Extension Ledgers

During the initial set-up of SAP S/4HANA, key settings are determined in the scoping and organizational structure phase (also known simply as the scoping phase). These include the number of standard ledgers and accounting standards for financial statements. But remember, once the scoping phase is finalized, these settings cannot be changed

At this point, the number of standard ledgers and the accounting standards are determined by selecting the relevant business scenarios:

In SAP Central Business Configuration (CBC), a new project of the ‘Implementation’ type is created, allowing the selection of the countries and regions where the company operates. This drives the different local accounting principles.

If the company operates in one single country, no further selections are required as a standard leading ledger is included by default in the Enterprise

Management Bundle and can be used to manage local accounting GAAP.

However, if more ledgers are required to manage other accounting standards, additional finance scenarios can be added.

For instance:

Scenario J58 is the default one, set to manage the local accounting standard - Ledger 0L

Additionally, the following additional scenarios can be selected manually:

• Scenario 1GA – Accounting and Financial Close – Group Ledger IFRS (1GA) – Ledger 2L

• Scenario 2VA – Accounting and Financial Close – Group Ledger US GAAP (2VA) – Ledger 3L

It is important to note:

• The default scenario (J58) can never be removed

• Once the Scoping phase has been completed, the standard ledgers cannot be removed, or additional standard ledgers added.

• It is not recommended to activate scenarios that are not immediately required, as this would trigger the execution of unnecessary closing tasks and burden system performance.

• You can change the default assignment of accounting principles to ledgers, which is recommended if you are using parallel accounting, using the Assign Accounting Principle to Ledgers and Company Codes configuration step. You must do this before the first posting is made in the system.

Journal entries automatically produced by valuation runs, such as foreign currency evaluation and currency translation, incorporate accounting principles. For the postings to be accurately allocated, the system must assign the relevant accounting principles to the relevant ledger.

By default, the system applies the local accounting principle to the leading ledger. However, it is advisable to reassign this, transferring the leading ledger to the organization's accounting principle, normally IFRS or USGAAP. This could especially aid inter-company processes. Please be aware that this only works if you don't already have transactional data in your production system.

For additional information, you can refer to:  Parallel Accounting Using Parallel Ledgers | SAP Help Portal.

Use the configuration activity Assign Accounting Principles to Ledgers and Company Codes to check or modify the assignment of accounting principles to ledgers and company codes.

Please consider the following, when reassigning accounting principles to ledgers:

• Only the accounting principles of the countries in the implementation scope, IFRS, or USGP, can be used if these scope items are activated.

• It is not possible to create your own account principles.

• The assignments of the standard ledgers will also apply to the extension ledgers.

• Only one ledger is required for local financial reporting: The local accounting principle is then assigned at the company code level.

As stated previously, extension ledgers are based on an underlying ledger. All postings made to the primary ledger are also implied for the extension ledger, eliminating the need to store data redundantly. When you pull reports from an extension ledger, you are also accessing data from the underlying ledger.

You can use extension ledgers to make manual postings differing from those in the primary ledger, often for simulation, reallocations, or tax reasons. This results in various postings across different ledgers.

To set up an extension ledger:

• Navigate to the Define Extension Ledger configuration activity in your configuration environment.

• In Edit mode, add a new entry to select the ledger code and description name, as well as the ledger type and the underlying ledger.

• You will then have to define the authorized document types and their associated number ranges for each extension ledger.

Once the extension ledger is set up, you must specify the Ledger group representing the extension ledger in the header of each journal entry.

Remember, when querying an extension ledger, it automatically retrieves the postings made to its underlying ledger as well. This will be important to know when retrieving and analyzing accounting bookings posted to an extension ledger.