Discounting is the process of determining the present value of a payment that is to be received in the future, used for long-term receivables or payables in accordance with a contract. You use discounting of long-term assets and liabilities for the scenario of treating long-term receivables as a loan. This is the first job to be run in the sequence of the advanced valuation process.
To be compliant with the IFRS regulation, when determining the transaction price, an entity shall adjust the promised amount taking into consideration the time value of money, if the transaction contains a considerable financing component. This is the case when the timing of the payment agreed by the parties provides the customer with a significant benefit of financing the transfer of goods or services to the customer.
In this case, a discount rate shall be applied to the amount due in the future to calculate the net present value as if this were a separate financing transaction. The effects of financing (interest revenues) also need to be shown separately in the financial statements.
You use the Post Discounting for Long-Term Assets and Liabilities job to calculate the net present value of long term assets and liabilities, post the initial discount and interest revenue and perform the monthly discount unwinding with the respective postings in the General Ledger.
Capabilities
- Calculate and automatically post net present value, initial discount and interest income.
- Post automatically periodic adjustments of discount (unwinding the discount) and interest income.
- Use different discounting rules based on aging increments and interest rates.
- Leverage reporting capabilities based on the usage of semantic tags.
S/4 HANA´s Discounting of Long-Term Assets and Liabilities covers contracts that include a single financing component. For revenue contracts with more than one significant financing component, use the revenue recognition applications. For discounting of lease contracts, use SAP Contract and Lease Management.
The business partner is updated with a Risk Class, which is helpful in determining the rate of interest. It is not applicable for suppliers/accounts payable. The interest indicator that you want to use exclusively for discounting has the type D.
The job is available in the Schedule General Ledger Jobs app. by choosing the Post Discounting of Long-Term Assets and Liabilities template.