Managing Fund Accounting for SAP Treasury and Risk Management

Modified Accrual:

• Long-term debt issued is shown as "Other Financing Sources", with premium or discount reported as current financial resources.
• Long-term debt principal repayment is reported as a debt service expense when paid.

Full Accrual:

• Long-term liabilities are included on the statement of net position (balance sheet), with premium or discount on long-term debt deferred and amortized over the life of the debt issuance.
• Payments of long-term liabilities reduce the balances reported on the balance sheet.

In SAP Treasury and Risk Management, a securities transaction (transaction TS01) is created to define the lifecycle of a debt. Based on this initial transaction, subsequent postings to accounting can be created. The lifecycle includes, for example, initial debt issuance, interest calculations, and accruals and amortization. Subsequently, the 'post flows' transaction (TBB1) posts to G/L.

Account assignments, such as Fund, Grant, Profit Center, Cost Center, WBS, and Functional Area, are typically required fields in the securities transaction (based on the configuration of differentiation criteria). It is possible to enter the account assignments manually or derive them from the associated cost object, such as cost center or WBS element.

It is also possible to split a securities transaction in different funds and other account assignments.

All subsequent postings in treasury use account assignments from this securities transaction.

In SAP Treasury and Risk Management, valuation areas are defined and mapped to accounting principles (GASB modified accrual and full accrual accounting or in some cases US GAAP).

The valuation areas and mapping to respective accounting principles are delivered by SAP and the selection of the accounting principle is done during the scoping phase. To understand the options of how the accounting principle(s) can be mapped to ledgers, refer to the lesson on modified and full accrual accounting principles in unit 1.

Additional G/L accounts are provided for postings that are specific to modified accrual. Full accrual follows the standard GAAP accounting principle posting and the accounts are not listed here.

While most of the postings are initiated by SAP Treasury and Risk Management transactions, some manual ledger specific FI postings (transaction FB50L) have to be recorded after the initial debt issuance and repayment. This can also be used to move the funds from funds such as Debt Service Funds to Capital Project Funds and similar.

Here is an example of how SAP Treasury and Risk Management configuration has been setup for specific G/L account postings in valuation area for modified accrual (USM). This is done with the configuration activity Define Account Determination for SAP Treasury and Risk Management. Refer to the Treasury training material for more information on how to configure the account determination.

The following configuration shows that accounts can be maintained independent of the valuation area (valuation areas blank), but different accounts can be used specifically for a valuation area (valuation area USM for modified accrual).

Transfers are accounting transactions between funds, which are neither revenues nor expenditures. Therefore, transfers are in essence a movement of fund balance from one fund to another. Transfers have a similar effect as revenues (transfers in) or expenses (transfers out), but from an institutional perspective, transfers do not represent "real" revenues or expenses, and must net to zero.

The following chart shows the transaction and full and modified accrual accounting entries for Debt Issuance:

Subsequently, Dept Repayment also has specific accounting entries for full and modified accrual.

The Treasury Posting Journal app shows a list of the accounting documents that have been created for the various updates that can occur and for each valuation area.

In the example in the figure, Posting Journal Modified Accrual (USM) and Full Accrual (USF) valuation areas, we use valuation area for modified accrual (USM) and full accrual (USF). Different accounts can be used for posting in these two areas as show in the example provided for bond issuance.

The debt in this example is also split into two funds, which is a common practice for US. In a modified accrual environment (Valuation Area USM - in the current configuration assigned to ledger 0L), the debt related to bond issuance is used to finance, for example, capital projects and is made to 'Technical Clearing Account (TRM) - long-term debt (PSM). This differs from full accrual (Valuation Area USF - assigned to ledger 2L), where we post to 'Bond Payable Long Term' posting.

The ledger assignment to 0L and 2L is one possible option and based on the ledger to accounting principle assignment explained in the beginning of this course.