Outlining Modified and Full Accrual Accounting Principles

The Governmental Accounting Standards Board (GASB) sets standards that follow generally accepted accounting principles (GAAP) for US state and local governments, public colleges, and universities. These public sector organizations follow accounting policies that conform to GAAP as prescribed by the GASB, in the Codification of Governmental Accounting and Financial Reporting Standards.

In governmental organizations, government-wide financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. In contrast, governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting.

Parallel accounting in SAP S/4HANA Cloud helps you fulfill financial standards and reporting requirements when you are required to account and report on multiple bases (for example modified and full accrual basis).

To use parallel accounting in your system, you need parallel ledgers. Recording business transactions in parallel ledgers allows you to create financial reports according to different accounting bases, for example, full accrual basis of accounting or modified accrual basis of accounting.​

You can use parallel accounting by running parallel ledgers for different accounting bases. Then, depending on the type of posting, you can post data to one ledger at a time or both ledgers at once.

SAP S/4HANA Cloud, public sector supports up to two financial accounting ledgers for parallel accounting: a leading ledger and a nonleading ledger. The leading ledger is used to manage the data required according to the primary accounting principles, while the nonleading ledger is used for the data required for financial statements for additional accounting standards.

Organizations that must follow a single accounting basis (for example, GASB full accrual basis or US GAAP accrual accounting) have options to set the leading ledger and accounting principles according to requirements.

Any update to commitment, actuals, and reporting for the purposes of comparing the budget and actuals is triggered from the leading ledger.

Use this configuration activity to check the assignment of accounting principles to ledgers and company code or to change default assignments within given options.

You can only assign the following accounting principles:

• UGSF for US GASB Full Accrual (economic resources measurement focus)
• UGSM for US GASB Modified Accrual (current financial resources measurement focus)
• USGP (US GAAP Accrual Accounting) for organizations that do not need to conform to GASB

Default assignments can be changed if no postings have been made in any company code in general ledger accounting. If a posting has been made in any system in your system landscape, the default assignments cannot be changed.

Assign Accounting Principle UGSM (US GASB Modified Accrual Accounting Principle) to ledger '0L'.

Assign Accounting Principle UGSF (US GASB Full Accrual Accounting Principle) to ledger '2L'.

For governmental organizations that must account for and report multiple bases (for example modified and full accrual), parallel accounting has to be set up. By default, SAP S/4HANA Cloud, public sector is assigned with modified accrual accounting for the leading ledger and full accrual accounting for the nonleading ledger. You have the option to change these assignments to accommodate your accounting standards and reporting requirements.

Parallel accounting in SAP S/4HANA Cloud helps you fulfill financial closing and management reporting requirements when you have to account and report based on different accounting bases.

To use parallel accounting in your system, you need parallel ledgers. Recording business transactions in parallel ledgers allows you to create financial reports according to different accounting bases, for example, according to both modified accounting principles and full accrual basis.

The following options and combinations of ledger and accounting principles are available for financial or fund accounting in SAP S/4HANA Cloud, public sector.

For example, if an organization's accounting principle is to only comply to GASB full accrual accounting, but their budgeting is on modified accrual basis, you do not need two ledger options. This is because you can set up the rules for determination of budget account and budget consumption according to your budgeting requirements.

The figure, Architecture Chart, illustrates the default options. Other options are available.

Extension ledgers are delivered based on an underlying ledger. The postings to the underlying ledger also apply for the extension ledger, without a need for redundant data storage. Reports for an extension ledger also access the data of the underlying ledger.

Extension ledger 0E is delivered for commitment accounting purposes and is always reported along with the leading ledger.

The features of parallel accounting are used in the following application components:

• General ledger accounting
• Overhead accounting

Valuation rules and features are delivered in the following application components for US full accrual, modified accrual, and GAAP accounting principles:

• SAP Contract and Lease Management
• SAP Treasury and Risk Management
• Fixed Assets

Additional information is provided in the sections on these topics.

In general ledger accounting, parallel accounting is supported in the following areas:

• Reclassification and sorting of receivables and payables
• Value adjustments
• Foreign currency valuation
• Accruals
• Advanced foreign currency valuation
• Post credit-risk-based impairment

In the case of manual G/L postings, you enter the ledger group. This posting is then only updated in the ledgers that belong to this ledger group.

Postings for which no ledger or ledger group is specified are always updated in all ledgers.

Allocations are used to move costs from one cost center to another. You can define and run allocations per ledger or for multiple ledgers.

Other overhead accounting applications and jobs, such as overhead calculation and settlements, can be run per ledger or for multiple ledgers.

Many of the corresponding reporting applications, such as trial balance and financial statement, can be run by respective ledgers.