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.

In order to have GASB specific accounting principles, you will need to activate scope item 7O6_US in your system. Once you have scope item 7O6_US activate in your system:

• Leger 2L will be available with IFRS accounting principle assigned to it.
• GASB accounting principles such as UGSM (Modified Accrual) and UGSF (full accrual) are available.

Accounting principle to ledger assignments can be changed only if no postings have been made in any company code. If a posting has been made in any system in your system landscape, the assignments cannot be changed.

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 will have the following accounting principles once scope item for Accounting Principles and Fund Accounting for GASB is active: :

• 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)
• IFRS (International Financial Reporting Standards) for organizations that need to conform to IFRS

Assign Accounting Principle UGSM (US GASB Modified Accrual Accounting Principle) to ledger '0L' if you need modified accrual as your leading ledger accounting principle.

Assign Accounting Principle UGSF (US GASB Full Accrual Accounting Principle) to ledger '2L'. If you need full accrual as secondary ledger accounting principle.

For governmental organizations that must account for and report multiple bases (for example modified and full accrual), parallel accounting must be set up. Parallel accounting in SAP S/4HANA Cloud helps you fulfill financial closing and management reporting requirements when you must 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 figure, Architecture Chart, illustrates the account principle UGSM (Modified Accrual) assigned to leading ledger 0L and UGSF (Full Accrual) assigned to ledger 2l.

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.