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Support for IFRS in SAP Business One Locate this document in the navigation structure

 

SAP Business One includes a number of enhanced features that support companies in the preparation of financial statements according to International Financial Reporting Standards (IFRS) in addition to their group reporting and also any other GAAP reporting needs.

Accurate reporting in SAP Business One depends not only on functionality, but also on correct setup and handling. Additionally, SAP Business One localizations vary according to different local GAAP requirements. Therefore we strongly recommend that you consult with your SAP partner and your company accountant when identifying what your IFRS requirements are, how to implement them, and which authorizations to define for them. You are responsible for carrying out all the appropriate operations and providing the appropriate documentation to ensure the accuracy and completeness of your financial reports.

Note Note

Both SAP Business One IFRS-related capabilities and the IFRS are subject to future change.

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Preparing for Financial Reporting According to IFRS

Before you start adjusting your SAP Business One application for the purpose of preparing financial statements according to IFRS, we strongly recommend that you follow the steps below:

  1. Analyze the differences between the local GAAP and IFRS. The most common differences are:

    • Valuation and depreciation of fixed assets

    • Foreign currency valuation

    • Provisions

    • Inventory valuation

    • Revenue and cost recognition

  2. Identify which differences are relevant for your company.

  3. Minimize the number and extent of the differences as much as possible (for example, by adjusting the internal accounting policy).

  4. Prepare the internal accounting policy to support the preparation of financial statements according to IFRS.

Basic Concepts of the IFRS Setup

You have the following options regarding how IFRS is implemented and used at your company:

  • Parallel postings to specifically created G/L accounts

  • Using reference fields and user-defined fields to mark journal entries and then setting filters accordingly in the reports’ selection criteria

  • A combination of these two methods

The following figure shows you the recommended accounts setup for the two different types of reporting:

This graphic is explained in the accompanying text.

Recommended Accounts Setup

Parallel Accounting Systems

Business transactions can have different meanings and/or valuation for local GAAP and for IFRS purposes. You can create different types of G/L accounts in the chart of accounts to support both local GAAP and IFRS-related postings. If your company needs to report according to both the local GAAP and to IFRS, the chart of accounts can include three types of G/L accounts:

  • Local G/L accounts – for local GAAP purposes only

  • IFRS G/L accounts – for IFRS purposes only

  • Common G/L accounts – for both local GAAP and for IFRS purposes

Recommendation Recommendation

Use different G/L account codes and/or names to indicate the type of G/L account.

Example
  • 41100 – Sales Revenue – Domestic

  • IFRS – 41110 – Sales Revenue – Domestic

  • Local – 41120 – Sales Revenue – Domestic

End of the recommendation.

Note Note

You cannot change an account code once the account already has postings. However, you can change existing account names.

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Note Note

SAP Business One allows a maximum length of 15 characters for G/L account codes and of 100 characters for G/L account names.

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Possible Scenarios

SAP Business One allows you to cover the following scenarios in your accounting system:

  • A transaction has the same impact for the local GAAP and for the IFRS rules. The transaction is posted to the common G/L accounts; for example, a purchasing invoice for services.

  • A transaction has different valuations for the local GAAP and for IFRS. It is posted in parallel to both local and IFRS G/L accounts; for example, pension liabilities or depreciation of fixed assets.

  • A transaction is required only by local GAAP rules. It is posted to local G/L accounts only; for example, a specific provision.

  • A transaction is required only by IFRS rules. It is posted to IFRS G/L accounts only; for example, financial leasing.

  • A transaction is required only by local GAAP rules or only by IFRS rules. It is posted to the common accounts. When the GAAP and IFRS reports are created, you filter the relevant postings based on selection criteria for reference fields and user-defined fields. For example, 3 of 10 postings to a common account are not relevant for IFRS, so you exclude them from the IFRS report based on selection criteria filters.

The following figure shows account postings for the first four of these scenarios:

This graphic is explained in the accompanying text.

Examples of Postings to Common Accounts, Local GAAP Accounts, and IFRS Accounts

Manual Postings

You adopt one of the following approaches for manual parallel postings to local GAAP accounts and to IFRS accounts:

  • Posting only local transactions and marking them as local. At the end of the financial year, filtering the transactions and manually creating relevant postings for IFRS purposes, transaction by transaction.

  • Posting only local transactions, and marking them as local. At the end of the year, filtering the transactions and manually creating relevant postings for IFRS as aggregate transactions.

Note Note

When you are setting up IFRS, make sure to discuss with your partner and your company accountant which IFRS postings will be made manually and which IFRS postings, if any, can be made automatically. The standard case is that the majority of IFRS postings are done manually.

As an alternative to the manual posting scenarios (see above), you can manually create documents twice, once for local GAAP and once for IFRS. In this case, a second numbering series is required for each affected document type. Automatic parallel posting to the accounts is done by specifying the account in the invoice.

End of the note.