Procedure for Balance Netting of Accounts 

§10 (1) of the bank accounting directive for Germany requires the following:

Daily due payables to an account holder (that are not subject to any commitments) must be offset against the daily due receivables from the same account holder […], provided it has been agreed that for the calculation of interest and charges, the account holder is to receive neither penalty nor benefit from having several accounts. Instead, the accounts are handled as if there were only one account.

In the Account Management (FS AM) system, you can meet this requirement by assigning a netting group. The system takes this into consideration accordingly for the general ledger transfer.

The netting group is a field in the account master data that you can fill as required. Before the transfer to the general ledger, the system adds up the flows and the balance carryforwards for all accounts of the same account holder with the same entry in this field. The result of this calculation (debit total or credit total) is the factor that decides whether the flow totals to be transferred are posted either to receivables accounts or payables accounts.

Even if the accounts being netted have different general ledger groups, first the overall total is calculated and then the flow total is posted for each general ledger group, either to the corresponding receivables account or to the corresponding payables account. If more than one general ledger group is involved, this could mean that for one general ledger group, credit postings are made to the receivables account or debit postings to the payables account. Across all general ledger groups, however, posting is always only to receivables or payables accounts.

This is the only way of meeting the balance sheet netting requirement, but at the same time, ensuring a differentiated statement of payables and receivables accounts according to different customer types.

To ensure correct netting, consider the following:

·        Netting can also be carried out across bank posting areas. Note that in this case, during balance sheet preparation you must select all bank posting areas involved in netting.

·        You can only net accounts that have the same currency.

·        The name of a netting group is only valid for one business partner. This means that the netting group NG1 for business partner BP_1 is not the same as the netting group NG1 for business partner BP_2.

·        Another prerequisite for correct netting is that the accounts of a netting group are assigned via the bank posting areas to the same company code in FI GL, to which the account flows are transferred.