Example: Parallel Accounting and the Derived
Depreciation Area
Use
To implement parallel accounting using ledgers, you need to create a real and a derived depreciation area in Asset Accounting. This derived depreciation area is used so that the values of the asset subsidiary ledger are correctly reflected in General Ledger Accounting. The derived depreciation area triggers adjustment postings to keep the general ledger and subsidiary ledgers in synch.
The following example settings and example postings explain the function of the derived depreciation area. The information is related to Making Settings for Parallel Ledgers in FI-AA. The menu paths are also listed there.
Starting Situation:
You want to use the accounting principle LGAP (local valuation) in the ledger group containing the leading ledger. In another ledger group, you want to use the accounting principle IFRS. You created both ledger groups. In Asset Accounting, you already assigned ledger group LGAP to the master depreciation area 01.
Prerequisites
For this example, you make the following settings in Customizing:
· For parallel valuation according to IFRS, you create the real depreciation area 30 so that it adopts its values from depreciation area 01. You assign ledger group IFRS to real depreciation 30. You also choose Area Posts Depreciation Only for the depreciation area.
· Create derived depreciation area 60 and assign ledger group IFRS to it. For the derived depreciation area, you choose Area Posts APC Only . You also specify that depreciation area 60 represents the difference between depreciation areas 30 and 01, that is, the values of depreciation area 30 minus the values of depreciation area 01. For whether the values of depreciation area 60 are positive or negative, you have to specify that all values are allowed. In addition, set the indicator specifying that the derived depreciation area is treated as a real depreciation area.
· Depreciation areas 30 and 60 each use the same accounts as the master depreciation area 01. (You make this setting by entering depreciation area 01 as the Different Depreciation Area that is used for account assignment.)
Features
The following example postings make the function of the derived depreciation area clearer:
Example 1
...
You want to post an invoice receipt for EUR 1200 to fixed assets. In IFRS, you do not want to capitalize the freight costs of EUR 200 that were incurred. Instead you only want to capitalize them in the local balance sheet. The posting of the invoice receipt is made in Materials Management (MM) and follows in all ledgers in General Ledger Accounting.
· The result, as shown in the figure below, is that EUR 1200 is posted to the fixed asset control account in all ledgers, since a posting to the master area causes the same amount to be posted in all ledgers (step 1).
· The value of EUR 1200 is updated to depreciation areas 01 and 30. In depreciation area 30, you now make a manual adjustment posting for the freight costs in the amount of EUR 200 (step 2).
· Depreciation area 60 makes the adjustment posting of EUR –200 in the IFRS ledger group (step 3).
Postings in the Different Ledgers
Example 2
You want to post an asset retirement with revenue (for the amount of EUR 300). Depreciation areas 01 and 30 have the same APC, but due to different depreciation terms, they have different depreciation (EUR 500 and EUR 600).
If you post the retirement, then the values of the master depreciation area would be updated to all ledgers, so that the depreciation and loss would both be shown incorrectly in the IFRS ledger (depreciation area 30) with the values 500 and 200.
However, derived depreciation area 60 automatically triggers an adjustment posting (100 and –100), so that the ledgers of Asset Accounting and General Ledger Accounting are again in synch.
Postings in the Depreciation Areas
Depreciation Area |
01 (master area) |
30 (IFRS) |
60 (30-01) |
APC |
1000 |
1000 |
0 |
Depreciation |
500 |
600 |
100 |
Loss |
200 |
100 |
–100 |
Revenue |
300 |
300 |
0 |