As part of our continuing blog series on New Asset Accounting I’m going to cover how SAP went about fixing the issues that were talked about in part 2.
Blog Series: S/4HANA New Asset Accounting (Part 1): Introduction S/4HANA New Asset Accounting (Part 2): History of Parallel Valuation S/4HANA New Asset Accounting (Part 3): SAP’s Asset Parallel Valuation Solution FIN_AA_PARALLEL_VAL S/4HANA New Asset Accounting (Part 4): Functional Improvements S/4HANA New Asset Accounting (Part 5): Technical Changes S/4HANA New Asset Accounting (Part 6): Should you Migrate in ECC?
As covered in the previous blog, the solution that SAP came up with using the existing asset functionality in ECC was able to meet the requirements for parallel valuation in both the asset subledger and the NewGL. It worked with both the account and ledger based solutions so that customers could choose which approach best fit their needs. But the shortcomings were legitimate. Derived areas were suddenly tracking values, there were several new posting types to the GL, additional month end processes to true-up the asset subledger and the GL… It worked but it wasn’t optimal. From working with SAP for over 23 years, it’s my opinion that it’s not what SAP really wanted either. If you have a specific requirement, then you want functionality that is specifically designed to support that requirement. Considering how important and increasingly core of a requirement that parallel valuation was becoming, SAP really needed (and most likely, wanted) a solution that was built from the ground up to account for parallel valuations. Luckily, these shortcomings were also mostly technical in nature.
Here’s an overview of some of these issues from SAP:
Introducing New Asset Accounting
As a response to this, SAP started rewriting their asset posting kernel to track how parallel values could be tracked and posted to the GL. This was a large undertaking and involved processes that are fundamental to the valuation, posting, and integration of the asset solution.
With EhP7 (SP2) for ECC 6.0, SAP released a new business function called FIN_AA_PARALLEL_VAL. SAP refers to this as New Asset Accounting and makes the distinction that with the function inactive, you’re using Classic FI-AA or Classic Asset Accounting. FIN_AA_PARALLEL_VAL = New Asset Accounting. Activating the business function will add a new IMG node. At the top of the structure will be a section for the migration process. If you see this in the IMG, then you know New Asset Accounting is active… though there are some other ways to confirm which version you’re on.
What are the Benefits to New Asset Accounting?
Why should customers be looking at New Asset Accounting? There are several benefits listed below but the most dominant reason for this is to better track parallel values. If a customer is on ECC but wants a more reliable and integrated approach to parallel valuation, they should strongly consider implementing New Asset Accounting in ECC now. Alternatively, if customers need more justification for implementing S/4HANA then the following benefits of New Asset Accounting help justify the S/4HANA transition. Considering that SAP announced that they will stop maintenance of ECC as of 2025 (SAP Announcement), this is something that most SAP customers are trying to plan for and New Asset Accounting can help with that business case.
- Direct link between the depreciation area and the ledger group. The bulk of the benefit of New Asset Accounting is that the integration between the asset subledger and the GL has been significantly strengthened. This shows up in many areas but the first example is in the definition of the depreciation area itself. For instance, area 01 is no longer hard coded to be the leading valuation (Ledger 0L). It can be IFRS, US GAAP, your local GAAP, or another valuation. So long as it is configured correctly, it will post to a unique ledger group / accounting principle. We also get separate FI documents for each area that posts to the GL. If you have three areas that post to the GL and are mapped to 3 ledger groups / accounting principles, then you’ll see 3 fully burdened and self contained accounting documents every time a posting is carried out on the asset.
- The depreciation area is now a bit easier to manage. There are simpler posting types. For most requirements there will now be a simple decision of whether the area needs to post in realtime, or not. Also, we no longer need derived areas (for the purpose of parallel valuation). We only need a single depreciation area to capture the full valuation details for a particular accounting requirement. This means that the valuation, and reconciliation, between FI-AA and the GL will be complete and accurate right from the beginning. There is no month end process to ensure both sides are correct.
- Postings to the GL are now all realtime. Each depreciation area (again, must be configured correctly) will be immediately posted as it’s own unique document to the assigned ledger
- Month-end and year-end closing should be faster and much easier. This is because the periodic posting program is no longer required to true-up the values as calculated by the derived depreciation areas. This is a big improvement because there were several cases where we’d received failed V2 updates from the posting program… those can be difficult to track down and resolve.
- Reporting. Similar to the two previous points, the data displayed on the Asset Explorer is now realtime and current. The drilldown to the source FI document will always be available.
- More flexible account determination. There were some limitations around derived areas that made the GL account assignment process harder. That is no longer the case.
- There is quite a bit of technical simplification once you get on S/4HANA and the Universal Journal. We’ll cover this in more detail later.
What has changed? We’ll cover the bulk of the technical and functional changes in a separate blog. Some of them are dependent on whether you are running New Asset Accounting on ECC or S/4HANA.
Strategy and Other Technical Items
If you are running ECC currently, you can choose to either remain on Classic Asset Accounting or migrate to New Asset Accounting. If you are currently running on ECC and have not migrated to New Asset Accounting, this has to be accounted for as part of your plan to get on S/4HANA. Do you want to clean up your configuration, ease your month end processing, optimize the posting process so that parallel valuation is easier, and prepare for your eventual S/4HANA transition? Than you should consider making the migration now. A key benefit is that you’ll have more control over the process and migration. However, as of S/4HANA only New Asset Accounting is available. Let’s go through some key items:
- For ECC, New Asset Accounting can be activated in ECC 6.0 but it requires the following:
- ECC 6.0 EhP7 SP02.
- EA-FIN must be activated so that the NewDCP is active.
- The NewGL with ledger approach must be implemented. The classic GL or the account approach to parallel valuation are not supported.
- The function FIN_AA_PARALLEL_VAL can be activated at the client level if necessary.
- For S/4HANA, New Asset Accounting has the following items to look out for:
- It is delivered active. It’s always on… Classic Asset Accounting is no longer delivered or available and New Asset Accounting is the only solution going forward. Note that this is no longer dependent on the FIN_AA_PARALLEL_VAL business function. If you go to SFW5 and see that it’s inactive, you may think that New Asset Accounting is not active… but that’s not the case. Whether the function is active or not, only New Asset Accounting is in the system.
- Similarly, for the purpose of the NewDCP, EA-FIN is delivered active.
- Both the ledger and account approach to parallel valuation can be used.