SAP BUSINESSOBJECTS FINANCIAL CONSOLIDATION 7.5 STARTER KIT FOR US GAAP SP1 Simplified Configuration Description 2010-04-28 1
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Contents Chapter 1 Foreword... 5 Chapter 2 Data collection... 7 Data entry format... 7 Account typology... 7 Customizing the chart of accounts... 7 Data package configuration... 8 Package Summary... 8 Links between reports in the package... 9 Data entry principles... 9 Order of package data entry... 9 Breakdown by flow... 10 Data package validation... 10 Types of control... 10 Set and subsets of controls... 10 Main types of control... 10 Control levels... 11 Chapter 3 Consolidation process... 13 Overview of the consolidation process in SAP BusinessObjects Financial Consolidation... 13 Consolidation definition... 13 Consolidation processing... 13 Configured automatic entries... 14 Chapter 4 Analysis process... 15 Reports typology and organization... 15 Consolidated Financial statements... 15 Accounting reports... 15 Ledger by audit-id... 15 Smart Links between reports... 16 Flat Balance sheet... 16 Consolidating Balance sheet... 16 Map of links between reports... 17 End of analysis Debit-Credit Ledger... 17 Analyzing data with the audit trail... 18 3
Contents Standard audit-trail... 18 Analysis of a balance sheet account... 18 Cash Flow audit-trail... 20 Illustration of how you can analyze a CFS line item... 20 Monitoring and controlling the consolidation process... 21 Summary reports for end-users... 21 Control report for the administrator... 21 Consolidation control dashboard... 21 Appendix 1 Entry Balance... 23 Appendix 2 Financial statements... 27 Appendix 3 Default naming convention... 31 4
Foreword Foreword The SAP BusinessObjects Financial Consolidation (FC) starter kit assists you in setting up your application in order to adhere to US GAAP. It enables you to collect data at the reporting unit level in order to produce, retrieve and understand your consolidated accounts via pre configured common consolidation rules, financial statements and a comprehensive set of audit trail reports. 5
6 Foreword
Data collection Data collection Data entry format Account typology The Starter Kit for US GAAP chart of accounts is based on the US GAAP XBRL Taxonomy published by the SEC in December 2007. It enables you to retrieve a balance sheet with the current / non current primary breakdown and an Income Statement classified by function. Some disclosure accounts are also included in the configuration to analyze headcounts movements and the breakdown by employee category. The chart of accounts is presented in the appendix. Customizing the chart of accounts Enhancing the chart of accounts The chart of accounts has been designed to be easily enriched with your industry-specific accounts. In the Starter Kit for US GAAP, accounts are defined with a behaviour-based method. In this dynamic implementation, the characteristics that are attached to an account define its behaviours throughout the consolidation process: for instance data collection schedule, analysis by flow, or position in the account hierarchy, etc. Creating an account with the save as feature from a template account allows you to assign the appropriate attributes automatically to the new account. Characteristic values can also be imported from an Excel spreadsheet along with account codes and labels, either by copy and paste from an Excel spreadsheet, or by importing a flat file. The behaviour-based implementation principles have been used for data entry and analysis reports as well as consolidation rules to integrate new accounts in the consolidation process in a dynamic way. Adapting the naming convention for codes The Starter Kit for US GAAP is provided with a default naming convention for accounts codes (Cf. appendix). However this convention can be changed with no impact on the configuration. This is because SAP BusinessObjects Financial Consolidation does not use short codes to identify accounts and define where they are used in the application. It uses an internal identifier. More generally this applies to any configuration objects. Therefore your naming convention will be fully taken into account in the whole starter kit and notably in the input schedules and the output reports. 7
Data collection Data package configuration The data package groups together schedules that are used for entering data at the reporting unit level (financial statements).the data entry schedules are grouped into books by type of information: Balance & Equity, movement Analysis, Intercompany breakdown, Statistical and disclosures. A homepage has been created to guide the user through data entry steps. In order to facilitate the data entry, links between schedules have been implemented to provide intercompany or movements details in a faster way. Package Summary 8
Data collection Links between reports in the package Data entry principles Order of package data entry A step-by-step approach for entering data is configured in the package thanks to its architecture and the links that have been created between the schedules. This approach is summarized in the package homepage. The steps are as follows: 1. Enter (manually or importing) the closing balance (balance sheet and income statement) 2. Enter the period movements of the balance sheet items (investments, intangible and tangible assets, depreciation, net equity etc.) 3. Enter intercompany balances 4. Enter headcounts 9
Data collection Other disclosure schedules can easily be created and inserted into the package folder and linked to the package homepage. Breakdown by flow Flow entries allow you to identify variations in the balance sheet between the opening and closing balance and therefore automatically generate the statement of cash flows. The flows available in the package may be classified into two categories: Flows for usual transactions Flows for specific transactions (reclassification, internal mergers ) Data package validation Types of control There are two types of control: Blocking controls: if these are not valid, the status of the data package cannot be validated. All these controls must be valid. Non-blocking controls: these controls are just warnings and do not prevent the data package from being validated. Set and subsets of controls In the package, controls are organized into subsets within a set of controls. Each subset corresponds to a book. Main types of control AIM EXAMPLE Check main balances Gross value of asset >= Depreciation Analysis by partner of an IC account must = account total Changes on flows must be analyzed Internal investments must be analyzed Assets = Liabilities + Equity Net income as per P&L = Net income as per Balance Sheet Gross value of Properties, Plants and Equipment >= depreciation at closing Analysis by partner of Accounts receivables, Intercompany must = account total Changes of Properties, Plants and Equipment must be analyzed (F15 = 0) Investments in subsidiaries must be fully broken down by held company 10
Data collection Control levels 4 levels of control have been created in the US GAAP Starter Kit to activate more or less controls depending on the reporting time period: Level 1 Income statement Level 2 Income statement and balance sheet positions Level 3 Income statement and balance sheet, including movement Level 4 Period end disclosure (Income Statement, full Balance sheet and disclosures) The control levels check from the minimum level (LEV1: submission of the income statement only) to the maximum level corresponding to a full package (LEV4: complete submission). Note: Each control is linked to a level; The level of control to be reached is set by the central administrator when the package is generated; When a level is required to be reached (e.g. level 3), all the controls attached to lower levels must also be valid (e.g. level 1 to 3). 11
12 Data collection
Consolidation process Consolidation process Overview of the consolidation process in SAP BusinessObjects Financial Consolidation Consolidation definition The settings of a consolidation definition are: A category and a data entry period: selection of the data to be consolidated A scope A version A consolidation currency The version parameter is a technical dimension that allows different consolidation settings to be selected for a given category, a given data period and a given currency: Set of consolidation rules Scope (pro-forma statements) Exchange rates table (pro-forma statements) Consolidation processing Two processing modes exist: full processing and incremental processing. During the course of full processing, the software executes the following steps: Read the scope Load data: data of the period (package data and manual journal entries) and the opening balance, if any Convert package data and manual journal entries Run the rules of the selected set of rules (see below) For incremental processing, the software executes the same steps as described above only for the manual journal entries recorded since the last consolidation; for new packages. The conversion of data entered in foreign currency is carried out as follows (using the closing rate method): The closing balance of the balance sheet is converted using closing exchange rates, except for net equity which is recorded using historical exchange rates (calculation and recording of the currency translation adjustment) The net income of the period is converted using average exchange rates Since they are automatically calculated from balance sheet movements and profit and loss accounts, cash flow statement items are calculated at the average exchange rates of the period. 13
Consolidation process The starter kit handles the full consolidation method. However it can be enhanced easily to allow you to book manual journal entries related to the equity method. Note: FC includes features to manage the equity consolidation method automatically, notably rule settings and category scenario options. These features have not been used in the Starter Kit for US GAAP to keep the configuration simple. The scope changes handled by the Starter Kit for US GAAP set of rules are: Subsidiaries entering the scope Subsidiaries leaving the scope Acquired companies as part of internal mergers Flows generated during the consolidation process allow you to retrieve changes due to currency translation differences and to changes in scope consolidation (incoming/outgoing entities, etc.). They enable the configuration to automatically produce analyses of changes in Equity and the Cash Flow statement. Configured automatic entries The Starter Kit for US GAAP includes a set of consolidation rules that enable you to produce consolidated data, using data from packages. This set of rules can be enhanced in order to meet your specific accounting policies. The automatic consolidation entries are: Elimination of intercompany reciprocal operations Elimination of investments Calculation of the currency translation reserves on shares and equity In addition to standard consolidation rules, some technical rules have been configured in order to: Calculate and store the subtotal accounts Calculate and store the cash flow statement line items Calculate and store year-to-date consolidated amounts 14
Analysis process Analysis process Reports typology and organization Consolidated Financial statements The following central financial statements are ready to use: A balance sheet with a current / non current format, an income statement including intercompany accounts, a consolidated cash flow statement, a statement of changes in equity. Samples of these statements can be viewed in the appendix The financial statements are also available in the following formats: A breakdown by segment (e.g. consolidating Income Statement ) and leaf level unit A breakdown by quarter for the whole company or a point of view in the reporting unit hierarchy. The Performance Management folder has been created to group these periodic reports. This might also be your favourite folder for your custom comparison reports: multi-period, actual vs. budget vs. forecast etc. Lastly, a report allows you to analyze the changes in headcounts both by employee category and by country. Accounting reports The accounting reports, namely balance reports and ledgers allows you to analyze consolidated data by drilling down to the original data: package input, manual journal entry, automatic journal entry. Moreover dedicated journal reports allow you to retrieve both automatic and manual journal entries in a Debit / Credit format, including the breakdown by partner. Ledger by audit-id 15
Analysis process Smart Links between reports Links have been built between financial and accounting reports (balances & ledgers) providing you with: A comprehensive audit trail from top level consolidated data to amount at input or journal entry level (cf. Audit trail below) An intuitive access to different retrieval formats for financial statements: consolidating, by leaf level unit Flat Balance sheet Consolidating Balance sheet In a few clicks, you can link to different financial views of consolidation statements or drill-down to various breakdown types: the input level account, leaf level units or by manual and automatic journal entries in the debit-credit reports. 16
Analysis process Map of links between reports End of analysis Debit-Credit Ledger 17
Analysis process Analyzing data with the audit trail The Starter Kit for US GAAP contains reports for the analysis of consolidated data. Each data item is linked to an audit ID and an entry number which makes the audit trail possible. The audit ID allows the accounting origin to be tracked. For instance: The 0PACK Package data audit ID tracks data that has been entered in the data packages The 30-ICE1 audit IDs are linked to the elimination of intercompany transactions With analysis schedules, each line of the balance sheet and income statement can be detailed by account, unit or audit-id. Standard audit-trail Analysis of a balance sheet account 18
Analysis process 19
Analysis process Cash Flow audit-trail The cash-flow statement is dynamically built during the consolidation on the basis of accounts and flow couples defined in the balance sheet by flow. In the Cash Flow audit trail, each line of the Cash Flow Statement can be analyzed to know which account/flow pairs generates it. Illustration of how you can analyze a CFS line item 20
Analysis process Monitoring and controlling the consolidation process Summary reports for end-users Summary reports from the C-0 folder provide overviews of the consolidation process and operational information to the end-user. Process overview reports Check existing consolidations Check packages timestamps Operational information reports Check Cash Flow Mapping Check the conversion rates that have been used in a given consolidation Check the consolidation scope Control report for the administrator The Consolidation control dashboard helps to validate high-level balances issued by the consolidation at a glance. Consolidation control dashboard 21
22 Analysis process
Appendix 1 Entry Balance Appendix 1 Entry Balance Assets 23
Appendix 1 Entry Balance Liabilities and equity 24
Appendix 1 Entry Balance Income statement 25
26 Appendix 1 Entry Balance
Appendix 2 Financial statements Appendix 2 Financial statements Consolidated Balance Sheet 27
Appendix 2 Financial statements Consolidated Income Statement 28
Appendix 2 Financial statements Consolidated Cash Flow Statement 29
30 Appendix 2 Financial statements
Appendix 2 Financial statements Appendix 3 Default naming convention In the financial accounts, the first character indicates the account type (more detailed than the account class) 1 = Current Assets 2 = Non Current Assets 3 = Current Liabilities 4 = Non Current Liabilities 5 = Equity accounts 6 = Revenue 7 = Cost Of Revenue 8 = Operating Expenses 9 = Non-Operating S = Stats The code s suffix indicates the account type TP = External transactions, Equity - Minority interest GR = Group Intercompany transactions, Equity - Group part EL = Elimination accounts GV = Gross Value DA = Depreciation / Amortization MI = Equity - Minority interest CO = Equity Consolidated (Group part) TT = Total 31