The following are the questions (now with answers) asked during the Implementing IFRS at SAP webinar presented by Christiane Ohlgart on 9 September 2009. This webinar explained how SAP implemented IFRS alongside US GAAP at all of its operations worldwide. Christiane led the project. You can view the replay of the webinar and download the presentation by registering here. You can also register for or listen to replays of the other webinars in the series here.
A few questions that were very similar to each other have been omitted. The questions have also been grouped into a number of headings that hopefully should make finding answers to a specific question/topic easier to do. All individual and company names have been removed.
The headings are:
- Accounting Systems
- Accounting Objects
- Accounting System - Ledger
- Chart of Account
- IFRS Accounting
- Month-end Close
- IFRS - US GAAP Difference
- SAP Product Portfolio
- IFRS around the World
If you have any comments, a follow up question or a completely new question, please go to the IFRS Forum and ask your question there.
Q. Does Flex GL mean new-GL?
A. Flex GL is short for flexible GL. Alternatively, some people say New GL. The offical name of the parallel ledger product is SAP General Ledger.
Q. What version of SAP were you on during this project?
A. Initially 4.6c, from 2007 onwards SAP ERP ECC6.
Q. Was your implementation on SAP ECC6.0 Classical GL or was ERP "NEW" GL already implemented?
A. We started on 4.6c and migrated in 2007 to ECC 6.0 Classic GL.
Q. What module within SAP do you use for consolidation with US and IFRS reporting?
A. The SAP SEM ECCS Module.
Q. Is SAP using any non-SAP solutions to process accounting data?
A. No. All accounting is done in the system. We are just currently implementing a tool for creating year-end questionnaires to collect the data for the annual reporting package.
Q. How did SAP deal with their parallel reporting year for financial reporting purposes? Did you use additional GL accounts? Excel working paper entries?
A. No, we did not use Excel. We used an account-based approach and added IFRS accounts to our general chart of accounts, and had one financial statement version for US GAAP (excluding IFRS accounts) and one version including IFRS accounts. The IFRS accounts also represent the reconciling items between US GAAP and IFRS and allow for easy reconciliation and explanation on a topic by topic basis.
Q. Do all your subsidiaries use the same fiscal year variant? Are all closing on the same date 31/12 (December 31st)?
A. Almost all have 31/12 (December 31st), except for SAP India. You can solve that problem in the system but for group purposes their fiscal year is 31/12 (December 31st), that means that is what is the basis for the audit. For statutory I think their fiscal year-end is 30/6 (June 30th).
Q. I would like to place the following questions regarding the IT/software transition process to IFRS compliance.
1. Q. Which SAP standard modules are currently being used?
A. FI / CO/ SD/MM/HR; SEM ECCS
2. Q. How many months it takes for a project for such process?
A. I think the definition, implementation and test of processes takes about 12-18 months, but the main time consuming factor is the identification of differences and decision on how to handle them
3. Q. Which SAP solutions are recommended according to your experience...?
A. FI / CO; SEM ECCS would be required, but SD and HR are helpful.
Q. Can you please give some insights on how IFRS - GAAP reconciliation is performed in SAP?
A. Due to the fact that we have all our IFRS postings on delta accounts the reconciliation is fairly easy, because you simply need to analyze which deltas were posted. You can do this in FI on entity level as well as in the consolidation ledger, where it is a little more complex because the consolidation is done in two variants and you need to define your own report that compares the two consolidation variants.
Q. Are there standard reports available to reconcile US GAAP and IFRS financials?
A. No, they have been generated in our consolidation ledger. But if you just use the delta account logic, you can use the RFBILA00 on entity level and see the reconciling item.
Q. How can we do comparative analysis of financial statements for the previous years? Do we need to carry out any historical data conversion to do this?
A. I think you should keep historical data. IFRS should be added to the historical data in order to be able to compare both versions.
Q. What additional accounting objects are implemented for IFRS?
A. We needed to implement additional cost and profit centers, as well as functional areas, because we wanted to exclude IFRS from the management view (internal reporting). On the other hand we wanted to still have full capability for reporting cost of sales under IFRS. In addition we started segmenting the balance sheet for IFRS purposes so we added the balance sheet accounts into the PCA ledger.
Q. Is it possible to provide specific example of additional 'CO' objects? IO? or cost element?
A. Examples for additional CO objects would be additional IFRS specific profit and cost centers as well as IFRS specific functional areas that had to be created to allow for full segment reporting and cost of sales reporting under IFRS.
Q. Was there a significant amount of customization to the FI and CO modules required (additional CO objects and transaction types for provisions, etc.)?
A. Depending on how you define customization. The general set up of FI and CO was not changed, but of course we had to create accounts and add an IFRS financial statement version which takes time as well. Furthermore we had to create a document type for IFRS specific postings so we would ensure that US GAAP and IFRS are not mixed.
Q. Is it true that SAP will discontinue using US-GAAP? Would this not be a big problem because this is your leading ledger?
A. It is true, that we will discontinue US GAAP. But since IFRS accounts are part of the same ledger, just reported with a different financial statement variant, that is not an issue at all.
Q. Was it a requirement to turn on New GL in order to implement IFRS? If not, did you use Special Ledger?
A. No it is not a requirement to turn on New GL and I think Special Ledgers have some limitations as well and are not necessarily the preferred option. Only New GL or additional accounts will provide full reporting capabilities.
Q. Whether you would recommend using Special Purpose Ledger?
A. No, Special Purpose Ledgers do not provide full reporting capabilities that you would need for a full set of financial reporting
Q. Do you think it is possible to maintain US GAAP and use a special ledger for IFRS?
A. I think you can maintain US GAAP. Whether you use the special ledger technique or other SAP options depends on the type of differences that you have and the internal and external reporting requirements.
Q. Do you recommend use of GL Accounts in Classic GL or Flex GL for parallel reporting under local GAAP and IFRS?
A. So far we were happy with the Classic GL but I think we could also have benefits from Flex GL especially with regards to accounting for local GAAP on entity level.
Q. Why are you not considering to implement the New-GL as a solution to the parallel reporting?
A. We are considering it for the future; it was not available when we started our project. New GL is a larger scale project that will impact the whole company, while IFRS was really handled as a corporate project with a roll-out just before the entities had to start posting.
Q. So you managed IFRS without a non leading ledger!
A. IFRS is part of the leading ledger. I think this is the big advantage.
Q. Were the IFRS adjustments posted to the GL or in consolidation only?
A. All IFRS postings are posted on entity level in FI.
Q. If you have one chart of accounts for the SAP as a whole, how do you control postings?
A. We have one chart of account for group purposes. There is one company code for each entity and we control the postings on an entity by entity level.
Q. Hello, May I know what is the need for IFRS chart of accounts. You should have used the old Chart of Accounts. May I get some insights?
A. We do not have a separate IFRS chart of accounts. We have a global chart of account that includes US GAAP and IFRS reconciling accounts. Dependent on the view (US GAAP/ IFRS) they are included or excluded from the financial statement versions.
Q. What is the SAP element for Cash Generating Units, used in goodwill valuation?
Q. Was defining your IFRS segments for segment reporting part of the project, or was the segment defined before, and how did you decide on the actual segments you are using?
A. We debated the segments with the auditors (KPMG) but in the end they agreed that based on our management reporting and the convergence of the standards the segments would remain as presented under US GAAP.
Q. What do you mean by Asset components?
A. IFRS requires that larger fixed assets are split into their individual components (e.g. buildings) if various components have different useful lives.
Q. How long is your closing cycle - month-end to closing meeting?
A. We consolidate our US GAAP figures on workday 9 and 10 and IFRS on workday 12 and 13. Balance sheet and period accounting consolidated statements are available at the end of the first day of consolidation, while the cost of sales income statement is available after the second day. The disclosure committee meeting typically meets on workday 10 or 11.
Q. May I know how the closing cockpit is configured in SAP?
A. We currently only use the consolidation closing cockpit for consolidation activities. For the entity close we have an Excel timetable and communicate that to the subsidiaries. Based on that timetable, we schedule a job that closes the respective accounts group-wide as indicated in the closing timetable. Afterwards the entities have to get back to us and follow a formal late posting and error correction process. Since the SAP Financial Closing cockpit was recently introduced, we hope to use it in the future to improve the closing cycle further.
Q. Can you tell us how you minimized the differences between US GAAP and IFRS?
A. This is really an accounting policy decision. Both standards have some flexibility with regards to how to interpret the standard or even offer some options (i.e. Pension accounting). We have made sure that we apply options in the standards in the same manner. In addition since IFRS does not provide as many rules, IAS 8.10-12 allows referencing other standards as long as they are not contradictory.
Q. At the time of transition, how did you handle "Asset componentization" - do you require SLO by SAP, e.g. for changing the Depreciation areas in between US GAAP and IFRS?
A. No, we proved to KPMG (our auditors) that the impact would be minor for already capitalized assets and applied that approach only prospectively.
Q. For local countries that switch to IFRS in the first year and need to prepare dual reporting. They are looking at three sets of books: US GAPP, IFRS and local GAAP. How is local GAAP recorded? using another set of accounts? and how is dual reporting handled? custom report?
A. We record local GAAP similar to IFRS on so called A-accounts (additional accounts for local GAAP maintained as delta accounts) that capture the difference between US GAAP and local GAAP.
Q. How are you preparing your analysts in adopting IFRS?
A. We have been including IFRS financials in all our press releases in 2009 and we are having road shows and presentations to get them prepared.
Q. I would be interested in templates that SAP used while moving to IFRS. I am looking at leveraging the Templates for our implementation.
A. Sorry, but we did not use any templates.
Q. Christiane, I saw that the implementation at SAP took a long time from the understanding, conception, development etc... So, how smooth do you think it will be for us, the customers?
A. I think the issue of such a project is not IT related, but accounting related. First accounting has to come up with the framework and decisions and then they have to discuss with IT on how to most efficiently implement it. The IT effort was really rather low. This is why I stressed the fact that the project mission has to be clearly defined in order to always know what you want to accomplish as part of the project.
Q. How did IFRS project impact other Project Portfolio for SAP? After 2014 or may be later, once SEC requires all US companies to comply with IFRS, does it mean discontinuance of US GAAP?
A. I think our software if fully US GAAP and IFRS compliant if customized correctly. The fact that SAP internally applies IFRS going forward, does not mean that this impacts our product roadmap, because SAP is just one customer on its own, but we need to develop what SAP's 82,000 customer base requires.
Q. Is SAP coming up with IS specific IFRS solutions?
A. I am not sure, which industry specific solutions you would require; because the standards are principle based I would only see a difference for the financial industry, which has to follow certain other requirements.
Q. Is any publication by SAP forthcoming on IFRS, by SAP PRESS with different examples of all IFRS statements for different industries?
A. IFRS statements are accounting standards and you can download them from the IASB. There are also many resources on the Deloitte webpage [www.iasplus.com]. I do not think that SAP will publish anything because I do not see too many industry specific IFRS issues.
Q. Do you use SAP capability to generate XBRL statements?
A. Yes, we use the SAP BusinessObjects XBRL Publishing by Ubmatrix
Q. On January 30, 2009, the Commission issued rules requiring companies to provide financial statement information in the XBRL interactive data format. Is SAP going to comply?
A. Yes, we will comply but so far the full IFRS taxonomy has not been published. Currently only the US GAAP taxonomy is available.
Q. Is SAP going to present their financials in XBRL format for the calendar year 2009 on your website?
A. Yes, if we are required and the taxonomy has been finalized.
Q. I'm asking the specific program due to the Brazilian legislation is complex.
A. I know that Brazilian legislation is complex and I think there is a separate country version but I do not know yet about Brazilian convergence projects except that SAP Brazil hast to apply the same rules as any other entity at SAP
Finally, don't forget, but if you have any comments, a follow up question or a new question, please go to the IFRS Forum and ask your question there.
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