UPA is the natural evolution of different SAP ERP functionalities, like for example Costing-Based COPA, Margin Analysis, COGM, Currency and Valuation profiles. UPA brings the goal of having different parallel views under the lean finance philosophy: simple and efficient processes, in a single source of truth, easy to consume for business users.
Activate UPA and unlock management accounting that’s fully integrated into compliance: post different parallel values per ledger across the entire value chain to deliver simultaneous Group and Local GAAP reporting, reduce reconciliation effort, and accelerate complex multi-GAAP implementations.
We are a group of Finance SAP Consultants with different competencies in different fields, we decided to come together to test UPA, following same steps as a new customer would do, putting ourselves in our customer' shoes. We adopted the green field approach, so after obtaining a new system we installed the UPA Business Function and we implemented the SAP UPA best practices.
We would like to concentrate on a “hands on” exercise executed on an S/4HANA 2023 internal system. Please be aware that UPA is available for new Implementation customers from S/4HANA 2022 and from S/4HANA 2023 for Customers having systems with existing data.
BUSINESS CASE
There are 4 Use cases addressed by Universal Parallel Accounting.
In this article we will concentrate on the first one: Parallel Valuations- Unconsolidated view for International companies which need to report Group and Local GAAP.
“Two different ledgers and accounting principles used consistently across the value chain”
(definition by Janet Salmon, chief product owner for SAP Management Accounting).
When UPA is active, it is possible to write parallel different values per ledger across the entire value chain. This gives the possibility of being compliant with different accounting principles in the management accounting as well to obtain a complete GAAP financial statement.
Even If UPA is not implemented, parallel accounting is still reachable across the value chain but can only copy, in some specific part of the value chain, the values originally written in the Leading ledger. In these processes the leading ledger value is applied to all ledgers. This may causes need for manual adjustments and/or additional revaluation activities at month-end.
The aim of this blog is to analyze each box of the UPA Value Chain in sequence and to demonstrate the results of parallel ledger posting in an unconsolidated view.
The business scenario described below concerns a company (belonging to a Group of companies) which want to track impact of the different transactional flows (from posting overhead costs to asset capitalization, depreciation, to consumption of activities and materials for the production and sales of a finished product), in the Financial statement items (revenues, Investments , Asset Under Constructions, Final Assets, Overheads, Cost of Goods Manufactured, Cost of Goods Sold , Sales Revenues and Margins), evaluated following different accounting principles.
FUNCTIONAL TESTS
Find below the previous value chain adapted with the functional steps of our functional tests.
In the Best Practices we activated we had Controlling Area Currency Dollar (USD) and Company Code Currency Euro (EUR). So every posting we will have in this functional test will be in both currencies. Only when entering the cost rate is it managed in a single currency type (the controlling area currency in this example)
So let's start with the first step: Cost posted to the investment internal order.
1. Posting a Finance Document on an Internal Order
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SCOPE ITEM |
J54 Post primary costs on the internal order |
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STEP (UPA-exclusive capabilities) |
Ledger common manual posting to internal order. |
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Business Case Coverage |
Capitalizable expenses allowed as part of the assets cost, depending on the accounting principle. For example, financial expenses from a loan related to a short-term construction project: the adjustment may only apply in one ledger (Local GAAP but not IFRS) |
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With UPA/Without UPA |
No differences with installation where UPA is not active. We also decided to use the same values for the 2 ledgers |
Please be aware that we decided to use internal orders instead of WBS elements because we wanted to test the internal orders that are still available in the S/4HANA Private Cloud Edition.
We decided to post the same values in Ledger 0L and 2L (by using ledger group 0L2L).
2. Manage Cost Rate Plan
We planned here different rates per ledger on both activity types (Setup and Personnel Hours) for brevity we used the same activity types for activity type allocation to an Internal order (next step) and later for Product cost planning calculation. Please note that the controlling area currency used is USD.
3. Direct Activity Allocation
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SCOPE ITEM |
J54 Direct Activity Allocation |
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STEP (UPA-exclusive capabilities) |
Ledger-specific valuation of activity consumption |
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Business Case Coverage |
Activity allocation (e.g. consulting activities) previously valuated with different prices per ledger are now allocated from the cost center to the Internal Order resulting in different amounts posted by ledger (in order to accommodate local market differences or/and local inventory- asset valuation rules) |
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With UPA/Without UPA |
Activity allocations always post to all ledgers (with or without UPA) Only with UPA the values posted can differ between ledgers (because of different activity cost rates). Without UPA, the system uses the ledger-independent cost rate. |
See below the accounting document showing activity allocation from the cost center to the internal order (10 hours per activity type):
Note that there is a single journal entry with postings to two ledgers, based on the reference document 300000300 posted in the previous step.
As the activity price is 30 USD/hour in ledger 0L and 50 USD/hour in ledger 2L, different amounts are posted per ledger. You can see here that the Activity Allocation From the Cost Center to the internal Order has different values per Ledger.
4. Settlement- Asset Under Construction
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SCOPE ITEM |
6DT Asset Under Construction |
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STEP (UPA-exclusive capabilities) |
Ledger Specific settlement rules for WBS/ Internal Order according to different accounting principles. |
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Business Case Coverage |
Asset Under Construction capitalization values differs by country based on local GAAP vs. IFRS requirements. |
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With UPA/Without UPA |
UPA allows different settlement rules per ledger. With UPA, AUC settlement is based on the combination of company code and ledger (FI, CO and AM are ledger-based areas) Without UPA, settlement values are the same for all ledgers (it´s not an end-to-end process) It´s not possible to use UPA without IAA or UPA in connection with “New Asset Accounting” |
You can manage different settlement rules per ledger. To simplify this example, the settlement rules in the order are assumed to be identical across all ledgers, as you can see in the image below:
However, keep in mind that different settlement amounts in the receiver can result from:
In our case, different settlement results are obtained per ledger due to different posted amounts.
In the image below, you can see how UPA remains consistent throughout the entire asset lifecycle:
Asset capitalization and depreciation are ledger-specific in UPA, no manual adjustments or clearing are required, ensuring a seamless asset lifecycle (see image below).
When UPA is activated, the option for ledger-specific distribution rules is enabled in the configuration activities for the settlement profile.
Chart of depreciation is only used as an object for depreciation key management.
Depreciation areas for parallel currencies are no longer required; each area is automatically managed in all currencies of its assigned ledger.
Capitalization
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SCOPE ITEM |
J62 Intelligent Asset Accounting |
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STEP (UPA-exclusive capabilities) |
Ledger Specific settlement rules for WBS/ order and depreciation run for assets according to different accounting principles. |
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Business Case Coverage |
Asset capitalization and depreciation values differs by country based on local GAAP vs. IFRS requirements. |
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With UPA/Without UPA |
UPA allows different settlement rules per ledger. With UPA, asset depreciation calculation is based on the combination of company code and ledger (FI, CO and AM are ledger-based areas) Without UPA, settlement and depreciation values are the same for all ledgers (It´s not an end-to-end process) It´s not possible to use UPA without IAA or UPA in connection with “New Asset Accounting” |
As you can see, up to this point we have been working with two currency types: EUR and USD mentioned at the very top of this blog. To simplify the next steps, we will stick to currency type EUR for the Fixed Asset analysis, that results in the following amounts:
Capitalization (AuC –>Fixed Asset)
The AuC 40000001-0 is settled to Final Fixed Asset 20000000-0.
5. Post Depreciation
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SCOPE ITEM |
J62 Intelligent Asset Accounting |
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STEP (UPA-exclusive capabilities) |
Ledger Specific settlement rules for WBS/ order and depreciation run for assets according to different accounting principles. |
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With UPA/Without UPA |
Without UPA, settlement simply takes the values from the leading ledger and copies them into ledger 2L or any other additional ledgers. This resulted in balances sitting on order/WBS A or order/WBS B that needed to be cleared manually, and they were not representative. The value of the asset under construction in ledger 2L was therefore not reliable at all. |
Let’s review the ledger-specific capitalization amounts for assets resulting from internal order settlement to the AuC 40000001-0:
The final asset’s capitalization and depreciation values are ledger-specific:
Once again, the analysis remains available in parallel currencies for both ledgers, as shown in the image below:
6. Universal Allocation
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SCOPE ITEM |
J54 Universal Allocation |
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STEP (UPA-exclusive capabilities) |
Ledger specific Automatic Allocation between Cost Centers |
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Business Case Coverage |
Automatic Allocations of costs per ledger. In this specific case we decided to use the same rules per every ledger . |
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With UPA/Without UPA |
Same result between UPA and S/4HANA (Universal allocation is already able to execute allocation by ledger in S/4HANA). In UPA the only way to distribute cost is the universal allocation. As in S/4HANA Universal Allocation supports Ledger allocations and 10 currencies. |
As said, the Universal allocation functionality is already working per single ledger even without UPA. So to show you how it works we inserted here an exercise but you can execute it in the same way in a not UPA environment.
In the following picture you can see the allocation flow from cost center 10101101 to 101013012 and 10101301
7. Standard Cost Calculation
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SCOPE ITEM |
BEG Standard Cost Calculation |
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STEP (UPA-exclusive capabilities) |
Multiple material valuation per ledger and legal view. |
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Business Case Coverage |
Different accounting principles for inventory valuation, depending on local/ global compliance requirements. |
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With UPA/Without UPA |
With UPA multiple cost estimates might be created (in reference to specific ledger costing variant) in order to update the various ledger. The material may be valuated with different inventory price per ledger (a single price can also be used when the cost variant is not assigned to a ledger- ledger field blank). These different prices are available for the full end-to-end flow (with different COGS and contribution margins per ledger) Without UPA, none of the solutions provided a full E2E process, because they weren’t defined by ledger, but by other parameters. |
Parallel accounting enables you to calculate the cost of goods manufactured based on various accounting principles. The underlying accounting principle is assigned to each ledger. By using ledger-specific costing variants, costing types and valuation variants, you can calculate different material prices per ledger. Please check the configuration in your system.
The costing type 2L (linked to the costing variant P02L) is assigned to ledger 2L. It means the costing variant P02L will update only ledger 2L with the results of the material cost estimate, which is expected to be different from Ledger 0L.
The product master data valuation tab contains information about inventory prices across all ledgers and currencies, as shown in the image below:
Likewise, the material stocks are valuated accordingly:
After releasing the material cost estimate, inventory prices will be updated per ledger. Stock movements will be valuated differently in each ledger if different prices exist.
It’s not just materials that can have different ledger prices; cost rates for activities in a cost center can vary by ledger too (as seen before). For example, depreciation rates often differ by country, so the the activity “machine hours” can carry different values depending on the ledger.
Let’s take a look at the following example of direct labor and production setup costs (activity types: 11 and 3):
During a costing run, SAP reads activity cost rates for activity types 3 and 11 according to the ledger assigned to each costing variant. In the example, P00L (ledger 0L) picks up the rates in the red box while P02L (ledger 2L) picks up the rates in the blue box. This setup lets you model country-specific direct labor and production setup costs by ledger automatically, without manual adjustments.
During the release step, the system updates the material prices and creates the corresponding posting documents. The stock revaluation is calculated as:
(new standard price – previous standard price) × stock quantity
resulting in different amounts per ledger and currency type, as shown below.
8. Product Cost Posting
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SCOPE ITEM |
|
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STEP (UPA-exclusive capabilities) |
Ledger-specific WIP and variance calculation or/and optional manual execution. |
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Business Case Coverage |
End-to-end integration between FI and CO with parallel valuation (assets, activities, inventory) enabling multiple accounting principles and extended to CO production processes (WIP and variance settlement) |
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With UPA/Without UPA |
UPA enables valuation of GI/GR and activity consumption at IFRS vs local GAAP rates and also supports ledger-specific settlement of actual production variances. UPA is only working with the event-based approach (3F0) Without UPA order settlement (WIP/variances) simply takes the values in the leading ledger and copying them into whatever other additional ledgers. |
Let’s go through the production process, starting from the final picture (the calculated actual unit prices) and trace back the path by which those prices are determined for ledger 0L and 2L. This latest calculation is explained further in the blog, in the Actual Costing section.
For simplicity, we will focus on currency type EUR in the Material Price Analysis app, although cross-currency types analysis per ledger is supported.
Goods issues (GIs) posted at production order confirmation (using ledger-specific material prices and activity allocations based on each ledger’s cost rates ) may debit different amounts to the order in each ledger:
You can see the finance postings of material documents 4900000031 and 4900000032 for both ledgers in the image below. Note that, in this case, raw materials do not use different inventory prices per ledger; however, the information is still posted by ledger:
Goods receipts (GR) posted at production order confirmation (using ledger-specific standard material price) may credit different amounts to the order in each ledger.
You can see the finance postings of material documents 5000000020 for both ledgers in the image below. Note that, in this case, different prices per ledger were used (keep in mind these values come from the released material cost estimate per ledger seen before)
These values are shown as the preliminary production valuation (GR) in the Material Price Analysis app (see blue box in the attached image below):
9. Event-Based Settlement
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SCOPE ITEM |
|
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STEP (UPA-exclusive capabilities) |
Ledger-specific WIP and variance calculation and settlement. |
UPA is only working with the event-based approach.
In the event-based approach (3F0), there are two models to trigger the settlement:
- Settlement based on business events: Settlement is triggered automatically by business events such as goods movement or activity confirmation (RAK= RSEBW)
- Manual Settlement: Settlement is initiated manually by setting the Order Settlement Trigger Type to Settled Manually instead of Based on Business Event (recommended for high volume scenarios).
Please, check the configuration in your system.
During the first partial goods receipt, WIP starts to be reversed out proportionally until the final goods receipt or the CTEC status is reached. At that point, WIP will be completely cleared, and variances will be calculated and assigned to their respective variance categories.
Settlement based on business events provides real-time business insights and reduces period-end closing workload. Manual settlement helps decrease the large volume of settlement documents, especially in scenarios where backflush is heavily used and production orders have short lifecycles, making WIP analysis unnecessary.
Continuing with our example you can see ledger-specific debit and credit postings result in different WIP and variance amounts calculated for each ledger and posted to the order.
The total production price difference for ledger 0L (307,75 EUR) is shown in the CKM3N App:
The same logic applies for ledger 2L. In this case, the price difference is 513,01 EUR.
Note that event-based settlement generates one document per triggering event:
10 Preliminary COGS Values
Preliminary values for goods issues associated with the sales order are derived from the released standard cost estimate per ledger explained before. Let’s track these types of movements in the Material Price Analysis app:
Drilling down into the financial document posted with the goods issue for ledger 0L (two goods issues of 1 unit each)
Keep in mind that the COGS splitting document for these preliminary values is also created during the GI:
And for ledger 2L:
With the correspondent ledger specific COGS splitting:
Verify that released material cost estimates per ledger are applied to stock movements across all currencies and parallel ledgers:
11 Actual Costing
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SCOPE ITEM |
33Q Actual Costing |
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STEP (UPA-exclusive capabilities) |
Ledger-specific actual material cost |
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Business Case Coverage |
Ledger-specific contribution margin calculation, aligned with different accounting principles, is enabled since actual costing is performed per ledger and COGS are revaluated at the end of the period (PUP). This is an end-to-end process where full margin analysis can be reported by market segment and ledger, as costs are split by ledger across the entire value chain. |
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With UPA/Without UPA |
Monitor Material prices App exclusive for UPA (App Id F7245) Without UPA actual material inventory prices can only vary based on the valuation view (group/ profit center/ legal), and only one actual inventory price valuation is allowed in the legal view. Without UPA APP Manage Material Valuations (App Id F2680) should be used instead. |
Actual Price calculations are executed on a per-ledger basis: the Material Ledger derives actual prices and variance allocations separately for each ledger, so each ledger receives its own calculated actual price for materials. As a result, period-end ML close postings (inventory revaluation and COGS revaluation) are computed and posted per ledger, yielding different inventory values and cost of goods sold (COGS) amounts by ledger.
This closes the parallel valuation loop, enabling parallel FI postings and discrete contribution-margin reporting in Margin Analysis. In short, ledger-specific UPA plus Material Ledger close support a parallel value flow across end‑to‑end processes and let you analyse margins by ledger (see section 12. Profit Margins)
The different actual prices per ledger that are calculated for the legal valuation view can be analyzed and compared:
Or analysed for all valuation types, where you can see differences between actual prices, inventory prices and standard prices (for example you can see that the actual price for ledger 0L is 25,46 EUR, while the standard price is 22,81 EUR)
Stock and GI (COGS) are updated by ledger with the corresponding adjustment and market segments assignments (product, sales order…) when actual costing run is performed, adjusting preliminary COGS values (See section 8. Preliminary COGS Values) and posting both the actual values for COGS and the ending inventory values (delta posting). Let’s take a look at the results for Ledger 0L:
Line-Items posted during actual costing run:
The adjustment for ending inventory is calculated as follows:
(actual price – standard price) * ending inventory quantity = (25,46€/Kg- 22,81 €/kg) * 198 Kg = 524,45 €
The adjustment for COGS is calculated as follows:
(actual price – standard price) *GI from sales order quantity (period) = (25,46€/Kg- 22,81 €/kg) * 2Kg = 5,3 €
Let’s take a look at the results for Ledger 2L:
Line-Items posted during actual costing run:
12 Profit Margin
To complete the E2E flow, let’s review how margins are affected depending on the ledger/accounting principle used for their calculation:
Margin of 69.08 EUR: 120 EUR revenues minus 50.92 EUR Actual COGS (2uds * 25.46 EUR).
Actual COGS are calculated based on actual material costs. Note that the COGS split is retrieved from the actual costing cost components for ledger 0L and a delta posting is created between actual and standard cost component splits from the preliminary COGS values (see Section 8. Preliminary COGS Values )
You can check it in the image below where the quantity is set to 2, which is the same as the sales quantity:
That comes from PUP calculated during actual costing run: 25,46 €/UN
Same logic applies to ledger 2L, with every specific ledger amounts:
Margin of 51,92 EUR: 120 EUR revenues minus 68.08 EUR Actual COGS (2uds * 34.04 EUR).
Other App to analyze ledger-specific contribution margins:
This brings us to the final step of the end-to-end process example.
Another Important part of the UPA implementation is the Best Practice Activation
BEST PRACTICES ACTIVATION (AND DEACTIVATION)
As you may know, you can find SAP Best Practices in the SAP SIGNAVIO Process Navigator.
When Activating SAP Best Practices to Implement UPA, the first thing to be considered from a functional point of view, is which UPA Best Practices needs to be activated and which ones (not valid for UPA) needs to be deactivated deactivated. Second thing to consider is required business functions. Please pay extra attention to SAP's standard documentation based on your system version. In fact UPA has its own Best Practices and request to deactivate some others. Furthermore, UPA has it's own post activation steps based on business scenarios you're going execute on system. You can check further details in the Administration Guide
Please keep in mind that UPA comes with a set of UX mandates like usage of new Fiori apps instead of GUI transaction codes which makes Fiori usage a must for the system.
When setting up a Best Practice Client, specially in a multiple country activation, one important step is to set up wisely the client currency (transaction SCC4). Also, how to setup that client also makes activation step more complicated or simple. We have chosen the “Alternative 1” to make it more simple. “Alternative 2” brings some pre-delivered configuration content from client “000” and some of them may be conflicting the ones delivered with Best Practice content. Please check the Administration Guide for further details.
Some specific UPA best practices are related to the activation of the FINS_PARALLEL_ACCOUNTING_BF business function. Please check the Administration Guide.
P.S. Regardless of UPA activation, please pay extra attention on activating required business functions and selecting best practices since there are some licensing implications.
To conclude, there are already many other blog posts written by the Product Owner and other SAP community members .
Universal Parallel Accounting in S/4HANA
Overhead Accounting with Universal Parallel Accounting in S/4HANA 2025
Overhead Accounting with Universal Parallel Accounting S/4HANA 2022
Profit Center Valuation with Universal Parallel Accounting S/4HANA 2023
Inventory Accounting with Universal Parallel Accounting in S/4HANA 2022
Please be aware that as stated by OSS 3191636 UPA can be activated via a Business Function. For details, please refer to the Business Function Documentation
If you have more questions about UPA you can check the UPA FAQ contained in OSS 3265275;
If you want to start your journey with UPA it is suggested to apply for SAP Early adopter care program in UPA
If you need to know how functionalities may evolve in future S/4HANA releases please have a look to the SAP Roadmap Explorer
Brought to you by a group of SAP Consultants in collaboration with the S/4HANA RIG
Helena Carro @Helenacarro
Mehmet Canca @mehmetcanca
Vineek Gopan @Vineek
Gianluca Taccone @gianluca_taccone
Javier Trinidad @Javier_Trinidad
