Accrual Engine

AC205 Lesson: The Accrual Engine

Lesson: The Accrual Engine

Lesson Overview

This lesson describes how the Accrual Engine works.

Lesson Objectives

After completing this lesson, you will be able to:

Describe the generic functions of the Accrual Engine

State the advantages of using the Accrual Engine in comparison to normal

accrual procedures

Activate an application component of the Accrual Engine for a company code

List the required closing activities for the Accrual Engine

Business Example

You will learn about how the Accrual Engine works.

Figure 58: Application Components of the Accrual Engine

The Accrual Engine is a generic tool for calculating and creating accrual postings.

As input it receives basic data that describes the subject matter to be accrued,

for example, data for a rental agreement. The Accrual Engine uses this data to

calculate the accruals and creates the related periodic postings.

2006/Q2 2006 SAP AG. All rights reserved. 165

Unit 5: Profit and Loss AC205

Just like the motor of a machine, the Accrual Engine itself is not visible for the

end user. Instead, the user works with the application components of the Accrual

Engine. The subjects to be accrued are entered there and are forwarded to the

Accrual Engine.

SAP develops and delivers the application components of the Accrual Engine.

They cannot be developed by customers. The application component always

refers to a special accruals scenario and provides an optimized user interface

for this scenario.

The Accrual Engine is used amongst other things for:

Manual Accruals in Financial Accounting

Provisions for Awards

Lease Accounting

Intellectual Property Management

Additional application components will be delivered in future extensions.

Figure 59: Interaction with the Accrual Engine

The diagram shows the interaction between the Accrual Engine and the

application component.

166 2006 SAP AG. All rights reserved. 2006/Q2


The Accrual Engine stores two types of data:

Basic Data

The basic data consists of a description of the subject to be accrued (accrual

object) and all other information required for carrying out the accruals. Basic

data is time-dependent.

Accrual Engine Documents and Totals Records

All accruals postings create documents in the Accrual Engine (Accrual

Engine documents) and update fiscal year-specific totals records. The

Accrual Engine documents automatically create corresponding documents

in FI. Various levels of summarization are possible. If errors occur during

the FI update, you can trigger this again manually.

Usually, two main processes are triggered from the application component:

Create/change basic data Depending on the Customizing settings, an

opening posting may be made immediately.

Periodic start of the accrual run or reversal of an accrual run

An Info system gives you direct access to totals records and documents in the

Accrual Engine. You can also carry out accruals simulations.

Figure 60: Advantages of the Accrual Engine



In comparison to standard methods of carrying out accruals, the Accrual Engine

has several advantages.

The Accrual Engine calculates the accrual amounts automatically. You do

not have to calculate the amounts manually and enter them as fixed values in

recurring entry documents.

You can make periodic accruals postings automatically as

performance-optimized mass data processing using an accrual run. The

delta amount of the cumulative accruals minus the accruals already carried

out is posted. If the amount to be accrued changes, the accruals amounts

are adjusted automatically.

You can simulate planned future accruals. Depending on how the application

component is configured you can also carry out complete simulation

scenarios.

The Accrual Engine supports parallel accounting with either different

account areas or parallel ledgers.

An extensive Information System provides information about planned

accruals and accruals that have already been carried out.

Figure 61: Activate the application component

To activate an application component of the Accrual Engine you have to carry out

the following Customizing activities:

The application component must be assigned to the company codes that

are to use it.

The required accounting principles must be defined if this has not already

been done.

The application component must be assigned to the required combination of

accounting principle and company code.

The current fiscal year must be open for the application component.



Figure 62: Closing Activities of the Accrual Engine

The Accrual Engine requires only a small number of closing activities of a purely

technical nature.

Reconciliation: Accrual Engine/General Ledger

Here, Accrual Engine documents and General Ledger documents are

reconciled with one another to check whether the transfer to the General

Ledger was complete and without errors.

Balance carryforward

At the end of the fiscal year you have to carry forward the balances of the

accruals objects into the next fiscal year. This has nothing to do with the

balance carryforward in the General Ledger.



Lesson Summary

You should now be able to:

Describe the generic functions of the Accrual Engine

State the advantages of using the Accrual Engine in comparison to normal

accrual procedures

Activate an application component of the Accrual Engine for a company code

List the required closing activities for the Accrual Engine


AC205 Lesson: Manual Accruals

Lesson: Manual Accruals

Lesson Overview

This lesson describes the application component Manual Accruals.

Lesson Objectives


Describe how the application component Manual Accruals works

Define subjects to be accrued as accrual objects

Describe the basic settings of the application component Manual Accruals

Business Example

You have been asked to make the basic settings of the application component

Manual Accruals.

Figure 63: Manual Accruals with the Accrual Engine

In the application component Manual Accruals, you create the basic data

manually via a simple user interface.



The basic data is usually subject matter to be accrued based on different contracts,

such as rental agreements, insurance contracts, and so on.

Hint: There are also two function modules that you can use to import

accrual objects from a database table via a batch job. These are:

ACAC_OBJECT_CREATE_EXT to create an accrual object

ACAC_OBJECT_MODIFY_EXT to change an accrual object. If it does

not exist yet, it is created.

A report must be written to select the data, export it, and adjust it to the structure

of the function modules. The function modules can then be called up to load the

data into the Accrual Engine. You can also transfer legacy data this way (for more

information read the IMG documentation).

Figure 64: Deferrals

You have to create deferrals when an expense or revenue is posted in the current

period, but is incurred or earned partly or completely in the future.

The slide shows an example of a deferral where an expense invoice for 120

is received at the start of the year and posted in the first period. However, the

invoice covers a contractual service that is used throughout the entire year (for

example, insurance). The expense must therefore be distributed over all periods of

the fiscal year equally.



Figure 65: Posting Deferrals

Following on from the example on the previous slide, the posting for the deferrals

is as follows:

The invoice for 120 arrives in Accounts Payable in the first period and is posted

there. The posting record is:

Expense to Vendor

Using an opening posting, the entire amount is transferred from the expense

account to an account for invoice deferral items (ARAP). The posting record is:

Prepayments and Accrued Income to Expense

During period-end closing, part of the amount is posted back to the expense

account from the prepayments and accrued income account, which means that the

prepayments and accrued income are reduced. Posting record:

Expense to Prepayments and Accrued Income

If the contract is terminated prematurely, the entire residual amount is posted to

an expense account. Posting record:

Expense to Prepayments and Accrued Income



Figure 66: Accruals

You have to create accruals when an expense or revenue is to be received in the

future, but is incurred or earned partly or completely in the current period.

The slide shows an example of an accrual where an expense invoice for 120 is

received at the end of the year and posted in the last period. However, the invoice

refers to a service that is used during the entire year. The expense must therefore

be distributed over all periods of the fiscal year equally.

Figure 67: Posting Accruals



The posting record for accruals is Expense to Other Payables (or provisions) in

each period. It is posted to the account

Other payables: If you are certain about the reason and amount of the accrual

Provisions: If you are uncertain about the amount and/or reason of the

accrual and can only estimate it

In each period in which you carry out accruals, the credit balance on the account

Other Payables (or Provisions) increases.

When the invoice is finally received, it is posted as

Other payables (or provisions) to vendor The other payables are thereby converted

into real payables.

Figure 68: Definition of the Subject Matter to be Accrued

The subject to be accrued is defined as an accrual object. You make this definition

manually in the application component Manual Accruals. Accrual objects in

this application component are identified uniquely for each company code using

an accrual object number from a defined number range.

The accrual objects are grouped in accrual object categories for manual accruals.

These summarize the subject matter of similar accrual objects. For example,

insurance contracts (accrual objects) can be assigned to the accrual object category

Insurances.

You can use accrual object categories

As a navigation level to find accrual objects more easily

To assign special customer-defined parameters that describe the accrual

object in more detail



Each accrual object can have several accrual items. An accruals item describes

how a related accruals type (usually costs or revenues) is accrued using a specific

accounting principle.

Figure 69: Accrual Calculation

The accrual is calculated for each accrual item, for each combination of accrual

type and accounting principle specified. In addition to the amount to be accrued

and possibly also a quantity to be accrued, the accrual item contains an accrual

method.

A function module is defined for the accrual method, and this calculates the

accruals. For the Manual Accruals area, several function modules are delivered.

However, you can also develop your own function modules for the accruals.

The function modules delivered that you can also use for manual accruals begin

with ACE_DS_* and are listed on the slide.

You can also define derived accruals types. These accruals amounts are calculated

from the accrual amounts of other accrual types and not directly. However, derived

accrual types are not particularly relevant for manual accruals and are more

important for other application components.



Lesson Summary

You should now be able to:

Describe how the application component Manual Accruals works

Define subjects to be accrued as accrual objects

Describe the basic settings of the application component Manual Accruals



Lesson: Posting Control and Account Determination

Lesson Overview

This lesson explains how to configure the posting control and account

determination for the Accrual Engine.

Lesson Objectives


Define the posting control of an application component in the Accrual Engine

Configure the account determination of an application component in the

Accrual Engine using rules

Business Example

The employees in Financial Accounting want to show you the different posting

options available with an application component.

Figure 70: Posting Control


AC205 Lesson: Posting Control and Account Determination

The posting control is defined for each

Company code

Accounting principle

Accrual type

You define

How frequently accruals are carried out (for each posting period, daily,

monthly, quarterly, every six months, annually)

The level of summarization for postings before the update to FI You can

make the following settings

No Summarization: A separate line item is created for each accruals

item.

Summarization at accrual object level: A line item is created for each

accrual object.

Maximum Summarization: The postings are summarized to the level

of different additional account assignments.

Figure 71: Account Determination Task

The purpose of account determination is to

Determine the document type

Determine the debit account (here: target account)

Determine the credit account (here: start account)



For each accrual type, you define in Customizing which postings are to be made

automatically and, therefore, for which postings account determination is required.

None (the accruals are calculated in the Accrual Engine, but not posted)

Only the opening posting

Only periodic postings (useful, for example, for accruals)

All (opening posting, periodic accruals, and - if the accrual object is

terminated prematurely - a closing posting)

For parallel accounting, the Accrual Engine supports

Parallel accounts

Parallel ledgers

For parallel accounts, you must configure the account determination of the

Accrual Engine accordingly, that is, the accounts must be found depending on

the accounting principle.

For the parallel ledger solution, you have to assign a special ledger for the

accounting principle in Customizing for parallel accounting.

Figure 72: Derivation Rules



Accounts are determined using derivation rules. These rules consist of

Conditions under which the derivation rule is executed (optional)

Determination of fields used in the derivation rule Here you define

Source fields (derivation rule input) All fields filled from the Accrual

Engine.

Target fields (derivation rule output) All fields that must be filled for

successful account determination, or user-defined parameters that you

can use for sequential derivation rules.

The rule entries themselves that derive the input for the target fields from

the content of the source fields.

In the case of manual accruals (application component ACAC):

You define parameters as required in the Data Dictionary structure

ACAC_PARAMETERS. In the standard system, this table contains one

parameter only with the name EXAMPLE. You can create additional parameters

by filling the corresponding fields in this DDIC structure. Instead of using this

structure directly, however, you make an entry in the INCLUDE structure

CI_ACAC_PARAMETERS. The new fields must be customer-defined fields

and start with Y or Z. Once you have activated the changed INCLUDE structure,

you can assign the new parameter to one or more accrual object categories and

maintain it in the corresponding accrual object.

Figure 73: Account Determination Rules

The derivation rules are summarized in a set of rules. Depending on how the

derivation rules are defined, they are processed either in parallel or sequentially.

Parallel derivation rules are processed sequentially and determine

independent results.

Sequential derivation rules must be created in the correct order, because

their results are cumulative.



Figure 74: Parallel Derivation Rules

The order in which parallel derivation rules are created and processed is

irrelevant, since their results are independent of one another. Examples are:

Derivation rules for different accrual objects that can be differentiated by

means of user-defined parameters. In the conditions, the system queries the

content of the user-defined parameters (for example, Parameter = Rents?)

and the derivation rule is only executed if the condition is fulfilled.

Derivation rules for different elements of the accounting document, that is,

one rule for the document type, other rules for the accounts.

Figure 75: Sequential Derivation Rules



The order in which sequential derivation rules are created and processed is

important. Examples are:

Derivation rules for account determinations with different levels of detail,

that is, the first derivation rule provides a very basic account determination,

the second a more detailed account determination for certain transactions,

and the third a very detailed account determination for other transactions.

Use of extended account determination. Using the extended account

determination you can summarize combinations of source fields with a

derivation rule for characteristic combinations. In a second derivation rule,

account symbols are determined from characteristic combinations. In a third

derivation rule, the accounts are derived from the account symbols.



Exercise 13: Accrual Engine, ManualAccruals

Exercise Objectives

After completing this exercise, you will be able to:

Post Accruals using the Accrual Engine

Business Example

Your company code AC## (## = your group number) has taken insurance which

costs 6000 units of your house currency each year. The insurance amount for the

current year was paid in full in the first month of the year.

Task:

Post the accrual for the insurance amount with the Accrual Engine.

1. Create an accrual object for company code AC## (## = your group number).

Choose the accrual object category Z_INSURANC. Enter Accrual for

Insurance Contributions Warehouse ## (## = your group number) as

the explanatory text for your accrual. You take the responsibility for the

accrual object yourself.

Use your cost center T-A20A## for the account assignment (## = your

group number).

For a time-based accrual, it is important to know over which period an

amount is to be distributed. This period extends over the current year.

Choose accrual type INSURA for your insurance contributions. The legal

principle to be used for the financial statements is the local accounting

principle LOGA. Your company has signed an insurance contract that costs

6,000 EUR per year. You want to create accruals for this amount.

2. Choose 'Check and Simulate'. As the parameter for the simulation of the

allocation posting, choose 01/01 of the current year. The period is to be

determined from this key date. Look at the results of your simulation.

3. Save your accrual object.

Caution: Make a note of the number of your accrual object.

Look at the accounting document. What is the entry in the document header

text? What is the text in the line item? From the accounting document, go to

your original document (= Accrual Engine document) which was created by

the Accrual Engine.

Continued on next page



4. Display the line items of the Accrual Engine in the information system of

the Accrual Engine. First select only actual values for your company code

and your accrual object. Then select the simulated values for reporting key

date 03.31 of the current year.

5. Execute an accrual/deferral run for the first posting period.

Start your periodic accrual/deferral run. Restrict the general selections to

your company code, accounting principles, accrual type, and accrual object

number. As the key date for the accrual, choose 01.31 of the current year.

First carry out a test run, and then an update run.

In the information system, display the totals and the line items of the Accrual

Engine. Restrict the selection to your accrual object number.


Accrual Engine

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