Parallel accounting in SAP in accordance with the German Commercial Code and International Accounting Standards / International Financial Reporting Standards

Since 2005, listed EU companies have been required to prepare their consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS) – formerly known as the International Accounting Standards (IAS) – (EU Directive 1606/2002 from 7/19/2002).

Companies that already report according to the US-GAAP have until 2007 to make this transition. Even companies that are not directly affected by this directive are planning to prepare statements not only based on the German Commercial Code, but also based on the IAS/IFRS. The reasons for this decision include:

  • IAS/IFRS corporate policies that German subsidiaries must comply with
  • Increasing globalization of the economy and the capital market
  • More transparency for competitive advantages
  • Short closing times (fast close)
  • Bank rating criteria (Basel II), which require transparent reporting that allows international comparison

For example, the IAS/IFRS require companies to account for their results by segment and region. This means that companies that already account for multiple categories may have to make even more changeovers for fiscal consolidation and reporting. All currency adjustments for the subsidiaries must be made with regard to the goodwill in the corporate group’s equity. This guideline alone requires an automated process for equity clearing.

Companies also have to publish appropriate figures from the previous year for comparison. In practice, this means that, for example, the opening balance sheet for 2004 is already prepared in accordance with IAS/IFRS based on the financial statement from 2003, so that the IAS/IFRS requirements are effectively already being taken into account at the same time in 2004.

Regardless of the corporate changeover date, this requires specialized support and a custom implementation concept for the specific company that goes beyond simple fulfillment of technical duties. If the far-reaching consequences are identified early and at all levels, the company can reckon with a rapid implementation.

The same holds true for implementation in the data processing system. An SAP system inherently offers all the required functionalities for parallel accounting, but adjustments are necessary in almost all modules and applications, e.g.:

  • Financial accounting: Presentation of value adjustments
  • Asset accounting: Parallel accounting
  • Controlling: Segment reporting for the appendix
  • Materials management: Evaluation of long-term production orders, inventory valuation

There are different options for meeting these requirements. This means that companies need to consider and plan carefully in advance. Benefit from our consultants’ experience and expertise as they support you with our practical approach to planning and implementing your IAS/IFRS project. Of course, we can also help you implement parallel accounting according to the German Commercial Code and the US-GAAP or UK-GAAP. Make a non-binding appointment with us today.

A fact sheet is available for download. Please also read our press release about implementing an IAS/IFRS project at HARPEN.