Finance in S4/HANA 1610 the

what, why and how

Published on December 4, 2016
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Ugur Hasdemir
FollowUgur Hasdemir
SAP Finance Consultant at Delaware Consulting Netherlands

Nowadays there is a tremendous interest in S/4HANA, especially

from current SAP customers. It's about what, why and how to go to
S/4HANA. This motivated me to start writing a series of blogs on the
subject matter.

In this part 1 of the blog I will explain the what and the why of
S/4HANA. In part 2 the How will be explained further.

Let's start from the beginning by knowing the product. The What. In
the title of this post I say 'Finance in S/4HANA' and not 'S/4HANA
Finance'. That has a reason which you will find out below. This post
expects some entry level knowledge about S/4 HANA and the HANA
technology in general. I will dive into the different S/4 HANA
product versions and the Finance specific topics.
The What... Let's know the product
In 2014 SAP introduced the simple innovations starting in the area of
Finance. The new product was initially named Simple Finance and
at that time there were already rumors about Simple Logistics. The
Simple naming convention lasted until the release of Simple Finance
2.0. In 2015 SAP announced that the name Simple Finance will be
changed to S/4 HANA Finance. By doing this, SAP introduced
heterogeneous naming across different product lines. Simultaneously
it created a lot of confusion with all the different release numbers.

Let me try to help you understand the differences. As you can see in
the figure below, S/4 HANA Finance is a different product than
S/4HANA (Enterprise Management).
S/4HANA Finance includes only the finance innovations
(replacement of classis FiCo) on to the already existing system. So
everything in logistics will remain as it is. You can imagine that the
migration effort to this product is lower than directly going to S/4
HANA. More about this in the How topic.

In S/4HANA 1610, SAP has included all the available functionality of

the latest release of S/4HANA Finance 1605. This means that in terms
of Finance S/4HANA 1610 and S/4HANA Finance 1605 are in sync.
Except for some minor differences which are listed below. This make
things a bit easier to understand later on :).

The Why... Key differences and innovations in the

area of Finance in S/4HANA 1610
Now we have to understand the product. Lets look at the benefits of
S/4HANA for our organization. In this topic I will hit the key
differences compared to classic FiCo in R3.

To make the list comprehensive I will also mention some features

which were already included in Simple Finance 1.0 back in 2014.

One Single Source of truth and all accounts become GL

accounts

All actual line items will be stored in the new table ACDOCA. The
will be no redundant, aggregate or total tables anymore. All
dimensions of GL, CO, COPA, AA and ML will be in ACDOCA.

In the ACDOCA whe have multidemsional GL, parallel ledgers,

parallel currencies, 999,999 line items and custom defined fields. The
chalenges of gathering combined content of several tables to
represents the truth and reconcile the different level of detail stored in
the different components/tables of SAP (e.g. CO= much detail, Fi=
less detail) is now somehting of the past.
The reason of the merge of secondary and primary cost elements is
the fact that all actual line items will now be stored in one single
table. The ACDOCA. This also applies on purely (internal) CO
postings. You should not include these secondary accounts in your
P&L.
Parallel currencies and parallel valuation

In S/4HANA 1610 we can now have up to 10 parallel currencies per

ledger. Real-time conversion for all currency types is possible, Zero
balance per document is guaranteed for each currency and CO-area
currency is now calculated for all accounts (also non cost element).

Parallel valuation functionality is significantly enhanced in S/4HANA

1610. SAP now provides two options to store multiple valuations:

-Parallel valuation updated in parallel single-valuation ledger

o Separate ledger for each valuation
o Transparent separation of posting and reporting based on
different regulations
- Parallel valuation updated in multi-valuation ledger
 o Separate amount columns in the same ledger
o Reduce memory footprint
o Reduce effort and time for closing

See an example of the 2 methods below.

Profitability Analysis in S/4HANA 1610

With S/4HANA SAP focuses on the enhancement and integration of

Account based COPA. This is the preferred type of Profitability
Analysis. Costing Based profitability analysis is still available and can
be used in parallel, but there will be no integration with the Universal
Journal (ACDOCA table).

Below you will find the list of enhancements on Account Based

profitability analysis. Critical gaps of the past are closed.

Split of Cost of Goods Sold on multiple accounts based on cost

component split. This is done during posting of the Goods issue.
Split of production variances on multiple accounts. This is done
at order settlement.
3 new quantity fields provided in the line items and a BAdI for
conversion of the logistical quantities to common quantities in
Finance.
Real-Time derivation of market segment information from cost
postings (Cost Center, order etc.)

Summary of the enhancement:

Unfortunately there are still some limitations which are on the future
roadmap. Current limitations of Account Based profitability analysis:

Sales conditions which are not posting to GL (statistical) are not

supported
Realignment of characteristics which are changed after posting
are partially supported. Not for all characteristics!
Creation of sales order generates expected revenue, COGS etc.
in profitability analysis is not supported.

Attributed Profitability Segments

In my opinion, this is one of the greatest enhancements in Profitability

Analysis. I was always thinking why this was not possible in SAP and
now it is here! With a couple of additional configuration steps the
Attributed PA segment can be activated.

Another good example is when you have a debit memo request in a

Time & Material Service order which has a settlement rule for
settlement to COPA. The debit memo request will have an account
assignment to the service order and no profitability segment. That
means that you do not have the profitability segment information until
the service order is settled to COPA. With this new functionality you
can have the real account assignment to the service order and an
attributed assignment to a profitability segment. Great stuff!

Event based revenue recognition

The revenue recognition process is now fully integrated with the

Universal Journal. There is no separate storage for Revenue
Recognition data anymore.

Cost and revenues are recognized as they occur. The entry of the
source document will generate two postings. An entry for the initial
costs and revenue and an entry for the revenue recognition posting.
There is even a new app Event based revenue recognition for
monitoring of revenue recognition postings and manual adjustments.

Bank Account Management (lite)

In the old setup there were house banks and bank accounts in SAP.
In S/4HANA basic functions of the Bank Account Management
functionality of Cash Management is brought in to the core. This is
called Bank Account Management Lite.

The main new features and differences compared to the old house
bank and bank account setup are the following:

Group-wised account management

 Signatory
Overdraft Limit
Opening and Closing with approval process
Easily maintain bank accounts

To highlight the latest point. Bank accounts are now part of master
data and can be maintained by users through a dedicated Web Dynpro
or Fiori application. The house banks itself are still created in
customizing. Transaction Fi12 is obsolete and the new transaction
Fi12_hbank is introduced for this purpose.

So the process of creating the house bank and the house bank account
are separated and executed in two different places.

New Asset Accounting

Migrating to New Asset Accounting is a pre-requisite for migration to

S/4HANA (Finance). The reason and motivation behind New Asset
Accounting is:

No data redundancy
Reconciliation between GL and AA ensured
Transparent assignment of depreciation area to accounting
principle
Simplified chart of depreciation: only 1 CoD per valuation
No delta depreciation areas
Asset balance in real-time (APC posting run not needed)
Plan values in real-time
Usage of the New Depreciation Calculation Engine is mandatory and
the tables ANEA, ANEP, ANEK, ANLC, and ANLP are not updated
anymore in New Asset Accounting.

An example of the new posting logic during integrated asset

acquisition with two ledger with two different accounting principles:

As you can see a new technical clearing account is used to post

accounting principle specific documents. The balance of the technical
clearing account is zero.

Embedded Analytics and Reporting

SAP blends transactions and analytics in one system allowing

operational reporting on live transactional data.
I can talk hours about reporting in S/4HANA. With the new data
structure (e.g. ACDOCA), all the pre-delivered Virtual Data Models
(VDMs), the performance of HANA and the modern and state of the
art reporting tools/interfaces, there are so many new possibilities.

The concept of embedded analytics in S/4HANA is to provide pre-

defined models across the entire suite in which the business logic is
embedded. So the provided data models are delivering contextual
information rather than raw data.

In a nutshell I can say that the following reporting tools are mostly
used at my customers where I did S/4HANA implementations:

Fiori-reporting
Analysis for Office
SAP Lumira

Each tool has its own purpose of course. I can say that with out of the
box analytical Fiori apps and the KPI Modeler in SAP Smart Business
together with the Analytical Path Framework already provides a lot of
content and satisfies a lot of customers.
Some examples of Smart Business cockpit and the Analytical Path
Framework apps.

Next to these type of apps, SAP provided multi-dimensional reporting

apps. For example the Market Segment Actuals app in which I can
report on my P&L with in addition my Profitability Analysis
characteristics.
For more flexibility the products from the BO suite (additional
license) Analysis for Office and Lumira can be used. This is worth
another separate blog.

After reading this blog I hope you have gained a good understanding
of the S/4 product and the key differences and innovations in the area
of Finance. Part 2 will explain the How. With the different migration
scenarios and deployment possibilities.
Stay tuned! Soon I will also start sharing demo videos on specific
topics on an S/4HANA 1610 system.