SAP BPC has various features and functionality that will meet a wide range of business needs. In this eBook we will focus on the features most needed for financial consolidations. This will give you the reader a better focused perspective in how BPC fits into the financial processes associated with a close. The features highlighted are:
♦ Currency Translation: Currency Translation is referring to the process of converting balances of 1 specific entity/company from local currency to a global or presentation currency. Why is this function important?
Here is an example:
Let’s say we have 2 different companies that are subsidiaries of a parent company. The parent company is a US based company and needs to submit the consolidated financial statements to the US government agencies. One subsidiary is located in China and the other one is located in France. Each of the subsidiaries will have transactions in their local currencies (Chine subsidiary in RMB and France subsidiaries in EUR). We cannot just combine all of the numbers together and give it to the US regulators since the exchange rates between RMB and EUR to USD is not 1to1. So in order to produce consolidated financial statements we first have to convert the local currency transactions to a USD equivalent.
SAP BPC has standard delivered functionality to convert balances from local currency to a global or presentation currency (this could be USD or any other currency established as the presentation currency). There are multiple steps to be taken in order to perform currency conversion correctly.
Digram of Currency Conversion rule configuration landing page in Administration
♦ Account Reclass: Reclass of accounts is a standard delivered functionality that can provide users the ability to move a specific balance from one intersection to another intersection. Why is this function important?
Here is an example:
For most companies, after the year end process, there exists a need to reclass the current year’s earnings into retained earnings. Any money that is calculated at the end of the year to represent total Net Income or Current Year retained earnings should become part of the Retained Earnings in the New Year.
This reclass process typically happens in the Balance Carry Forward process. One way of achieving this is by utilizing standard configuration of reclass to perform this process.
Digram of Eliminations and Adjustments rule configuration landing page in Administration.
♦ Consolidations Logic: consolidation logic is one of the most critical pieces BPC has as standard functionality. There is facility in BPC to book consolidation entries automatically depending on relationships and balances between 2 different entities. Why is this function important?
Here is an example:
Let’s say we have the 3 separate companies again, 1 parent company that owns 2 subsidiaries (1 in China and 1 in France). Since we need to produce consolidated results we need to combine all of the financials to get a holistic view of what is happening for the company as s whole. But let’s say that the 2 subsidiaries do business with each other. The Chinese subsidiary sells its products to the French subsidiary. Now the 2 individual companies will have financial entries generated against that transaction. However, if we just combine all 3 companies together, that entry should not included since it is like moving a box from 1 room of a house to another room in the same house. These types of transactions need to be taken out when reporting consolidated results.
The consolidation logic facility is where someone can program these types of elimination entries to ensure the system is not including these types of transactions.
Diagram of Consolidation method setup in administraion
♦ Journals: SAP BPC comes standard with the ability to post adjustment journals. The journal functionality includes security options for segregation of duties where only 1 party can save the journal entry into the system and another party will be the one approving the journal program can keep track of each individual adjustment entry and who saved the entry and who approved the entry. Reports can be run against the journals to provide a summary of all the journals and all of the details attached to the adjustments.
Diagram of New Journal Input default for Environment shell
♦ Consolidation Monitor: The consolidation monitor is there to provide a dashboard area where users can monitor which entities have run through which processes. This functionality will provide administrators and business user mangers an overview of the entire consolidation or process cycle. They will be able to identify issues and follow up on all outstand processes that have yet to be executed.
♦ Microsoft Office Add-Ins: SAP BPC is integrated with the Microsoft office suite of applications (Excel, PowerPoint and Word). The main functionalities can be found in the Excel add-in. This is where you can trigger process runs, post journal entries, create reports and run other analysis. Data can be pulled straight into Excel reports or even a PowerPoint presentation and document.
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♦ Ownership Structures: SAP BPC handle entity ownership structures easily with standard functionality where a business user can adjust how a company is rollup up and how the entity should be consolidated. Each consolidation methodology can be defined in BPC and multiple methodologies can be structure and how the entity is defined.
♦ Interfaces: Interfaces can be setup to source data from multiple systems. These systems can be other SAP systems or other non-SAP systems. Interfaces can be setup but it may need custom programming depending on where the information is sourced form.