The need for Parallel Accounting has been around for a long time and it has been used by customers operating internationally to fulfill their local and global reporting requirements. It made it easier for them to keep track of things like the different valuations of a product or service. But it also had some shortcomings when, for example, it came to keeping track of valuations across different business entities or at period-end closing when reporting from the subledgers needed to be consolidated but the ledgers and subledgers were not always supported consistently.
Enter, Universal Parallel Accounting. With UPA, customers have a harmonized architecture of accounting ledgers and currencies which makes period-end reporting simpler, reduces complexity across the entire company accounting landscape, handles different legal requirements across global divisions, handles multiple currencies at one time, and much more… UPA can essentially be divided into four main use cases and we have broken those down for you here:
Parallel Legal Valuations (Unconsolidated Views)
The market value of an item is almost never the same amount of money as a simple total of the cost of its parts. For example, the market-based value that you pay for those fancy collectible sneakers is much higher than the actual cost-based value for them to produce them. These are called multiple legal valuations and UPA can track these neatly across all of the global locations where a company might have legal entities to reflect the different requirements for asset and inventory valuation and comply with country-specific tax regulations. It also supports additional activities like optimizing service costs for subscription billing, and much more…
Alternative Fiscal Year
Not all tax years are created equal: Some start on January 1 while others start on April 1 (April Fools!). The Alternative Fiscal Year requirement supports these variations across the different global legal entities within a company and it has simplified tax reporting for our customers.
Parallel Valuations (Consolidated Views / Group Valuation)
Similar to the multiple legal valuations that we had just above, UPA also supports group and profit center valuations for management purposes. Group valuations might deviate from the legal requirements applicable to the legal valuations from before and they are used for real-time, on-the-fly business steering purposes such as understanding each entity’s contribution to the overall margin and Value Chain Analysis (VCA).
Multicurrency Capabilities
Naturally, with different global locations come different requirements for parallel currencies in the same entity. Of course, each location has its own local currency, but it may also require a functional currency depending on where it operates, or an index-based currency for high-inflation countries. UPA makes it possible for a company to track the value and cost in multiple currencies (for example the local currency of an entity, or the functional currency that a company reports in for valuations). These multiple currencies can then be ‘translated’ into the one single group currency of a business to understand the financial results. For example, SAP does business all over the world, but we report our financial results in our group currency Euros.
I hope this has helped you get to know UPA a little better. If you want more details or have any open questions, please read the more detailed blog posts of our Product Experts within SAP.
