1. Closing 4.6fi_27.1 Chapter 27 Closing Closing is the periodic process of reviewing system reports and executing system programs in preparing the legal financial statements of the organization. Chapter Objectives –Provide an understanding of the closing process as it is supported by the system. –Provide an understanding of the system and business requirements involved in period-end and year-end closing. –Explain the purpose of executing the various reports and programs used to support the closing process.

2. Closing 4.6fi_27.2 Close Prior Posting Period Open New Posting Period System Requirements for Closing

3. Closing 4.6fi_27.3 Period Closing Where do I start???? Pre-closing activities Financial closing Managerial closing

4. Closing 4.6fi_27.4 Pre-Closing Activities Post journal entries to record recurring entries and accruals. Make sure all entries have been included from the entire system (depreciation, material valuations, salaries, invoicing complete, etc.) Make sure all external programs affecting the trial balance have been interfaced.

5. Closing 4.6fi_27.5 Financial Closing Foreign Currency Valuation Execute the Financial Accounting Comparative Analysis. Create financial statements for review and analysis. Post final adjustment entries

6. Closing 4.6fi_27.6 Foreign Currency Valuation Types –Receivables & Payables (when clearing) –Balance Sheet Accounts Maintained in Foreign Currency (RFSBEWOO) –Open Item Accounts (SAPF100)

7. Closing 4.6fi_27.7 Amount in BRR - 4,800 Amount in USD - 5,000 Step 1 - Invoice Amount in BRR - 4,800 Amount in USD - 5,200 Step 2 - Payment 200 USD Exchange Rate Difference Clearing a Receivable / Payable with an Exchange Rate Difference Automatic Posting To Gain / Loss Accounts Configured as Realized Exch. Rate Differences

8. Closing 4.6fi_27.8 Posting 1 100 FC Exchange Rate.80 Month End Exchange Rate.70 200 FC = 140 LC 100 FC 80 LC 100 FC 75 LC 200 FC 155 LC FC Account Loss from Exchange Rate Difference 15LC Revaluing Balance Sheet Accounts Managed in Foreign Currency Posting 2 100 FC Exchange Rate.75

9. Closing 4.6fi_27.9 Used when running automated valuation programs Combines Specifications – Exchange Rate Type – Document Types Valuation Method

10. Closing 4.6fi_27.10 US-GAAP Discounting Valuation Process Local GAAP Management (Political) Custom Algorithm Foreign Currencies Flat-rate individual value adjustment Valuations Receivables and Payables Receivables Valuation of Open Items

11. Closing 4.6fi_27.11 A / R A / P End of Period Different Exchange Rate Valuation POSTING Automatic (SAPFIOO) Posted to Adjustment Account Offset to Gain / Loss Account Foreign Currency Valuation of Open Items

12. Closing 4.6fi_27.12 1st step: Check if account has debit balance 2nd step: Clear total of all credit memo items to the oldest receivable item (baseline date) 100 - 110 = -10 Item 100: No revaluation 3rd step: Clear difference of 2nd step to the amount of next oldest item 80 -10 = 70 -> 70 * 10 % = 7 -> revaluation amount: 63 (= 70 -7) 4th step: Next younger item: 60 * 10% = 6 -> revaluation amount: 54 (= 60 - 6) Customer account 100 (01.01.00) 80 (02.01.00) 60 (03.01.00) Baseline dates 60 50 ReceivablesCredit memos Adjustment for: 30 days overdue: 10% 90 days overdue: 20% Flat-Rate Value Adjustment Current Date: 04.01.00

13. Closing 4.6fi_27.13 Explanation: Flat rate value adjustment (method 3) uses the result of the foreign currency valuation (method 1). Example: 1. Open item : 100 For. Curr. 170 Loc. Curr. 2. For. curr. val. result: 160 3. Flat rate val. adj. result: 160 - 10% = 144 Adjustment = 10% Method Base amount 3 1 Example 1Example 2 Method Base amount Explanation: Any valuation method (2,3,98,99) uses local currency amount of the documents. Example: 1. Open item : 100 For. Curr. 170 Loc. Curr. 2. Flat rate val. adj. result: 170 - 10% = 153 Flat Rate Value Adjustment Base Amounts

14. Closing 4.6fi_27.14 1st step: Check if account has debit balance 2nd step: Clear total of all credit memo items to the oldest receivable item 3rd step:Determine if any items are due beyond the discount date 4th step: Discount Items at 10%per year Item 2: $75.49, Item 3: $56.15 Customer account 100 (9.01.00) 80 (11.01.00) 60 (12.01.00) Due dates Receivables Interest Rate: 10% per year Discount Date: 10/01/00 Discounting Current Date: 04.01.00

15. Closing 4.6fi_27.15 Customizing Maintain parameters : Key date, reval. method, postings, doc type Valuat. Adj. key AB Adjmt. Account (B/S)G/L Acct 1 Target account (P&L)G/L Acct 2 Etc... Customer Master Documents No.:13000543 No.:19300534 Dispatch: Start time, start date, immediately Edit valuation run: Valuation transfer: Forward (line item update), (sample) posting, log display Line item update/posting No.:13000543 No.:19300534 Discounting and Flat Rate Value Adjustment - Steps Change valuations, display log, value list, delete Honda Ford

16. Closing 4.6fi_27.16 GR/IR Clearing Account 2000 34 GR/IR Account 1000 3000 21 Asset Account 3000 1 Vendor 1000 2 Goods Delivered but Not Invoiced 2000 43 A Single Balance Sheet Item Target Account GR/IR Account Allocation

17. Closing 4.6fi_27.17 Financial Accounting Comparative Analysis Customers Vendors G/L Accounts Totals from: Customers Vendors G/L Accounts Totals from: Customers Vendors G/L Accounts Transaction figuresIndexes Documents Program SAPF190 compares totals contained in the indexes and documents (customers, vendors, G/L accounts) with the corresponding account balances. Program SAPF190

18. Closing 4.6fi_27.18 End of Period Reporting Balance Sheet / Profit and Loss Statement General Ledger Account Information System –Financial Statement Versions –Key Figure / Ratio Reports Special Purpose Ledger - for reports with more customized format.

19. Closing 4.6fi_27.19 Account Carry Forward: Customer / Vendor Balance Carried Forward General Ledger Account Balance Carried Forward Year-End Closing

20. Closing 4.6fi_27.20 Automatic Line Items Balance Carried Forward

21. Closing 4.6fi_27.21 Managerial Closing Preliminary close of controlling accounting period. Reallocation and settlement of costs throughout the entire organization. Review and analysis of internal reports. Re-opening of the controlling accounting period to correct and adjust accounting data. Run FI-CO Reconciliation ledger Execute readjustment programs to ensure Business Areas and Profit Centers are in balance

22. Closing 4.6fi_27.22 Closing Chapter Summary Key Terms: –Closing –Valuation –Valuation Method –Flat Rate Adjustments –Discounting –GR/IR Account –Balance Carry Forward