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Different GAAP postings in single NAV company

Posted on by 4

Hi Community,

We have a situation where a corp policy imposes a single chart of account (COA) to its legal entities. All good. Now besides the layout of the COA, there is the policy or 'how you post'.  People will post according to local statutory requirements (local gaap).

Now for group reporting, local gaap is not always correct. As an example, if a customer has not paid within 240 days, corp mandates it is taken out of revenue. However, local statutory wise, this needs to stay in revenue.

Today this is managed in a seperate set of books (usgaap book) in which these corrections are posted. Local gaap and usgaap are then added to come to the corp results.

Now, this is perceived as a work around and they would like to post both local gaap and usgaap in one and the same company. Struggling to think how this could ever work. You create a dimension or seperate accounts, but this could lead to all kinds of issues I fear.

Thoughts?

Much appreciated!

  • Verified answer
    Jens Glathe Profile Picture
    Jens Glathe 6,090 on at
    RE: Different GAAP postings in single NAV company

    Hi Gunther,

    well, let's try: Additional accounts for all US GAAP deviations - along with balancing accounts for these deviations, so that these will be a closed group of accounts where US GAAP deviations are posted to. From what I understand from your setup, this would eliminate the "consolidation" step to see one company in US GAAP (you can do this with account schedules). In effect, you would have two COAs (and differential books) living side by side, not touching each other - but in one company.

    Regarding Air Berlin: No, it was a custom job. I toyed with the idea to build a commercial product out of it, but it didn't work out yet. Too small a market for the vast effort. I know how to do it, though :)

    Regarding Force Dimension Balance: It is deep in the core of the posting logic. You would need to do a few things:

    1. Make sure that the "BOOK" dimension is always filled in (as you write). This can have some issues with system-created entries, the posting routines need to be checked that they use the correct dimensions for VAT, discount, adjustment postings. Also, Close Income Statement (for example) must be posted by book dimension. And a few other details. NAV2015 in the higher CUs is pretty good at doing it right. Not perfect, but good.

    2. Make sure that the balance check is by date, document no. and book dimension value. If not, a consistency error must be thrown.

    3. Make sure that you have "clean" subledgers (customers, vendors, fixed assets, bank). Transactions where these take part can only have the "local" book dimension. This avoids a lot of nasty special cases where the posting logic would have to be upped a few dimensions in complexity.

    All localized NAV codebases would have to be checked and tested against this, off course. From my experience, once you have good W1 implementations of your additional ledgers, this should be not too much of an effort, provided you're using a modern source control system.

    All in all, I would try to build it with the separate accounts method. GAAP deviations are only a few accounts compared to a complete COA, and ensuring that you can't mix these accounts with your normal posting stuff is easy. Consolidation accounts are simply the same as the normal accounts. It is the smallest possible customization while gaining what you intend. The other methods are more powerful (parallel ledgers is vastly more powerful), but it adds complexity while doing basically the same thing.

    If you need more information, please contact me by private message.

    with best regards

    Jens

  • GC-06081006-0 Profile Picture
    GC-06081006-0 4 on at
    RE: Different GAAP postings in single NAV company

    Hi Jens,

    Thanks for the feedback.

    This is how we work today: legal entities transact in a company called local gaap. We have a seperate company for each entity called us gaap. The sum of the two (consolidation) is indeer corp gaap. However having two post in 2 books and having to consolidate is perceived as cumbersome.

    I am not sure I understand your introduction on additional set of accounts and balancing accounts to leave the corp GAAP accounts alone?

    Concerning your other options:

    - AirBerlin: is that a commercially available addon?

    - Enforce balance by dimension. Indeed you could create a global dimension called 'Book' with values local, usgaap and make it mandatory. Balance by dimension to be enforced or make sure that 1 journal can only contain 1 dimension value.

    Now, continuing on this... would we not run into issue with localisations? I mean there are about 20+ countries in scope, will the localisation be able to filter the global dimension Book, dimension value usgaap out of all its fuzzy logic?

    thanks and have a great weekend.

  • Suggested answer
    Jens Glathe Profile Picture
    Jens Glathe 6,090 on at
    RE: Different GAAP postings in single NAV company

    Ooh, Danger, Will Robinson :) Seriously. If you want to handle it in one company in NAV, you can do it by posting to an additional set of accounts for the local GAAP deviations (and balancing accounts to leave the corp GAAP accounts alone). This would work, but it would go against corp policy. It would be the easiest work around, though. I would assume that you don't consolidate local GAAP figures? Like, ignoring them or mapping these to one account in the consolidation target? Problem solved :)

    The other options are:

    - Have several ledgers for the G/L, like: common, corp GAAP, local GAAP1, local GAAP2 and so on. Group them. And post for the groups that are affected by your transaction. More or less like SAP new G/L is working. We did that once at Air Berlin, one hell of an AddOn, extensive alterations to the posting codeunits, really neat in operation (all GAAPs live on the same COA). Had to be audited by a CISA (BDO), though.

    - Enforce balance by dimension code during posting. Filter the dimension codes when you do the reporting, or export to consolidation. <10% complexity of parallel ledgers, but not as powerful. To show different GAAP effects in the same COA it would be enough, though, IMO. Its an extension to codeunits 12 and 13 (at least), however.

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