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REFX_CE - Balance Sheet Valuation: Overview

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The functions for the balance sheet valuation of real estate contracts and leases allow you to show contracts in the balance sheet according to different accounting principles (such as IFRS, US GAAP, HGB).

Process Description

The postings needed in conjunction with contract management are modeled in two steps:

• Posting of receivables/payables

Receivables (vendor contracts, lease-out) and payables (customer contracts, lease-in) are posted using periodic posting (transaction RERAPP). This posting is based on the payment cash flow generated from the contract conditions through activation of the contract and any object cash flow that is generated. The postings are made independent of the accounting principle. The postings to customer or vendor accounts that are generated in this way are the basis for triggering the payments. If you are using the balance sheet valuation, the offsetting entry is made to a clearing account, which is cleared by the clearing posting of the balance sheet valuation.

If you want to trigger postings necessary for the payments outside of the contract, periodic posting is not required. In this case, you perform the valuation based on statistical conditions.

• Posting of balance sheet valuation

The function of the balance sheet valuation allows accounting-principle-specific valuations of the contract and corresponding postings. The following steps are necessary:

• Add valuation rules to the contracts

• Execute the valuation: A valuation cash flow is generated as the basis for the valuation postings.

• Posting of the valuation, transaction RECEEP

• For vendor contracts when asset accounting is active: Depreciation run (FI-AA) for posting depreciation of right-of-use assets

Requirements

1. Activate the CE01 subfunction.
2. Set up contract dialog

To enable balance sheet valuation, two tabs are provided in the contract. These contain:

• Valuation rules

• Results of the valuation with the valuation cash flow

The tabs for valuation can be shown in the screen sequence for transaction RECN for those contract types for which the balance sheet valuation is relevant. The screen sequence used for transaction RECN is defined in the Customizing settings for the contract type. For an alternative screen sequence for the contract, you can use transaction RECECN. The screen sequence that is used in this transaction can be found in the Customizing settings for Valuation-Specific Attributes for Contract Type in Company Code.

The use of different screen sequences allows you to control access to the contract data by the respective users responsible. For example, you could use transaction RECECN to maintain the valuation data, while operative contract management uses transaction RECN, where the valuation data may be hidden.

The respective screen sequence used is to be enhanced with the valuation parameters and the valuation (views REGC90 and REGC91, subscreens SAPLREGC 1040 and 1091, sections REGC90 and REGC91, screens REGC90 and REGC91). After changing the screen sequences, start transaction BUSP for application object REGC and generate all screens.

Note that the valuation for contracts with contract category 1 (= Internal Contract) is not supported.

1. Enhance authorizations

Note the explanations for the authorization objects F_RECE_*. Configure the authorizations for your users accordingly.

Financial accounting

The balance sheet valuation of real estate contracts and leases allows parallel valuations and postings for different accounting principles. While the periodic posting RERAPP always posts to all ledgers, the valuation posting RECEEP can post on an accounting-specific basis. You control at valuation rule level which accounting principle is used.

If you are using the ledger solution, you need to make the assignment to the accounting principle in the valuation rule.

If you are using the account solution, you need to control account determination for the individual valuation rules in such a way that the posting is made to the correct accounts assigned to the respective balance sheet variant. In the valuation rule, you need to assign the relevant depreciation area to asset accounting on a company-code-specific basis in this case.

According to the rules of IFRS 16 and FASB 842, tenants and lessees must show their contracts in the balance sheet. The possession dates for the contract object must be shown as right-of-use (RoU) to which a leasing liability relates.

• Initial posting after receipt of contract

RoU asset to leasing liabilities (posting via an asset clearing account)

• Postings at period-end closing

Leasing interest expense to leasing liabilities
Leasing liabilities to allocation of rental payments
Expense from depreciation to RoU asset

Asset accounting

According to the accounting principles IFRS and US GAAP, RoU assets are to be managed separately from other fixed assets. You therefore need to set up corresponding asset classes.

Asset transaction types

When classic asset accounting is used, accounting-specific postings to the RoU asset need to be assigned to the asset depreciation areas that represent the respective accounting principle. The assignment is made using asset transaction types, which are limited to the specific depreciation areas. These asset transaction types are derived from the flow type stored in the valuation rule: Assign Asset Transaction Types.

Depreciation key

If you do not want to use asset accounting, you can post directly to balance sheet accounts as an alternative. You can specify whether you want to post to asset accounting or post directly to general ledger accounts by defining the integration type in Customizing under Valuation-Specific Attributes for Contract Type in Company Code or in the valuation rule.

Controlling

If balance sheet valuation is not active, costs that are assigned to the contract after the partner-related cash flow has been posted are transfer posted to the originating objects during the periodic posting RERAPP based on the object cash flow.

Costs of rent/leasing (object) to costs of rent/leasing (contract)

This function of this transfer posting is replaced by the valuation postings. Costs on the controlling objects arise if the leading ledger (such as IFRS US GAAP) capitalizes a RoU no longer during the periodic posting but through posting of depreciation and interest. This normally leads to a different cost distribution over the term of the contract.

Transition phase

In the periodic posting (transaction RERAPP), the payment-relevant postings are carried out based on the partner-related cash flow. In the case of vendor contracts, the posting:

Costs of rent/leasing to vendor

To ensure consistency when valuation is active, the posting of the rent/leasing rate in RERAPP has to be redirected from the costs of rent/leasing account to the allocation of rental payments account as soon as the valuation is active. To do this, you need to enter the allocation of rental payments account under Replace Account Symbols in the Account Valuation field (balance sheet account).

The valuation postings replace the function of the postings from the object cash flow. Therefore, the object cash flow is terminated with the effective date (start of valuation or start of valuation posting). Depending on the settlement period for the conditions, subsequent postings in the partner and object cash flow may be required:

• Periodic conditions with settlement periods that are intersected by the effective date (for example, annual conditions and effective date 2019-04-01) are automatically and proportionally split in the cash flow into a previous operating lease (to the effective date) and a new RoU asset (as of the effective date).

• One-time conditions for which the settlement period exceeds the effective date must be adjusted manually.

Termination of the object cash flow and splitting of the cash flow items is triggered by the initial valuation posting. We therefore recommend that you execute the previous partner and object transfer postings (RERAPP) for the settlement periods of the opening period as follows:

• Initial valuation posting before the periodic posting or

• Partner and/or object cash flow before the initial posting. However, it is then mandatory to post RERAPP again after the initial valuation posting has been made.

If you are using customer-specific applications in conjunction with the object cash flow, you need to modify these.

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