Create and manage chart of accounts

This overview dialogue shows chart of accounts of a group in the selected period. The attributes of an account position (e.g. maturity) are displayed in a table:

Chart of accounts structure created in the CoA Group dialogue represents a common for all companies binding framework and is basis for the dialogue B/S Comparison in the Company tab. The only exception here is the CoA Company dialogue – chart of accounts in this dialogue can be extended company-specifically.

Creation of a chart of accounts is essential for calculation of deferred taxes under IFRS, German Commercial Code (HGB) and US-GAAP (so-called temporary concept). Adjustments to chart of accounts in the CoA Group dialogue affect only the currently selected period. Other GTC periods are not affected (also see Theoretical background to this chapter). You can create a new account position in the selected period by clicking the Create button. The attributes defined in a chart of accounts are described below. An existing data record can be edited by clicking on the pencil symbol. The magnifying glass symbol opens the selected data set in a read mode. Delete (archive) data sets using the recycle bin symbol.

Account positions data

The following attributes have to be created for every new account position that is an entry position. Entry positions are subordinate to superior account positions (e.g. technical equipment and machines belong to entry position which is subordinate to the superior account position Property plant and equipment).

Account ID Every account must have an individual ID. Once created, the ID cannot be edited anymore and even after deletion cannot be used again. This field cannot be used to enter the name of an account position. This happens after clicking the Create button in the newly appeared table area (see chapter Account positions in other languages).

Reporting Dimension The standard reporting dimension (---) is preselected during the consolidated balance sheet administration; this dimension cannot be edited. This attribute can only be changed company-specific in the CoA Company dialogue.

Superior account position By specifying the superior account position, the structure of the balance sheet is determined. Superior account position is the sum of all subordinate positions. In the overview dialogue and the B/S Comparison dialogue the structure is represented with the help of dot leaders displayed below the corresponding superior positions:

Relevant for current taxes This attribute defines whether an account position has influence on tax profit/loss. For German companies these are internal tax deviations (acc. sect. 60 par. 2 of Income Tax Ordinance). Only differences between the German Commercial Code (HGB) / or local GAAP and tax balance sheet will be considered further. The change of tax balance corrections affecting the profit and loss statement is calculated automatically by the GTC and used for calculation of current taxes: it is displayed in the Current Taxes dialogue as a proposed value.

Account is relevant for deferred tax Certain account positions such as e.g. equity or tax positions are excluded from the calculation of deferred taxes. When working with these positions the checkbox Account is relevant for deferred tax should not be checked. In this case the GTC ignores any balance sheet differences in these positions. Positions that are relevant for the calculation of deferred taxes (or TRR) are classified as temporary or permanent. So you need to activate the Account is relevant for deferred tax checkbox. When this checkbox is selected, the rows of the chart of accounts can be edited by entering allocation of balance-sheet gross differences. Thereof columns offer standard allocation options for the purposes of balance sheet differences split. Definition of the following attributes results in automated split option in the B/S Comparison dialogue.

Temporary differences P/L
Temporary differences OCI
Permanent differences P/L
Permanent differences OCI

Permanent balance sheet differences (e.g. in German tax law shares in affiliated companies section 8b of KStG (Corporation Tax Code)) do not result in deferred taxes. Activate the Account is relevant for deferred tax checkbox, since effects for tax rate reconciliation (TRR) can result from them.

Relevant for True Up

Results in temporary difference

In case of balance sheet differences the calculation of deferred taxes is started for the account positions marked as temporary. Activate this checkbox also for all account positions, where taxable (passive deferred taxes - DTL) or deductible (active deferred taxes - DTA) differences can arise. In addition, it is necessary to select the Account is relevant for deferred tax checkbox. On the contrary, account positions that are not classified as temporary are regarded as permanent. Permanent differences do not lead to the calculation of deferred taxes but can be relevant for tax rate reconciliation (TRR).

Income statement-related Account positions marked as P/L statement-related have a profit and loss statement effect during the calculation of deferred taxes. The profit and loss statement effect of deferred taxes is reflected in Summary and TRR dialogues. You have to select between P/L statement-related and temporary difference affecting equity. Profit-related effect of deferred taxes booking depends on underlying balance-sheet situation. If the changes in account position (e.g. depreciations) are booked in the P/L statement, the applying deferred taxes have to be considered as income statement-related.

Temporary difference affecting equity Account positions marked as temporary difference affecting equity do not have a profit and loss statement effect during the calculation of deferred taxes. They are reflected in the P/L statement-neutral OCI (other comprehensive income). Temporary difference affecting equity bookings can be seen in IFRS, e.g. under financial instruments (IAS 39) or pensions (IAS 19). Deferred taxes related to this value change should be booked as not income statement-related. The OCI effect deferred taxes is reflected in the dialogue Summary. Temporary difference affecting equity bookings can be assigned to a certain OCI issue (e.g. AFS securities). Individual issues can be managed in the master data dialogue Administration in the Revaluation surplus area.

Goodwill This attribute is relevant only for the period type Closing v1.

Short-term temporary difference This attribute defines maturity of an account position. The GTC enables division of deferred taxes into short and long-term positions. When the Short term temporary difference checkbox is activated, deferred taxes related to this account position are also classified as short-term. Maturity structure effects the netting of deferred taxes in the tool: short-term DTA are netted with short-term DTL and long-term DTA with long-term DTL. The classification of account positions as short- or long-term is not necessarily made.

Disclosed major class of deferred tax Activate this checkbox for account positions that have to be analysed for disclosure purposes. These account positions are aggregated in the Report DT dialogue. Either upper or lower level can be displayed for every position in the notes. This prevents double-counting of account positions. The generated (shortened) chart of accounts structure has to match the chart of accounts structure of the annual report. This ensures that the disclosures of the deferred taxes per account position can be taken directly from the GTC.

Tax non-recognition

Balance sheet differences calculated in the GTC dialogue B/S Comparison have to be assigned to the above-mentioned columns (Temporary differences P/L, Temporary differences OCI, Permanent differences P/L, Permanent differences OCI). If the Split differences checkbox is activated, the differences are grouped automatically. Otherwise, gross differences have to be grouped manually. This, for example, makes sense if a part of gross difference is classified as temporary and another as permanent

Automatic distribution of differences can be carried out in the B/S Comparison dialogue by clicking the button.

Account positions in other languages

Language settings can be made in the GTC dialogue Home. To view the data set in a local language, create it first. If no text is defined for a language, the data set can be identified only by account ID after selecting the language.

The Language table area (see the figure above) appears only after clicking the Create button when creating a new account position.

Theoretical background: tips on managing the chart of accounts

Chart of accounts created in the GTC is usually an extract from the chart of accounts of a group or a company.

Number of account positions It is recommended to limit the number of account positions to no more than 100. It must be ensured that the account position-related disclosures acc. to IFRS and German Commercial Code (HGB) requirements can be fulfilled. In addition, the aggregation level has to be sufficient to assign tax balance sheet values. Furthermore, a very detailed chart of accounts can increase processing time. A balance sheet value must be specified for every account position containing IFRS or German Commercial Code (HGB) value in the B/S Comparison dialogue.

Creating chart of accounts Position balance (e.g. ID 00000) should be the superior position of the chart of accounts. To identify the position as superior, select the entry (---) as superior position for the selected item. It means that the sum of all subordinate positions (e.g. 10000 assets and 20000 credits) amounts to zero (if not an error message appears in the B/S Comparison dialogue). The GTC does not differentiate between assets and credits positions, that is why add a minus sign before a position to indicate that it is credit (SAP logic).