Concept of Leading Ledger in SAP S4 HANA

  • By Priyanka Jubre
  • June 26, 2024
  • SAP
Concept of Leading Ledger in SAP S4 HANA

Concept of Leading Ledger in SAP S4 HANA

The Concept of Leading Ledger in SAP S4 HANA is an area in the general ledger application that stores accounting documents based on different accounting principles.


What is the use of a Leading Ledger?

The leading ledger is based on the same accounting principle as that of the consolidated financial statements. If you use the account approach for parallel accounting, you post all the leading ledgers to th. This leading ledger is integrated with all subsidiary ledgers and is updated in all company codes.

There are two types of ledger we r using in SAP HANA 

  1. Extension Ledger
  2. Leading Ledger

An extension Ledger is a Ledger that builds the basis for reporting and financial statements in Accounting-related transaction data and journal entries.


How do Extension Ledgers Work?

 Extension ledgers inherit the configuration settings of their underlying ledger. They cannot have differing currency settings or FYVs. However, they can have different accounting principles, posting period variants, or company codes assigned to serve their specific purpose. With  SAP s4 HANA, nonleading ledgers are fully integrated and posted in real-time across all applications. So, let’s examine how you can configure ledgers in SAP.


Most importantly, you must define which ledgers are required in your organization from the beginning; subsequent introductions of ledgers can be complicated and will require additional effort. The accounting and taxation reporting requirements must be discussed in detail with the business. The leading ledger should represent the main accounting framework used by the group.


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For most companies in Europe and other regions, that main accounting framework would be International Financial Reporting Standards (IFRS) but in the United States, the main accounting rules are based on US Generally Accepted Accounting Principles (US GAAP). So, most big US companies opt for US GAAP for the leading ledger, then many of them have IFRS in a non-leading ledger. In addition, a wise approach is to set up non-leading ledgers that represent local US GAAP and local tax rules for companies with significant international footprints. Companies that will roll out to various markets would undoubtedly find that, at least in some countries, these ledgers will be required, so we recommend setting them up from the beginning and activating them only for the countries where they’re needed. Some countries are known to have complex local tax requirements, such as Russia and Brazil, among others, and for them, local tax ledgers are a must.


Now, let’s delve into the configuration of ledgers. Follow the menu path Financial Accounting > Financial Accounting Global Settings > Ledgers > Ledger > Define Settings for Ledgers and Currency.


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Priyanka Jubre

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