Concept Of A Fiscal Year
Every business has to follow a certain accounting cycle in order to record the business transactions. Some businesses follow a January to December cycle while other businesses may follow an April to March cycle. The choice of the accounting year or the fiscal year depends on the business requirements. The fiscal year is usually a 12 month period over which all the business transactions are recorded. At the end of this period financial statements are prepared to review the performance of the business. These business requirements for the accounting year can be mapped into SAP by using a two alphabet identifier called the fiscal year variant.
A posting period is a period contained in the fiscal year over which transactions are recorded and clubbed together. Every transaction that is recorded in SAP has to be assigned to a posting period. Normally, every month is considered as a posting period which results in a total of 12 posting periods in a financial year. The special periods are meant for the year-end closing transactions. It provides flexibility to the accounting department to make adjustment entries while executing the year-end closing process.
The fiscal year variant can be used to define the following:
- Number of normal posting periods available in a financial year.
- Number of special posting periods available in a financial year.
- The duration of the accounting cycle i.e. a complete fiscal year or a shortened fiscal year.
- Whether the fiscal year is the same as the calendar year.
- Procedure to determine the current period while posting.
The fiscal year variant is defined at the client level and is therefore available to all the company codes in the client. If there is more than one company code which uses the same fiscal year configuration, then the configuration need not be defined again and again for each of the company codes. The settings can be defined one as once as a fiscal year variant and can then be assigned to multiple company codes. This saves time during new implementations and also reduces the errors that may happen due to repeated manual entry. The fiscal year variant is first defined and then it is assigned to the company codes for which it is to be used.
The fiscal year variant is one of the first configurations that is needed to be done while setting up the organizational structure in SAP. No transactions can be recorded without defining the fiscal year variant and assigning it to the company code. The fiscal year variant is used to define the normal and the special posting periods that are available for posting business transactions in a company code and the posting period variant is used to control which of these periods is open for posting.
Navigate to the implementation guide menu as shown in the screenshot below or execute the transaction code OB29 from the SAP Easy access menu display the fiscal year variant configuration screen.
Fiscal Year Variant Configuration (Main Screen)
The main screen for the fiscal year variant configuration is shown in the figure below. It lists all the fiscal year variants that are available in the current client.
Following settings can be done on the main screen for the fiscal year variant:
- FISCAL YEAR VARIANT: The fiscal year variant is defined as the two letter identifier. SAP best business practices suggest that all customized fiscal year variants should start with the alphabet ‘Z’.
- FISCAL YEAR IS SAME AS CALENDER YEAR:This option should be checked if the fiscal year is the same as the calendar year. This fiscal year variant will have 12 normal posting periods corresponding to every month of the calendar year. The starting of every posting period will be on the first day of the month and the closing will be on the last day of the month.
- FISCAL YEAR IS YEAR DEPENDENT: This option indicates that the link-up between the fiscal year and the calendar year should be redefined every year. This is required if the closing of a period is not on a fixed calendar date like the last date of the month.
- NUMBER OF NORMAL POSTING PERIODS: The number of normal posting periods in the fiscal year.
- NUMBER OF SPECIAL POSTING PERIODS: The last normal posting period is subdivided into special posting periods.
The total number of periods including the normal posting periods and the special posting periods can be 16 in a fiscal year. Special posting periods are used for year-end closing adjustments.
Fiscal Year Variant Configuration (Periods Tab)
The periods screen is shown in the figure below. It shows the details of the normal posting periods that are available in the fiscal year variant. It shows the months that are available for posting and the last day of the month when the posting period will be closed. It also defines which month should be considered as which period while posting business transactions. For e.g. in the screenshot below the 5th month of the year i.e. May will be treated as the second posting period in the fiscal year variant.
Fiscal Year Variant Configuration (Period Text Tab)
The period text tab is shown in the screenshot below. It shows the text to be used for both the normal as well as special posting periods in different languages. It is necessary to specify these settings by using a non-calendar year fiscal year variant.
Fiscal Year Variant Configuration (Shortened Fiscal Year Tab)
The shortened fiscal year tab is shown in the screenshot below. A shortened fiscal year is a fiscal year with less than 12 months. Such a fiscal year may be required while having a transition from April-March cycle to January-December cycle. In such a case the shortened fiscal year will be defined from April-December and then the January-December fiscal year variant can be used. This allows the company to close all the transactions up to December and start afresh from January with the new fiscal year variant.