Conceptual understanding regarding Annual Displacement Factor

[amarlal_lohano]

Dear Experts,

We have a query regarding Annual Displacement Factor in Fiscal Year Variant (FYV).

In our client, we have a fiscal year from 01-Jul-2014 to 30-Jun-2015, so in order to cover the posting periods, we have taken SAP standard FYV V6 (i.e. Jul-Dec with annual displacement factor -1 and Jan-Jun as 0). Now when we open posting periods from 1 to 12 of 2015 (In open and close posting periods - OB52) and try to post any GL entry on lets say 31-Mar-2015, system gives an error that Posting Period 09 of 2014 is not open, that means the system is considering the March as 9th period of FY 2014. Screenshots attached below

And considering the same scenario if we place Annual Displacement Factor as 0 for Jul-Dec and +1 for Jan-Jun, then the system is allowing us to post in the same date of 31-Mar-2015, that means, in that case the system is considering the March as 9th period of FY 2015.

As per our understanding, from both Accounting and Tax perspective we usually consider the Fiscal Year as 2015 / 2014-2015 instead of 2014 (when we post in between Jul-2014 to Jun-2015 (for which we have to use +1 as annual displacement factor)).

Our query is that in what cases/scenarios, we have to use -1 as Annual Displacement Factor, where an enterprise might have to treat its Fiscal year as 2014 instead of 2015, as SAP has used -1 as Annual Displacement Factor in many of its examples.

A detailed answer would be highly appreciated.

[Former Member]

HI Amar, maintain the posting periods give as period 01 yeear 2014 to period 12 year as 2015 system will allow thanks

[former_member709511]

Hi Amar,

It depends on the nomenclature requirement from business.

e.g. If a commpany is having April 2014 to March 2015 as the financial year & since majority of the months are coming in the calender year 2014. So in this case they may want to refer the entire April to March period as year 2014 & hence they will use -1 as displacement factor from January 2015 to March 2015 so that these last three months will come under year 2014. They will maintain posting period as below:

Month	Displacement Factor
Apr	0
May	0
Jun	0
Jul	0
Aug	0
Sep	0
Oct	0
Nov	0
Dec	0
Jan	-1
Feb	-1
Mar	-1

Regards,

Vaibhav G

[amarlal_lohano]

Dear Vaibhav,

Thanks for your reply. But again we are not completely satisfied with the answer provided, reason being, that In Accounting books, we have read two scenarios which identiy a financial year of fiscal year. 1) Accounting point of view 2) Tax point of view.

If we consider IAS/IFRS or US GAAP or any tax system of well known country, we will came to conclusion that we will consider the Financial year as 2014-2015/2015 instead of 2014, even if only a single month falls in the whole financial year.

Input from will be highly useful.

[former_member182098]

Hi Amar,

If your case displacement factor for (July to December - Period 1 to 6) is 0 and (Jan to June Period 7 to 12), then your fiscal year is 2014 (for 2014/15). Because you are telling the system, when you come to 2015, please do not treat it as 2015, make one minus and treat is as 2014 instead of 2015.

Had you configured differently for displacement factor for (July to December - Period 1 to 6) is +1 and (Jan to June Period 7 to 12), then your fiscal year is 2015 (for 2014/15). Because you are telling the system, you are still in 2014, but for these first six months, please add 1 year plus and consider it as 2015, but not as 2014.

In your case, your fiscal year is 2014 (for 2014.15), that means, you should use fiscal year 2014, but not 2015. That is the reason system is giving you the error.

For your information, First Periods are used for normal periods and the second periods are used for special periods (may be 13 to 16). Only you need to open special periods at the end of the fiscal year to facilitate opening the special periods of current year and new posting period of next fiscal year.

At the end of your fiscal year 2014, you should configure

1 2015 to 1 2015 (for normal periods of next year)

13 2014 to 13 2014 (for special periods of the current year)

Kind Regards,

Ravi

[amarlal_lohano]

Dear Ravi,

Many thanks for your reply.

We understand the complete mechanism of SAP for using -1, 0, +1 as annual displacement factor that how system treat the Fiscal year on the basis of our configuration regarding FYV, as further explained by you.

But our query still remains that in what cases/scenarios, an organisation might be using -1 as annual displacement factor. As for an organisation, they have to prepare their books for accounting and tax point of view, and in both cases we have to use +1 scenario, as we consider the later year (in our case 2015) as Financial year in both views. 

Regards,

Amar

[former_member182098]

Hi Amar,

As the fiscal year is falling between two years, the client needs to select one of the year as their base year (fiscal year). It is perfectly alright whether they select 2014 or 2015 as base year. There will not be any issue.

Personally, I would advise to go with second scenario that I have explained. First six months +1 next six months 0.

Best Regards,

Ravi

[former_member709511]

Hi Amar,

It is completely depends on client as how they want to refer any financial year. I have worked for Indian client who needs to comply with Indian Accounting Standards as well as IFRS.  However from tax point of view or accounting point of view they refer year as 2013-14 or 2014-15 and in SAP they maintain them as 2013 & 2014 respectively.

Regards,

Vaibhav G