SAP S/4HANA for Financial Products Subledger

A comprehensive subledger for financial products for banks, insurance and reinsurance companies, fintechs and other corporations.

Solution

Combining financial and cost accounting, Financial Products Subledger allows you to produce multiple, reconciled valuations for financial products.

Deployed as an add-on to SAP S/4HANA, Financial Products Subledger is based on a highly simplified core and designed for large data volumes, making use of SAP HANA capabilities. With SAP Fiori user experience and a streamlined data model, it is designed to run simple.

Banks and financial companies are regularly subject to accounting requirements in all jurisdictions. Companies that operate internationally must observe the valuation principles developed by national authorities and organizations as well as uniform accounting standards. The obligation to prepare an annual financial statement requires periodization because a company has to present its financial position on the balance sheet date as well as its economic development since the last balance sheet date.

BENEFITS 

Financial Products Subledger integrates seamlessly with Financial Accounting. It receives target values from the relevant source systems, and documents these in the form of subledger documents at contract or portfolio level. The subledger documents are aggregated to general ledger documents and transferred to the general ledger. You can use standard interfaces to make all the information from the subledger required for closing accounting periods available for reporting purposes.

To model how different future scenarios would affect the balance sheets of insurance contracts, you can create forecasts, plans, and simulations in Financial Products Subledger.

For SAP S/4HANA for Financial Products Subledger, you can choose between a single-instance installation (one software stack) and a dual instance installation (two software stacks). In a single-instance deployment, you deploy the back end and front end together, whereas in a dual instance installation, you deploy them separately.

Financial Products Subledger also enables the integration of Subledger Accounting and the allocation of secondary costs (costs for internal activity allocation and overhead costs). This results in an integrated view of all recognized primary costs, primary revenue and secondary costs.

  • Regulatory Reporting Compliance
  • Automated Multi-valuation Reporting
  • Shared Central Database
  • Integrated Process Standardization
  • Accounting Closing Processes Aligned with Business Planning & Sensitivity Analysis
  • Continuous Close Process
  • Reliable Inter-department Accounting Processes
  • Reduced Total Cost of Ownership
  • Efficient & Flexible Solution Design
  • State-of-the-art Analytics Capabilities to Support Management Decision Making

Why do you need FPSL?

Financial reporting for the FS industry has seen lot of changes in the last few years and the complexity will increase overtime. Some of the key regulations (but not limited to) which FS industry must deal with are:

Regulation

  • IFRS 9
  • IFRS 15
  • IFRS 17
  • US GAAP LDTI or Long Duration Targeted Improvements

Scope

  • Scope for the financial instruments and investments
  • Revenue recognition related to deferral / accrual of revenue based on performance obligations
  • Accounting for Insurance contract
  • Insurance related contract

To comply with the above regulations, any organization will need to have system and processes to be in place. Having a detailed product subledger allows to manage the complexity and required data parameters within the subledger and allow for an easier adoption of the standard.

Solution Architecture

SAP FPSL is installed as an add-on on top of S/4HANA and links to S/4HANA General Ledger. Below is a representation of the SAP’s architecture to support the Financial Services Industry with Focus on Banks.

Processes in Subledger Accounting

Day Processing​

Use day processing to register and document operational flow transactions and master data changes.

End-of-Day Processing

The system generates business transaction-based postings and updates contracts or securities positions in which master data has been changed.

Period-End Processing​

Use period-end processing to update accounting positions based on key dates and to document changes.

Year-End Processing​

Use year-end processing to close and open fiscal years by creating a year-opening balance.

Period-Opening Processing

Use period-opening processing to reset documents that were created during period-end processing or end-of-day processing (contract) on the previous day.

Product Scope

Different financial contracts and securities are preconfigured differently and have different properties in terms of their processing in Financial Products Subledger. These properties are grouped from a business perspective into the following product segments:

  • Cash on hand
  • Cash balances at central banks
  • Deposits (credit institutions)
  • Checking accounts
  • Savings accounts
  • Term deposits
  • Derivatives (ETD)