1. introduction

Financial reporting, or FinRep for short, is the Anglicized term in banking for a part of the reporting system. The Committee of European Banking Supervisors and subsequently the European Banking Authority (EBA) have been working on improving the regulatory reporting system and refining it through FinRep. Based on legal standards applicable in all EU member states, credit institutions must report certain company data to BaFin and Deutsche Bundesbank or the EBA or ECB with a specified reporting frequency. This includes FinRep. The Financial Product Subledger, or FPSL for short, is an adequate way to efficiently and easily meet the requirements of FinRep, which can largely be met with accounting data. FPSL is SAP’s accounting subledger solution as a successor to c/s AFI. It represents a high degree of standardization and gives banks, financial service providers and insurance companies the opportunity to meet a large part of their FinRep requirements and streamline processes.

FPSL brings extensive functionality for mapping general business requirements, such as accruals and deferrals and fair value, and integrates them into a simple and unified process model that provides customers with a clear and easy-to-understand view of their accounting processes. In addition, FPSL offers the technical requirements for mapping a large number of national and international accounting standards such as IFRS, US-GAAP and HGB.

2. overview

The basis for the reporting requirements is derived from various EU regulations (e.g. EU Regulation 1606/2002 of July 19, 2002 (the so-called IAS Regulation)). In addition, the German Accounting Law Reform Act (Bilanzrechtsreformgesetz, BilReG), which was passed in December 2004, transposed this IAS regulation into national law. Since 2005, capital market-oriented companies have had to prepare their consolidated financial statements in accordance with IFRS. Within the framework of the Single Supervisory Mechanism, or SSM, the ECB has formulated the final Regulation (EU) 2015/534 on the reporting of supervisory financial information (ECB/2015/13). Along with accounting requirements, the scope of external reporting, such as FinRep, additionally includes regulatory or supervisory reporting requirements, such as BCBS #239 and AnaCredit.

Based on the four core reports of the EU regulations (e.g. ECB/2015/13) and the EBA Reporting Framework on balance sheet assets, balance sheet liabilities, equity and P&L, up to 65 additional reports with detailed information are to be provided in FinRep. In addition to the complete breakdown of carrying amounts by business partner category, product or geographical criteria, details of impairment losses and fair values must also be reported.

3. challenge

Group reporting is to be carried out for the institutions based on the regulatory scope of consolidation. In some cases, this differs significantly from the consolidation groups specified for accounting purposes. In particular, the detailed reports (up to 65 reports) of FinRep are to combine classic accounting information with reporting requirements. While the information in the level of detail in the accounting system is not available at Group level in this way, the reporting system currently lacks the necessary data from the accounting system.

The functional separation of reporting and accounting on the IT delivery line, which is target-oriented in terms of architecture, thus becomes a challenge for banks, since the data must be consolidated again after the specific processing steps.

4. solution alternatives

Three main alternatives emerge for consolidating data and resulting fully and regulatory compliant FinRep reporting:

• Determination of the necessary data in accounting by means of adjustment of charts of accounts and posting systems as well as integration of data irrelevant for accounting. Here, accounting would be leading the way for FinRep.
• Processing of accounting data in the reporting system by means of downstream interface and preparation of reports in the reporting system. Here, the reporting system would be leading the way for FinRep.
• Determination of the necessary data by means of special evaluations from general ledger and sub-ledger, previous systems

and/or data warehouse. Here, an IT-driven reporting layer would lead the way.

Successful implementation of the messages depends very much on the IT architecture and on the specific circumstances of the credit institutions. To accurately meet FinRep requirements and ensure compliant financial reports, banks must act in a forward-looking manner. Our focus is on the interaction between FPSL and FinRep, thus creating the basis for being able to provide a large part of the necessary information for FinRep in a suitable form for other systems. Particularly in FPSL implementation projects, special attention is always paid to the further use of the data for various buyers, but especially any reporting buyers.

Not all of the data required for FinRep is directly available in FPSL, which was developed specifically for accounting, as it is not required for the annual financial statements. This concerns data such as collateral, some of which was previously added to the accounting supply chain via the c/s AFI using secondary data sources, transferred directly to a business warehouse or reporting to subsequently create the FinRep report.

Using FPSL, this data is to be transferred either directly from the inventory-managing systems to the connected applications (e.g. SAP BW, SAP BCS, IDL Konsis, or to a data pool (e.g. FSDM) as a result data budget. From there, other systems can be supplied and reporting can take place. It is also conceivable to use SAP PaPM to replace previous c/s AFI functions, whereby the storage from PaPM also takes place on the S/4 HANA database.

SAP S/4 HANA Finance Architecture

5. conclusion

In summary, a holistic view of FinRep is required, but FPSL within the S/4 HANA architecture is an essential part for correct FinRep reporting. Nonetheless, viable solutions must be designed for non-accounting data, and these solutions must be individually adapted to each customer.

ADWEKO already brings extensive expertise in FPSL and also c/s AFI to this, which we have already proven in numerous projects. In your case, too, we would be happy to take on the challenge and work with you to create your personal success story in the preparation of FinRep-relevant data.

If we have aroused your interest and you would like further advice, please do not hesitate to contact us with any questions or to arrange a further appointment.

We are looking forward to your inquiry!