Demystifying the Ledger, Currency Setup, and Currency Conversion in SAP S/4HANA Finance 1610

See how the ledger setup, currency setup, and foreign currency valuation features have evolved with SAP S/4HANA Finance 1610. This will help you evaluate if the new features can be used by your company.

Learning Objectives

Reading this article, you’ll learn:

  • What new features are available in the SAP S/4HANA Finance 1610 extension ledger
  • How the foreign currency revaluation process supports multi-currency reporting requirements
  • How to use the simulation extension ledger to simulate the results of a foreign currency valuation (FCV) run
  • How to set up user-defined currency types for real-time results
  • How to use an inception run

Key Concept

SAP S/4HANA Finance 1610 offers a new feature called a simulation extension ledger. The simulation ledger is a category of ledger that is meant for simulation postings. The simulation postings can be made out of the foreign currency valuation run (transaction code FAGL_FCV).

The ERP Central Component (ECC) Business Suite offered two choices for ledgers (leading and non-leading) and three choices for local currencies (LC1, LC2, and LC3). It included foreign currency valuation via transaction code FAGL_FC_VAL to re-valuate open items in foreign currency and general ledger (G/L) balances for non-open item G/L accounts.

These concepts have evolved throughout the SAP S/4HANA journey (from SAP S/4HANA Finance 1503 through 1511, 1605, and now 1610). At present, SAP S/4HANA Finance 1610 offers:

  • Ledgers: a standard ledger consisting of a leading and non-leading ledger and an extension ledger that includes a regular and simulation extension ledger
  • Currencies: You can assign up to 10 currencies (LC1 to LC 10) to a company code. Two of the 10 need to be standard SAP currency types and the remaining eight can be user-defined currency types. You can specify if the amounts for these currency types should be converted in real time or at period end.
  • Foreign currency valuation with a new transaction (FAGL_FCV) that provides the earlier functionality of the foreign currency valuation transaction (transaction code FAGL_FC_VAL). In addition, it can be used to create inception postings. Inception postings are made to post the amounts for user-defined currency types at period end, if you choose not to populate the amounts in them on a real-time basis. It can also be used for creating simulation postings in the extension ledger, to simulate financial results.

Extension Ledger in SAP S/4 HANA Finance

SAP S/4HANA Finance offers an extension ledger that you can use to manage parallel reporting based on multiple accounting principles, such as International Financial Reporting Standards (IFRS) and local Generally Accepted Accounting Principles (GAAP). The advantage with the extension ledger is that every financial posting to the underlying ledger is not physically replicated into it.

The extension ledger gives the same end result as a non-leading ledger, together with significant savings in disk space. It is to be used when the number of differential postings between the two accounting principles is at a minimum. This concept has already been discussed in the Financials Expert article “How to Use the Extension Ledger Functionality in SAP S/4HANA Finance” published in April 2016, and holds good until SAP S/4HANA 1511.

As of SAP S/4HANA Finance 1610, there can be two types of extension ledgers–the regular extension ledger (as in SAP S/4HANA 1511) and a simulation extension ledger (the new one). Either of them has to have an underlying ledger.

While the purpose of the regular extension ledger has already been explained in the referenced article in April 2016, we now explain what the new simulation extension ledger is all about.


Ajay Maheshwari

Ajay Maheshwari is an SAP Finance and Controlling (FI/CO) and SAP S4/HANA solution architect with more than 13 years of experience. He is well known for his contributions to the SAP Community Network (SCN) Forum.

He is among the all-time top 20 contributors to the SCN Forum, across all SAP modules and one of the top contributors in his own space, SAP FI/CO.

He is one of the official SAP mentors and has been recognized as the topic leader in the SCN Forum each year since 2011.

He has experience with SAP implementations and rollouts in several industries and thoroughly enjoys designing complex business processes and delivering SAP training in the areas of FI/CO and SAP S/4HANA.

Currently, he works as associate director at itelligence, an SAP Platinum Partner.

Kavita Agarwal

Kavita Agarwal is an SAP FI/CO and SAP S/4HANA solution architect with more than 16 years of experience. She is well known for her contributions to the SAP Community Network (SCN) Forum and is a platinum level contributor there.

She has experience with medium- to large-sized SAP implementations and rollouts in several industries and geographies and has been part of major finance transformation programs in the chocolates and confectionary industry. She enjoys designing complex business processes and delivering SAP training in the areas of SAP FI and SAP S/4HANA.

Currently, she works as an independent consultant helping customers optimize their SAP systems to derive maximum benefits out of their SAP investments and also offers e-learning solutions in SAP FI/CO.

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