With the heavy lifting for IFRS17 clearly in the review mirror, it’s time to look forward. To be singularly focused in the heat of a battle is human nature. And the effort to implement IFRS17 for a large multi-national insurance company is a battle. Many companies embraced the larger challenge of using IFRS17 as a catalyst for transformative change and have created an accounting and reporting system that provides more than merely meeting a regulatory obligation. 

When we look at the implementations we were involved in, one thing is clear: Financial Products Subledger (FPSL) can be leveraged to create a one-stop shop for all GAAP reporting.

Most companies silo reporting by GAAP. One team for local reporting. One team for international. Another for statutory. While this would seem to make sense, it doesn’t lend itself to comparisons that will obviously arise. Has anyone heard this question: “How can the different GAAPs be reconciled?” Next comes the scramble to make the teams talk to each other and create a reconciliation between the two. And then what comes next? Do this every reporting cycle, FOREVER. 

So, what is possible? 

All GAAPs. One Run. Simultaneously. 

It seems too good to be true, but we have tested it, built the system use case, and know that FPSL can produce asset and liability balance sheets for all GAAPs in one system. 

Two possible implementation approaches exist depending on cash flow data commonality between the different GAAPs. 

1. With a common cash flow between the GAAPs, a baseline delta approach is applicable. Book the common valuation for all GAAPs, then book the differences (or delta) needed to produce the various GAAP-specific valuations. To illustrate this, on the liability side for “IFRS17” and “Solvency II,” the IFRS 17 actuarial portfolio has a common cash flow, which can be used as the baseline. With a few adjustments relative to expenses (allocation of overhead expenses to the IFRS 17 actuarial portfolios), PAA (presented in cash flow format), and discounting (Solvency II specific yield curves), the baseline plus the adjustments will fulfill the Solvency II requirements.
2. With no common cash flow between the GAAPs, parallel accounting should be applied, and the valuation for each GAAP is recorded separately in its own legal entity. 

No matter which approach, the big gain is one centralized database or one source of truth for all operational, actuarial, and financial data. The holy grail of accounting and reporting that leads to:

• Process automation, real-time capabilities, and faster close cycles. FPSL has fully automated processing with real-time capabilities, allowing for continuous data recording, faster close cycles, and access to real-time data for reporting and analysis.
• Clear auditability. The solution produces subledger posting documents as output to document the financial impact of each business event. Such documents cannot be deleted; however, they may be reversed with specific processes, thus ensuring full subledger quality auditability. 

• Clear traceability. All transactions can be traced to the source system. The S/4HANA core has drill-down from GL postings to the subledger, where the source transactions were created. 

• Ease of Reconciliation. SAP has adopted an approach of “reconciliation by design.”  The solution works in such a way that each and every GAAP follows the same processing steps and is processed at the same level of detail so that each individual step in the calculation can be identified and compared.  In this way, SAP is able to offer a so-called “walk between the GAAPs,” meaning that if we take away the GAAP-specific deltas for one GAAP, we see the GAAP neutral (baseline) postings, and from there, we can add GAAP specific deltas to create the next GAAP. 

Does any of this resonate with you? Maybe you already have an FPSL install and want to leverage that investment to incorporate other regulatory reporting or GAAPs. Or perhaps you are looking at FPSL for the first time to streamline your accounting and reporting. Either way, we will show you how to get the most out of the system with a solution demo. 

For more information on Financial Products Subledger, click here: https://www.msg-global.com/fpsl-services-insurance