Many companies face the challenge of changing the fiscal year in an existing production environment. This usually occurs after a merger or acquisition when two companies need to synchronize their fiscal year periods to achieve consistency in financial reporting.

The fiscal year variant is defined in the IMG under Financial Accounting. The R/3 system uses it to determine the financial periods to which transactions are posted. As defined in R/3, the fiscal year is divided into posting periods, each with a starting date and an ending date.

Changing an existing fiscal year variant is a tricky process. Discover how transaction ME57 saves you time by assigning information records, pulling together requisitions that need to be converted, and processing the requisitions into purchase orders. R/3 provides three approaches for companies setting up a fiscal year variant or changing an existing variant. You make the initial selection on the screen shown in Figure 1.

Figure 1

Fiscal year variant configuration screen

• Calendar Year — The fiscal year variant is defined the same as the calendar year. This approach is easiest to configure and maintain. You select the calendar year and leave the year-dependent box blank in the fiscal year variant configuration. R/3 identifies the beginning and ending of all calendar-based periods. Since the fiscal year is identical to the calendar year, there is no need to maintain a year dependency. This functionality is provided by the system. Companies that require financial reporting based on the calendar year typically choose this approach.

• Year-independent — The fiscal year differs from the calendar year. This approach requires the fiscal year periods to be defined, but does not require configuration for each year. When the year-dependent box is not selected and the calendar year box is blank in the fiscal year variant configuration in Figure 1, you must complete the configuration to outline the beginning and ending periods (Figure 2). The beginning and ending periods are only defined once in the year-independent approach. Since the year-dependent box is not selected, the system uses the fiscal year variant for all years. This approach is typically used when a company requires a fiscal year that differs from the calendar year, and the fiscal year definition remains consistent for all years.

Figure 2

Periods defined by end date

• Year-dependent — This approach requires the fiscal year variant and periods to be defined for each year. When the calendar year box is left blank and the year-dependent box is selected in the fiscal year variant configuration, as shown in Figure 1, you must complete the configuration by identifying the period definitions (Figure 2) and the year (Figure 3). While this approach requires the most configuration setup, it also provides the most flexibility. This is a good approach in the event choice one or two has been implemented and fiscal year changes are necessary. With the fiscal year-dependent variant, you can set up the fiscal year to reflect a calendar year or a fiscal year that differs from the calendar year. In addition, you have the flexibility to change from a calendar year to a fiscal year. If necessary, you can also change your fiscal year definition in the future. Since the fiscal year is set up as year-dependent, you can define historical periods in the new fiscal year format or reflect the old fiscal year format. This gives you the ability to prepare reports for comparable time periods.

Figure 3

Prompt for year

Implementing the Change

Let’s take the example of a company that was using a year-independent fiscal year variant. The requirement was to implement a new calendar year based on a fiscal variant, while maintaining historical reporting based on the old fiscal periods. The year-dependent fiscal year variant provided the flexibility to meet both objectives.

Initially, the company used a fiscal year variant that started the first day of the fiscal year on December 29 and ended each period on the 28th of the calendar month. For example, a financial posting on December 29, 2001, would be reflected in the system as period one of year 2002. The following configuration shows existing fiscal year variant configuration maintained in the IMG under Financial Accounting> Financial Accounting Global Settings>Fiscal Year> Maintain Fiscal Year Variant (transaction code OB29). It defines 12 periods for the field year.

The terms "month"and "period"are used interchangeably. In the 4.x releases, the header text Annual Displacement has changed to Year Shift.

The annual displacement is +1. This moves days 29, 30, and 31 of period 12 into period 1 of the next fiscal year. The annual displacement functionality allows the flexibility to create a fiscal year definition. Based on the configuration shown below, the following 12 financial periods are created in R/3 in a fiscal year format.

Since the old fiscal year ended on December 28 and the new calendar year starts on January 1, three days in period 12 (29, 30, and 31) were not defined in either calendar. The company decided to extend period 12 three days to December 31. Those days would be recognized as a transition period. The following configuration shows the redefinition of period 12 as the transaction period to include all of December. Note that since the last three days of period 12 are not in period 1 of the next fiscal year, it is no longer necessary to use the +1 annual displacement.

Once the transition year has been completed, you can set up the new calendar-based, year-dependent fiscal year as shown below. The 12 periods created reflect the calendar months. The annual displacement functionality is not necessary since you are implementing a calendar year.

At this point, you should check that the variant you are using is used in CO and PA. (See, "Checking Variant Use in the CO and PA Modules," below.)

After you have ensured that the same variant is in use, you can change the fiscal year format from the year-independent fiscal year to the year-dependent fiscal variant. Follow the menu path Financial Accounting>Financial Accounting Global Settings>Fiscal Year>Maintain Fiscal Year Variant (transaction code OB29). Select Maintain fiscal year variant. Click on Fiscal year variant H1.

You then select the Year-dependent check box shown in Figure 1, enter 12 in the No. posting periods, and 4 in the Special periods box. After you select Year-dependent, the system provides the next prompt, requesting the year input (Figure 2). If you do not select this box or select the calendar year, the system uses the same fiscal year variant for all years. Under this setup, you cannot define fiscal years that are year-specific. When the checkbox year-dependent is selected, R/3 provides the next screen. If you do not select the box, you are creating a non-year-dependent fiscal year variant, and R/3 does not prompt you with the next screen.

Transition Year

The company in my example is activating the year 2002 as year-dependent and defining period 12 as the transition month. Periods 1 through 11 remain in the old fiscal year format. I added three days to period 12, which allows me to set up 2003 as a year-dependent fiscal year that will be calendar-based. It begins on January 1, 2003.

As you saw in Figure 2, the periods are defined by the end date. Once the year 2002 has been changed and saved, you need to make the year-dependent changes to the historical years 1997, 1998, 1999, 2000, and 2001. Since I moved to a year-dependent fiscal year, the old year-independent variant is no longer valid. The historical fiscal years are defined based on the old fiscal year format (i.e., each period will end on the 28th of the month). Transaction code OB29 shows the entries that you need to establish for historical fiscal year variants for 1997 to 2001.

Having completed the historical period setup for the transition year 2002, I can now set up the future years. Typically, you set up five or 10 years to avoid annual maintenance. The years 2003 to 2013 are set up in the same way as 2002; however, unlike the historical fiscal years, each period ends on the last day of the calendar month. This completes the configuration necessary to move from a year-independent fiscal year to a year-dependent calendar-based fiscal year.

Checking Variant Use in the CO and PA Modules
Before changing the fiscal year variant configuration, it is a good practice to validate that your controlling area and operating concern are using the fiscal year variant you are changing to in FI. This is a double-check to ensure the new fiscal year variant you are modifying is currently being used in CO and PA. In older systems, several fiscal year variants may be configured that are no longer in use. In more complex environments, it is possible to have several controlling areas defined that use different FI fiscal year variants. You need to validate that you are using the active variant.

To verify that the fiscal year variant that you intend to use is also used by CO, use transaction code OKKP or follow the menu path Controlling>Controlling General>Organization>Maintain Controlling Area. Select Maintain controlling area. This takes you to the screen shown in Figure 1.

Figure 1

Fiscal year variant configuration screen

Double-click on the controlling area US01.

In the Other settings tab in Figure 2, you can see that the controlling area uses the Fiscal year variant H1. (Note: "H1" is customer-selected, not R/3, terminology.)

Figure 2

Periods defined by end date

Follow the same validation process in Profitabilty Analysis via menu path Controlling>Profitability Analysis>Basis Setting> Maintain Operating Concern. Select Maintain operating concern. Check the Attributes box and click on the Display button shown in Figure 3.

Figure 3

Prompt for year

You can see in Figure 4 that the fiscal year variant H1 is referenced under the Attributes tab.

Figure 1

Checking the controlling area