SAP Performance Management for Financial Services (FS-PER).

Dear,

Recently, we finished a Proof of Concept of SAP Performance Management for Financial Services (FS-PER), in a client which implemented Bank Analyzer – AFI some years ago.

SAP has always had strong Cost Management and Accounting functionalities, even in SAP R2, which was the first SAP system I ever put my hands on.

Today, we have SAP Finance and Controlling, Business Planning and Consolidation, and some Cost Management and Accounting Functionalities in Bank Analyzer (Profit Analyzer), so, when I first heard about SAP Performance Management for Financial Services, I thought it should have an overlapping with other SAP Systems.

I was wrong, SAP Performance Management for Financial Services covers an important gap that we had with previous Cost Management systems in Financial Services.
One of the main challenges we have in Banking implementations is the data collection from multiple legacy systems, with different sets of master and transactional data. It’s very difficult to find a Bank which has a Single Source of Truth for Operational data. Usually, Business Partners, Contracts, Products, etc. are stored in multiple systems with a different set of values in every legacy system of the bank.

In SAP Bank Analyzer, we have the Source Data Layer for building a Single Source of Truth of Operational Data, but the Source Data Layer Primary Objects are oriented to the management and storing of “banking” master and transactional data (business partners, financial transactions, business transactions, positions, etc.)

On the other hand, managing “non-banking” data like process-costs, assets-amortization costs, etc. in the Bank Analyzer Source Data Layer, is not that simple.
Actually, these costs and revenues are more easily managed with the Accounting Management modules of  SAP-ECC or SAP Business Planning and Consolidation. But, what happens when we want to merge banking and non-banking data in a Cost Analysis model, or the client stores the Cost Management data in a legacy system?

For instance, let’s look at the direct cost that a foreign bank charges to our bank because our clients use the foreign bank ATM machine; this cost is posted as an invoice for a service provided by a vendor. If the foreign bank gives us the list of the ATM-cards using its ATM machine, we should post these costs as a direct cost of every account related to each of the ATM-cards.

With SAP Performance Management for Financial Services, we can easily collect the invoice cost from the Vendor’s Invoice and post it in the Bank Analyzer – Results Data Layer. Once in the Results Data Layer, we can include the ATM-card costs of the foreign bank in the cost and profit analysis of our client’s accounts (Financial Transactions).
In my opinion, this is the main advantage of SAP Performance Management for Financial Services, its capacity of integrating in a cost analysis model, data from different and heterogeneous sources.

SAP Performance Management for Financial Services supports data collection from the Bank Analyzer Source Data Layer, the General Ledger, HANA tables, external data, etc. and write the results in Business Warehouse or Business Planning and Consolidation Infocubes, or, as I mentioned before, in the Bank Analyzer Results Data Layer.

Additionally,  SAP Performance Management for Financial Services offers data cleansing capabilities, that we also can find in other SAP systems (BW for instance). The advantage is we can optimize the process of data transformation by having all the elements in the same system.
In terms of Data Transformation and Calculation, SAP Performance Management for Financial Services comes from a very rich library of functions for Costs Settlement, Funding Price Calculation, etc.

Finally, SAP Performance Management for Financial Services comes with two pieces of Business Content; Sample Content for Profitability and Efficiency Management and Business Content on Solvency II. The business content can be used as a template for our own Financial Calculations and Transformations, accelerating the implementation process.

Combining the functionalities of SAP Performance Management for Financial Services with the functionalities of the new Financial Services Data Platform and the high performance computing of HANA, SAP is offering us a powerful business suite for Profit Analysis in complex banking landscapes.

Looking forward to read your opinions.
K. Regards,
Ferran.

www.capitency.com
Join the SAP Banking Group at: https://www.linkedin.com/groups/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Ferran.frances@capitency.com

IFRS 15 for Banks with SAP Revenue Accounting.

Dear,

From January 1st 2018, a new Accounting Standard becomes mandatory for reporting the Revenue Recognition in Contracts with Clients IFRS 15, becomes effective.



IFRS 15 enhances the process of Revenue Recognition by establishing a 5 steps process.

1) Identify the contract with the customer.

A contract with a customer falls within the scope of IFRS 15 if all the following conditions are fulfilled.

- The contract has been approved by the parties to the contract

- Each party’s rights in relation to the goods or services to be transferred can be identified

- The payment terms for the goods or services to be transferred can be identified

- The contract has commercial substance; and it is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected.



2) Identify the performance obligations in the contract.

Usually, operational systems represent the Performance Obligations in the contract but there are two possible exceptions:

- Several Operational Items representing the same Performance Obligation. For instance, in a Desktop Computer (represented by a Sales BOM), several Items are detailed in the Sales Order (Monitor, CPU and Keyboard) but they represent the same Performance Obligation of delivering the Computer.

- One Operational Item representing several Performance Obligations. For instance some Computer Manufacturers offer one year technical support service (Performance Obligation) with every computer sold (Performance Obligation).



3) Determining the Transaction Price.

The transaction price is the amount that the vendor expects to receive in exchange for the goods or services.



4) Allocating the Transaction Price to performance obligations.

Once the transaction price for the contract has been determined, IFRS 15 requires to allocate it to the performance obligations of the Contract. Considering the two cases above, in which the Operational System Items does not represent univocally the Performance Obligations, we can understand the challenge of allocating the Transaction Price to the Performance Obligations.



First, IFRS 15 requires to determine the Stand-Alone Selling Price which is the price that the vendor expects to receive in exchange for delivering the goods or services of the performance obligation are sold separately to a customer. Be aware of the difficulty of estimating the Stand-Alone Selling Price when several performance obligations are sold together with a bundle price.

In order of determining the Stand-Alone Selling Price, IFRS 15 permits three approaches.

1. Adjusted Market Assessment. Estimating the Stand-Alone Selling Price according to the conditions of an specific market, reflecting the vendor costs and margins.

2. Expected cost plus margin. Estimating the Stand-Alone Selling Price according to the expected costs of the performance obligation for the vendor, plus its correspondent margin.

3. Residual Method. In case of bundle prices for grouped performance obligations, in which we can not estimate the Stand-Alone Selling Price of all the performance obligations, IFRS 15 proposes the following two-steps approach.

First we have to estimate the Stand-Alone Selling Price of the performance obligations of the group, that can be estimated with one of the previous approaches. The we will estimate the Stand-Alone Selling Prices of the rest of the performance obligations, by deducting the Stand-Alone Selling Price of the performance obligations already estimated, from the total contract price of the group of performance obligations.



5) Recognize revenue when each performance obligation is satisfied.

In case of a good or service delivered in one step, the performance obligation is satisfied at the moment of the final delivery to the customer, but in case of services or goods delivered during a period of time, IFRS 15 requires that the revenue is recognized according to the percentage of the performance obligation that has been delivered in every financial period.



Although, IFRS 15 impacts other industries much more than Banking (which is much more impacted by IFRS 9), there are some banking services impacted by the requirements of IFRS 15.

Fulfilling IFRS 15 requirements, requires Information Systems with strong sub-ledger capabilities, that we described briefly in a previous blog.



http://sapbank.blogspot.com/2016/02/fulfilling-ifrs-9-and-ifrs-15-sub.html



Additionally, SAP provides the Revenue Accounting and Reporting module for IFRS 15, which supports all the requirements of the 5 steps approach for Revenue Recognition described above.

We have worked recently in the design of an IT architecture, combining Bank Analyzer and SAP Revenue Accounting and Reporting for IFRS 15, for supporting IFRS 15 requirements in Banking.

I’ll give you some details in a future blog.

Looking forward to read your opinions.

Kind Regards,

Ferran.



www.capitency.com

Join the SAP Banking Group at: https://www.linkedin.com/groups/92860

Visit my SAP Banking Blog at: http://sapbank.blogspot.com/

Let's connect on Twitter: @FerranFrancesGi

Ferran.frances@capitency.com