Lessons Learned from Migrating to SAP S/4HANA with a Parallel IFRS to US GAAP Accounting Conversion

It is important for clients undertaking an S4/Hana implementation to consider the relevance of a solid Technical Accounting Standards background. This skill can enhance the management and execution of the programme alongside S4/Hana expertise. While external SAP consultants are valuable for configuration, they often lack comprehensive technical accounting knowledge. In many cases, SAP consulting firms may reuse previous client programmes for new clients without fully addressing unique requirements, which can lead to issues. SAP ByDesign doesn’t always help too, truth be told, as preconfigured set-ups interact with other data tables and if certain information is not prepopulated during migration and indeed during BAU work, it can prevent certain modules/ functionality to not work completely.

Undertaking a migration from a legacy ERP to SAP S/4HANA is a major transformational initiative. Layering in a simultaneous accounting standards transition—from IFRS to US GAAP—adds considerable complexity. This article outlines the key lessons learned from navigating this dual transformation, covering technology, data, finance and project governance¹.

Strategic Alignment is Critical

There is a need to align ERP goals with finance transformation goals where the decision to move to SAP S/4HANA should not be treated solely as an IT-driven modernisation project. When paired with a shift from IFRS to US GAAP, it becomes a strategic finance transformation programme. Business leadership must engage true experts to help define a specific client roadmap that integrates system capabilities (e.g., multi-GAAP reporting) with changes in accounting policy, disclosures and performance measures.

Lessons Learned:

• Create finance–IT steering committee with CFO-level sponsorship, with subject matter experts at the table.

• Map IFRS-to-GAAP differences early to it can be used this to shape chart of accounts design in S/4HANA at group level, sub-consolidation level (at regional level, perhaps) and entity level. Whist giving some serious thought on adjustments entities hierarchy roll-up structures.

 

Leverage S/4HANA’s Multi-GAAP Capabilities

Use the Universal Journal and ledgers functionality to run dual accounting standards in parallel.

S/4HANA’s architecture allows for parallel ledgers, where primary (leading) and secondary (non-leading) ledgers can be configured for different accounting principles (e.g. IFRS vs US GAAP). This proved instrumental in enabling comparative reporting during and after the transition period.

Leason Leaned:

• Avoid dual instances or manual reconciliations by leveraging the Universal Journal.

• Ensure the configuration of document splitting and accounting principles assignment is completed at blueprinting stage, not later.

Data Migration Is More Than a Technical Exercise

This specific area will make or break the project, where I have witnessed heated arguments and table banging and unpleasant words exchanged, just because the client did not reconcile historical financial data under both standards before migration into S4/Hana. What is also collated as data needs cleansing and split by currency.

Often legacy ERP systems lack the granularity or traceability required by US GAAP, particularly for areas like lease accounting (ASC 842), revenue recognition (ASC 606) and impairment testing where CGU are defined and do not necessarily mirror segmental reporting under IFRS 8. Mapping this data retrospectively for S/4HANA import requires serious technical accounting expertise by knowing all the standards and US GAAP principles which is not mutually exclusive but also interact and intwine with other ASC standards and sub-topics.

Lessons Learned:

• Build IFRS to US GAAP mapping templates for historical data.

• Use SAP Migration Cockpit and Data Services to automate mapping where possible.

• Use a “conversion reconciliation layer” to validate account balances between IFRS and GAAP for historic periods.

PMO Change Management Must Be GAAP-Aware

Mastery of US GAAP concepts takes years not months and how these need to be implemented in S/4HANA. Eventually functional leads (e.g., CoE, GPO’s and SLO’s- IFRS, US GAAP Consolidation, Fixed Assets, Revenue, Controlling, etc) need not only process training in S/4HANA, but also practical understanding of how US GAAP changes their day-to-day accounting tasks. Without dual training, there’s risk of reintroducing legacy assumptions.

Lessons Learned:

• Joint planning SAP/US GAAP process workshops using real company transactions- tiered in difficult level as: transactional BAU, Reporting and complex group transactions.

• Create SOPs IFRS and US GAAP layering entries within S/4HANA.

Controlling and Profitability Analysis Require Redesign

CO-PA, cost centres and profit centres must reflect GAAP-driven structural changes for segment analysis and CGU technical accounting work. In the past I have used internal order functionality for M&A work/ transactions for buy-side, sell-side/ carve-outs.

US GAAP requires different segmentation of financial results (e.g. based on operating segments or legal entity structures, etc). Not to mention the need for internal stakeholder reporting, that needs to be sliced and diced in a certain way to run the operations. This requires changes to the controlling area set up, realignment of cost objects, internal orders, additional fields and often bespoke data fields and reimplementation of margin analysis in S/4HANA.

Lessons Learned:

• Implement margin analysis in S/4HANA to replace legacy CO-PA.

• Rebuild profitability reports to match new US GAAP segment disclosures.

Lease, Revenue and FX Modules Need Special Attention

Lesson: ASC 606, ASC 842 and foreign currency rules in US GAAP drive deep configuration decisions. These accounting standards are significantly different from their IFRS equivalents and directly impact system behaviour, particularly in areas like revenue recognition (SAP RAR module) and lease management.

Example Fixes used:

• Deploy SAP Revenue Accounting and Reporting (RAR) for ASC 606 compliance.

• Activated Contract and Lease Management for ASC 842.

• Adjusted multi-currency settings to support FX remeasurement vs translation requirements under US GAAP.

• Moving from one group presentation currency to another requires some serious thought and resetting the dials for some key balance sheet headline items.

  
  

Early Prototyping and Iteration Beats a Boombastic Approach

Use a test Environment with US GAAP ledger simulation to yield better results than waiting for full integration testing. Given the novelty of US GAAP for many teams, I have developed a “GAAP simulation prototype” in a Test Environment S/4HANA environment. This allow finance users to validate journals, disclosures and reconciliations before the system goes fully live.

Highlighted Issues and Lessons Learned:

• Helped identify revenue recognition logic bugs early, around unbundling and calculating the implied price for certain goods/ services that are priced as a total package with may be a volume discount attached but then have different performance obligations attached.

• Allowed external auditors to review and sign off on accounting logic pre-go live, especially around a right to break a contract, embedded leases agreement within a repurchase agreement, consignment goods, bill-and-hold arrangements and even usage-based royalties/ licences.  Whilst the accounting may be straight forward building the logic/ rules can be quite time consuming- hence early planning is crucial.

Audit Trail and Controls Design Needed from Day One

Sarbanes-Oxley (SOX) and US listing requirements meant internal controls had to be system-enabled, not bolted on. S/4HANA’s Audit Trail, Change Logs and Workflow Approvals were implemented as part of the design—not post go-live. This was essential to pass PCAOB audit readiness.

Controls Implemented and Lessons Learned:

• Automated journal approval workflows by GAAP ledger.

• Role-based access controls tied to segregation of duties.

• Logging changes to accounting policy configuration in production.

• Cross system controls, where a TMS systems could be used for Front and Middle office in a Corporate Treasury function, with back office using FI-CO for accounting.

Dual Transformation Demands Dual Governance

The move to S/4HANA alone is a heavy lift. Doing it alongside an IFRS to US GAAP accounting change doubles the complexity. However, by aligning strategic finance and system goals, leveraging S/4HANA’s multi-GAAP strengths and addressing S4/Hana training, controls and design early, its transformation will deliver not only compliance but also significant operational and reporting benefits.

Recommended Steps and Lessons Learned:

• Run dual-GAAP proof of concept in Test Environment.

• Engage both SAP IT and Finance SMEs early to map data and processes.

• Define your primary vs non-leading ledgers and accounting principles at blueprint stage.

• Build a crosswalk for key areas: revenue, leases, fixed assets, FX, derivatives and impairments, etc…

• Ensure a RACI matrix is set-up and then later use it to write up a proper SOP with reference to what S4/Hana functionality/ T-codes to use, etc...

• Document new internal controls aligned with SOX and US GAAP expectations and use a bolt on risk management systems for attestations that controls are being applied as prescribed.

  
  

Dee Singh Kothari is a senior partner in Kothari Partners

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