Comprehensive Detailed Explanation with all SAP S/4HANA Cloud References

In SAP S/4HANA, the currency type is assigned at the level of the accounting principle . This assignment ensures that financial reporting adheres to the currency requirements of specific accounting standards (e.g., local GAAP, IFRS). Let’s analyze each option to determine the correct answer.

Explanation of Each Option:

A. Accounting principle

Correct : The currency type is assigned to the accounting principle in SAP S/4HANA. An accounting principle defines the rules and standards for financial reporting, such as local GAAP or IFRS. Each accounting principle can have its own currency type (e.g., company code currency, group currency) to ensure compliance with reporting requirements.

Reference : According to SAP documentation, the currency type is linked to the accounting principle to support parallel accounting and accurate financial reporting.

B. Valuation area

Incorrect : The valuation area is used in Asset Accounting and Inventory Management to define how assets or materials are valued. While valuation areas may involve currencies (e.g., for asset depreciation or material valuation), they do not directly assign currency types for financial reporting purposes.

Reference : Valuation areas focus on operational valuations and are not responsible for assigning currency types to accounting principles.

C. Company

Incorrect : The company is an organizational unit used in consolidation processes to represent legal entities. It does not directly assign currency types. Currency types are managed at the accounting principle or ledger level, not at the company level.

Reference : Companies are used for consolidation reporting but do not control currency assignments.

D. Ledger

Incorrect : While the ledger is closely related to accounting principles and supports parallel accounting, the currency type is not directly assigned to the ledger itself. Instead, the currency type is assigned to the accounting principle, which is then associated with the ledger.

Reference : Ledgers inherit the currency settings from the accounting principles they are linked to, but the assignment of currency types occurs at the accounting principle level.

Key References to SAP S/4HANA Documentation:

SAP S/4HANA Finance for Parallel Accounting : Explains how currency types are assigned to accounting principles to support parallel accounting and compliance with different reporting standards.

SAP Help Portal - Accounting Principles : Provides detailed guidance on configuring accounting principles and their associated currency types.

Currency Types in Financial Reporting : Highlights the role of currency types in ensuring accurate financial reporting under various accounting standards.

Integration of FI-AA and FI-GL : Describes how currency types are used in financial reporting and how they align with accounting principles.