SAP Financial Accounting (SAP FI) Practice Exam

What occurs during a fiscal year change?

1. All previous data is deleted

2. Balances of assets are carried forward to the new year

3. The company prepares for a new accounting standard

4. The previous year is entirely shut down

The correct answer is: Balances of assets are carried forward to the new year

During a fiscal year change, the balances of assets are carried forward to the new year, which is critical for maintaining continuity in financial reporting. This process ensures that all financial statements provide a clear view of the company's financial position by reflecting cumulative data from the previous fiscal year. Carrying forward asset balances enables organizations to effectively plan and manage their finances and operations based on existing resources and obligations. This continuity is essential for stakeholders, such as management and investors, who rely on accurate and comprehensive financial records to make informed decisions. It also supports regulatory compliance by ensuring that financial reporting adheres to standards that require transparency regarding asset management over multiple periods. Other options, such as the complete deletion of previous data, preparing for new accounting standards, or shutting down the previous year entirely, do not reflect standard practices within fiscal year-end processes. These activities could potentially disrupt the integrity of financial data and undermine the organization's ability to provide accurate reports. Thus, the correct answer emphasizes the importance of asset balance continuity during a fiscal year change.