Workday Updates: New Retained Earnings Reporting

Changes are coming to how Retained Earnings are calculated in Workday financial reporting. This blog provides an overview of the process, the upcoming changes, and what financial reporting professionals need to do to adapt to the new functionality.

Retained Earnings in Workday

In financial reporting, calculating retained earnings for the current year involves summarizing all Income Statement activity into a Retained Earnings account on the Balance Sheet. In Workday, a separate account is typically used for Current Year Retained Earnings. Traditionally, Balance Sheet reporting included a checkbox to summarize P&L data and calculate current year retained earnings, ensuring the Balance Sheet balanced.

The usual data source for financial statement reporting, Journal Lines for Financial Reporting, has a checkbox labeled “Calculate Current Year Retained Earnings (DO NOT USE).” This checkbox will be deprecated and eventually removed from Workday. To prepare for this change, all Financials customers must review and update their reports to ensure they continue functioning after this architecture change.

New Data Architecture for Retained Earnings

Previously, Workday calculated Current Year Retained Earnings by querying a Retained Earnings ledger, updated in real-time as journal entries posted to the general ledger. The checkbox triggered the report to return this data.

Going forward, this Retained Earnings ledger will be deprecated and replaced by a new field in the Journal Lines data source: the Balance Sheet Ledger Account. This field changes how reports must be built:

• If the Ledger Account is Asset, Liability, or Equity (on the Balance Sheet), the Balance Sheet Ledger Account field will match the Ledger Account field.

• If the Ledger Account is Revenue or Expense (on the Income Statement), the Balance Sheet Ledger Account will be the Current Year Retained Earnings account as configured in the tenant.

What This Means for Your Organization

After deprecation, the checkbox for calculating current year retained earnings will no longer be functional. Organizations must identify and update any reports using this checkbox:

• Hide the field in sub-reports where it's not needed (e.g., Income Statements).

• For essential fields (e.g., Balance Sheets), hide the field, leave it unchecked, and change the Ledger Account field to Balance Sheet Ledger Account.

Failing to update reports will result in balance sheets not calculating correctly, causing them to be out of balance and potentially affecting the roll-forward of Retained Earnings.

Identifying Affected Reports

Workday provides a report titled 'Custom Reports Affected by the Retained Earnings Change' to help identify which reports need updating. Consider the following when making updates:

1. Updating sub-reports used in multiple composites affects all associated reports.

2. Archive old report versions to validate new reports during cutover.

3. Use this opportunity to:

• Adopt best practices by having a sub-report belong to a single composite.

• Optimize sub-reports by removing extraneous data points and improving performance.

After updating your reports, opt-in to the new framework for calculating Retained Earnings to ensure accurate roll-forward of year-end balances.

The Impact

The number of affected reports varies by organization, but all must address these changes before the deprecation date for the Calculate Current Year Retained Earnings functionality. Act now to ensure your financial reporting remains accurate and compliant.

Author: Brady from Arizona