Performing Period-End Closing

The value of all goods and services used is recorded as an expense for each period.

By contrast, the costs of all used goods and services that are incurred during the creation of your own ("typical") business activity are recorded as costs for each period.

The non-operating expense is not recorded in Management Accounting as costs.

Accrued costs do not have a corresponding expense in Financial Accounting. They are only accrued for cost-accounting purposes. There are two different types of accrual costs:

• Valuation differences, which have corresponding expenses of a difference amount (for example, cost-accounting depreciation, imputed interest, and so on)

• Additional costs, which do not have a corresponding expense (for example, management salary, imputed rents, and so on)

To enable you to enter accrued costs, the SAP S/4HANA system provides various methods:

• Percentage Method

• Plan=Actual Method

• Target=Actual Method

To prevent periodic cost fluctuations in Cost Center Accounting, you should distribute irregular expenses to the relevant periods. This business transaction is the accrual calculation.

In SAP S/4HANA you can generate periodic postings automatically using the Accrual Engine. You no longer need recurring entry documents with fixed values. Basic data that identifies what is to be accrued is entered in the Accrual Engine. The Accrual Engine then calculates the accruals and generates the required periodic postings.

For example, you carry out accruals in Financial Accounting when you want to create monthly balance sheets. Alternatively, you carry out an accrual in Management Accounting only. Calculating accrual results in accrued costs since they have corresponding expenses based on the amount.

To calculate accrued costs, use the percentage method. The calculation is based on a percentage overhead, which is related to a cost element or a cost element group.

Unlike accrual calculation with a recurring entry in Financial Accounting, this method has the advantage that the accrued costs are calculated using the actual costs. The percentage method, for example, is useful for accrual calculations for labor costs relevant to salaries, such as bonuses.

When an accrual is calculated, the system debits the cost centers with the accrual cost amounts. At the same time, a user-defined accrual object (cost center, or internal order) is credited. The actual costs that arose are also posted to the accrual object, so that all of the balances that exist between expenses in Financial Accounting and accrued costs in Management Accounting are calculated, analyzed, and settled in the profitability analysis.

You create a primary accrual cost element (cost element category = 3 Accrual/deferral per surcharge) to process the accrual calculation.

You create an overhead structure to define the accrual calculation. You need to store the following keys for the accrual calculation:

• Base Components:

  On the basis of which cost element(s) do you want overhead surcharges to be levied?

• O/H Rate (Overhead Rate):

  How high should the overhead percentage be?

• Credit:

  Under which cost element do you want the overhead to be posted? Which cost center or internal order (accrual object) do you want to credit?

If you assign dependencies to the overhead key, you can specify conditions under which the overhead is calculated for a cost center. Depending on the cost element, you can, for example, post different overheads to different cost centers. You can add standard SAP system dependencies to your own user-defined dependencies.

In Customizing, you can assign an overhead structure within a client to any controlling area. This assignment is made based on validity time periods, although you can change the assignment at any point in time.

You can have an overhead structure for actual accrual calculations and for each version for planned accrual calculation in your controlling area for any period of time required.

You use the Target=Actual method to calculate accrual costs that are activity-dependent and activity-independent, but for which the percentage method cannot be used, because you cannot find a cost element to define the overhead rates.

Proceed as follows: Plan your primary costs on the cost center, for the time period in which you want to calculate the accrual. The system enters the planning values in the fields for actual values during the accrual calculation.

Similar to the percentage method, an accrual object (cost center or internal order) collects the credits. In Customizing, you need to define only the credit object and validity period of the affected cost elements.

You use cost element category 4 to plan under a primary cost element (= accrued cost element/target=actual).

At the same time, you use the accrual transaction in the menu to start accrual calculation (the percentage and target=actual method).

If you planned activity-dependent accrual costs, then the system includes the operating rate of the cost center when the planning values are transferred to the actual data. If, for example, your operating rate in the actual data is double than originally planned, the system calculates accrual for the doubled plan costs in the actual data. For accrued costs that are planned independent of activity, the operating rate of the cost center is not included or is set at 100%. This means that the planning values are transferred unchanged to the actual data. The accrual of planned primary costs that are independent of activity can thus also be regarded as a plan=actual method of accrual calculation.

You can enter statistical key figures as a tracing factor for periodic allocations. The costs from the clearing cost center "Telephone" can be allocated using the statistical key figure of "Telephone units" for example. If you enter "Employees" as a statistical key figure, then you can provide a report on the cost centers, on the level of HCM costs for each employee.

A decisive factor for statistical key figures is the way in which you create them as master records.

• Fixed values (category 01) are updated from the corresponding posting period onwards, in all of the following posting periods of the fiscal year. This takes place assuming that fixed values do not change over a longer period of time.

• Totals values (category 02) are entered for each period. They change from period to period, and therefore need to be re-entered in each posting period.

You can also enter statistical key figures especially for an activity type on a cost center (statistical key figures that are activity-dependent).

The Allocation of Allocation Type Distribution used in the Allocation Context of Cost Centers was designed to transfer primary costs from a Sender Cost Center to either Receiver Cost Centers or WBS Elements. Primary postings (such as energy costs) are collected on a cost center and allocated at the end of the period by means of a user-defined key.

Only Cost Centers can be used as a sender for the distribution in this Allocation Context.

A distribution receiver in this Allocation Context can be a Cost Center or a WBS Element.

You can reverse the Allocation run as often as required.

You can define several segments in one allocation if necessary, to set up the sender-receiver relationships.

The use of segments in the following description is a general feature for Allocation (Allocation of Type Distribution and Overhead Allocation).

To display the allocation relationships between the senders and receivers in the system, you need to make the following entries:

• From which objects are the costs allocated?

• To which objects are the costs allocated?

• Which costs are to be allocated?

• On what basis are the costs split among the receivers?

A segment contains sender cost centers. The allocation values are determined based on identical rules, and combines them with receiver objects, in which tracing factors are determined based on identical rules. The costing center Telephone, for example, allocates the telephone costs on the basis of the telephone units. When the rules for an allocation differ, a separate segment must be created. The cost center Energy, for example allocates the energy costs to the administration and the consulting cost centers on the basis of the square meters of an office.

Several segments are grouped together in one Allocation Cycle. You have to create separate cycles for plan and actual allocations.

You can combine sender and receiver relationships using the preceding rules.

Sender values can be posted amounts, fixed amounts, as well as fixed rates. If you use posted amounts, you can work with plan and actual values. You may specify a Sender Share in % that is less than 100%, resulting in a corresponding residual amount remaining with the sender cost center. For example, on the cafeteria cost center, this enables you to take into account that the cafeteria employees also use the resources in the cafeteria.

On the receiver side, you can store fixed percentages, fixed portions and variable portions as rules.

The Receiver Weighting Factor of the Variable Portions identifies a posted value on the cost center as an allocation base. You also specify whether the Variable Portions is to consist of costs in different currencies, quantities or statistical key figures. You can use plan or actual values as an allocation base.

If you want to be more economical with the allocation process, you should create separate cycles. If an error occurs in a cycle, you only have to repeat that cycle and not your total allocation process. You can also create a modular allocation process, schedule allocations to process separately.

A dependent cycle uses the results from the previous cycle. You need to execute dependent cycles in the correct order to enable the values to be processed correctly. On the execution screen, you can enter more than one cycle and the order in which they are to be processed.

Independent cycles can be processed in parallel if they have the same allocation type. In addition, the cycles must be assigned to different cycle run groups.

You cannot process cycles in the same cycle flow group in parallel.

The preceding figure explains how to create an Allocation Cycle Group. This is done with the help of the Manage Global Hierarchies app.

Here you have to choose Hierarchy Type Universal Allocations Hierarchy and to refer to the Allocation Context Cost Centers as well as to define to which Allocation Type, Actual/Planned Indicator, and Ledger your refer.

As a consequence you created the top node of the "hierarchy" and have to add your allocation cycle(s) to this node. Finally you have to activate this hierarchy in order to use it to run the allocation.

With the help of theRun Allocations app you can run the cycle group in productive run, test run. It's also possible to reverse a run, etc. A protocol explains the results of the run.

In the following we will focus on Allocations of Allocation Context Cost Center and Allocation Type Overhead Allocation.

Allocations of type Overhead Allocation were created to transfer primary and secondary costs from a sender cost center to receiving Management Accounting objects. With Overhead Allocation of Allocation Context Cost Center only cost centers can be used as senders.

A receiver in this scenario can be a cost center or a WBS element.

So in contrast to the Allocation of type Distribution the system does not display the original G/L Account on the receivers. Therefore, Allocation of type Overhead Allocation is useful if the cost element details for the receiver is not important, for example, as in the case of the allocation for the "cafeteria" cost center.

You can use the Allocation of type Distribution only for G/L accounts of type primary costs. The costs are transferred to the receivers using the original cost element, so they are transferred to the G/L account of type primary costs of the receiver. Secondary cost elements remain on the sender.

The Allocation of type Overhead Allocation allocates primary as well as secondary costs. The information on the original primary cost elements for the sender is lost because the costs are allocated using a G/L Account of cost element type 42 (assessment cost element).

This graphic shows two cycles with different sender-receiver relationships. There is a mutual relationship between two cost centers in cycle A as well as between cost centers of cycle A and B. Because the cost centers can make allocations to each other, the cost centers are not completely credited.

The segment relationships within a cycle can be defined in such a way that distributions and allocations of cost centers with different segments take place (a cost center is also a cost receiver). Cost centers that have already been credited can be re-credited during the cycle processing. To guarantee a final cost center credit the SAP system processes all sender and receiver relationships that were defined in a cycle iteratively. The segments are processed until all senders are credited according to their sender value.

If you deactivate the iteration indicator in the header of the cycle, the system processes the segments faster than in the iterative approach.

Cycles cannot be iterated with each other, even if they are of the same clearing type. Therefore, when you create a cycle, ensure that cost centers with the same allocation relationships are processed in the same cycle.

A Cycle Overview provides an overview of all cycles from one category, including all relevant segments. The cycles for the selected allocation are displayed in a main tree. The segments are assigned to one level lower down in the hierarchy in each case. On the Selection criteria tab strip, you specify which cycles and what additional information is to be displayed in the tree structure. On the Cycle information tab strip, you can display data for a particular cycle or segment. This provides information on the general data, the number of segments for the cycle, the last time the cycle was run. For segments, you are provided with information on the segment definition and the sender. On the Previous Processing tab strip you can see the Executed or Reversed Cycles and the Cycles with Segment Reversal.

For a clear picture of the costs that are to be assessed, you can summarize individual G/L accounts of type Costs or cost intervals into different assessment Cost Accounts.

You now decide in each segment whether to assign a single assessment cost account or an allocation structure.

In the allocation structure you can define which cost accounts are to be allocated under which assessment cost account. Therefore, you do not need to create more than one segment to obtain information on the source of the costs to be assigned.

In the allocation structure, you can assign single cost accounts, cost account areas, or cost account groups to an assessment cost element.

If required, you can go to the maintenance for allocation structures from the segment maintenance, to display, change, or create an allocation structure.

Many organizations have to change allocations from past periods. Corrections or information that is received after period-end closing, and simple errors mean that corrections are necessary even months after allocations were finished. Segment reversal and rebooking involves taking segments from a previous period and posting a new allocation in the current period (using corrected reference data from the previous period).

The segment reversal deletes the allocation postings for the selected segment by reposting the results with reversed +/- signs. The data for the current period-end closing transaction is not changed.

Segment reversal and rebooking deletes the allocation but retains the component data. If required, you can correct data from the previous period for a particular segment or segments. You can change statistical key figures, switch round +/- signs, select different receivers, and make any other corrections necessary. You can use the rebooking functions only in combination with the reversal function: a separate transaction for rebookings does not exist.

Although the period that is to be reversed is normally closed, this does not have to be the case. However, allocations belonging to the previous period must have used the cycle and the segments, and the current period must not be closed. You do not need to repeat period-end closing for the previous periods; reporting remains consistent for all the periods in question.

Segment adjustment is possible for assessment and distribution.

In this example, Cost Center A distributes its costs to Cost Centers B and C. Percentage rates were entered as tracing factors.

Between January and March cost center A distributes its costs of EUR 100 in equal parts to cost centers B and C. In April, however, an employee sees that the allocation bases were incorrect. The reposting is to be made, with a 75% portion for cost center B, and 25% for cost center C. You have to reverse the distribution for the closed periods (January through March).

Segment reverse in April cancels the allocations that took place from Cost Center A to Cost Centers B and C in January, February, and March. Cost Center A is debited with 3 × 100 = 300.

Cost Centers B and C are credited with 3 × 50 = 150. (The correction is posted in April, not in the original posting period.)

The segment reposting in April is a corrected reposting for the three previous periods using the new tracing factor. Cost Center A is credited with 300. Cost Center B is debited (75% of 1000) × 300 = 225. Cost Center C is debited (25% of 1000) × 300 = 75.

The standard reposting for April is now made on the basis of the new tracing factor.

Manual cost allocation lets you repost G/L accounts of type primary and secondary costs manually.

You can avoid having to make time-consuming settings in Customizing by using manual cost allocation for simple allocations. Manual cost allocation also lets you correct incorrect secondary postings and import data from external systems. Such adjustments do not involve a reversal, but a new allocation.

You can use manual cost allocation for all cost element categories. An exception to this is category 43 (allocation of activities/processes) which may only be used for activity allocation. Senders and receivers include cost centers, internal orders, WBS elements, networks, activities, customer orders, cost objects, and real estate objects.

If you carry out period-based allocation following manual allocation, ensure that all the G/L accounts of type costs used in the manual posting are contained in the allocation scheme for automatic allocation.

Indirect activity allocation automatically assigns activities in the actual data. Unlike the direct, manual allocation of activity, you need to define keys for the automatic periodic allocation of actual activities. In the same way as all other periodic allocation methods, indirect activity allocation uses segments and cycles, to define sender and receiver relationships. You define the processing methods per segment. Different processing methods can occur within a given segment. The costs are allocated using a G/L account of type secondary cost element category 43. The cost element assignment is taken from the master data for cost elements for the cost center/activity type plan, and can be changed.

Cost centers function as senders in indirect activity allocation. The receivers of an indirect activity allocation can be cost centers, WBS elements, internal orders, cost objects or business processes.

Depending on the activity type category, you can use one of two allocation methods:

• When you can determine the total activity for the sender, use indirect activity allocation to distribute the posted activity quantities from the sender to the receiver based on specific keys.

• For activities that are to be planned on a sender object, use activity type category three (manual entry, indirect allocation). The corresponding segment must use the sender rule"Posted quantities". All receiver rules are valid here except "fixed quantities".

For activity types whose actual activity quantities cannot be calculated or can only be calculated in a time-consuming manner, the S/4HANA system determines the activities using the following methods:

• The sender activity quantity is derived from the receiver tracing factors (with global or a weighted factor that is defined per sender).

• The sender activity is derived from the corresponding entries in the segment definition (as a fixed sender or receiver quantity).

This second form of indirect activity allocation uses activity type category 2 (indirect entry, indirect allocation). The corresponding segment must either use the sender rule "Inversely Calculated Quantity" along with any receiver rule, or the identical sender and receiver rules "Fixed Quantities". If you use sender rules for "inversely calculating the quantity", the sender-specific weighting factors mentioned previously are calculated with the sender values function (default value = 1).

When the cycle is run, the system first calculates the allocation bases of the receivers, to determine how the activities of the sender should be distributed. The sum of the tracing factors, multiplied by the "sender values" is the total activity of the sender. This quantity is then credited to the sender and debited to the receivers accordingly.

Use the period lock to lock plan and actual business transactions for a combination of controlling area, fiscal year, and version.

You can selectindividual business transactions for locking from a list of all the actual and plan business transactions.

It is also possible to lock individual business transactions for all the periods of the fiscal year, or all business transactions for individual periods.

• Accrual calculation distributes irregular expenses across periods using methods like percentage and target=actual for cost stability.
• Statistical key figures serve as tracing factors for periodic allocations, influencing cost distribution based on predefined criteria.
• Allocation of Type Distribution transfers primary costs from sender to receiver cost centers, maintaining original cost elements.
• Overhead Allocation consolidates primary and secondary costs, using secondary cost elements for efficient data management.
• Period lock prevents further postings after period-end closing, ensuring transaction integrity for specified fiscal periods.