Performing Results Analysis Before Resource Related Billing

Objective

After completing this lesson, you will be able to perform results analysis before resource-related billing

Results Analysis

The image shows a process of results analysis, comparing planned and actual values for different order items like material, internal activities, overhead, and process costs. It depicts the data flow from the initial order item table to the results analysis table, which includes metrics like revenue, cost of sales, work in process, and reserve.

Results Analysis calculates the following values:

  • Inventory
  • Reserves for unrealized costs
  • Reserves for imminent loss
  • Reserves for complaints and provisions
  • Cost of sale (COS)

Integration of Results Analysis (2)

The image illustrates the CO-PA (costing and profitability analysis) cost-based accounting process. It shows how actual costs incurred for order items like material, internal activities, overhead, and process are settled against the planned costs. Differences are recorded as work in process, inventory changes, reserves, or expenses.

The results of Results Analysis are then settled to FI, CO-PA, and PCA.

You can settle the following to FI and PCA:

  • Inventory
  • Reserves for unrealized costs
  • Reserves for imminent loss
  • Reserves for complaints and provisions
  • COGS:

    If you are using non-valuated sales order stock and the cost of sales accounting method in FI.

You can settle the following to CO-PA:

  • COS and revenue
  • Reserves for imminent loss and complaints

General Approach (1)

The image depicts a profitability analysis diagram. It shows how revenues (R) and cost of sales (C) are calculated using the percentage of completion (POC) method, which is represented by a grid. The profit is the difference between revenues and costs. The analysis provides methods to determine the percentage of completion for accurate profitability calculations.

The starting point for calculating accrual values is the calculation of a percentage of completion (POC) for the cost object.

General Approach (2)

The image contrasts the profitability analysis used in cost accounting (showing revenues, cost of sales, and profit) with financial accounting (showing actual costs and actual revenues to calculate profit/loss). It highlights that cost-of-profit analysis does not equal financial income, indicating a difference between the two accounting approaches.

The period-based costs and revenues of the sale are calculated from the POC. If these values are settled to CO-PA, the generated profit differs from the profit generated in FI and PCA.

General Approach (3)

The image presents a profitability analysis flow diagram comparing actual costs (C(a)) and revenues (R(a)) against planned/budgeted values (C(PA) and R(PA)). It calculates profit, work-in-progress inventory, reserves, capitalized revenue, and revenue surplus based on the cost and revenue variances. The diagram also includes symbols representing cost of sales and a rubik's cube, potentially symbolizing analytical complexity.

Stock and reserves are calculated in terms of the costs and revenue depending on the constellation of data.

General Approach (4)

The image presents a profitability analysis flow diagram comparing actual costs (C(a)) and revenues (R(a)) against planned/budgeted values (C(PA) and R(PA)). It calculates profit, work-in-progress inventory, reserves, capitalized revenue, and revenue surplus based on the cost and revenue variances.

Stock and reserves are transferred to FI and PCA so that the profit generated in FI and PCA is the same as the profit in CO-PA.

Method-Based Results Analysis

You can choose any of the following types of method-based Results Analysis:

1. Revenue-based method with profit realization
2. Revenue-based method without profit realization
3. Cost-based POC method
4. Quantity-based method
5. Quantity-based POC method
6. POC method based on revenue planned by period
7. POC method based on project progress value determination
8. Derive COS from resource-related billing
9. Completed contract method
10. Inventory determination, without planned costs, without partial billing
11. Inventory determination, without planned costs, with partial billing
12. Inventory determination, provisions for follow-up costs, with partial billing
13. Inventory determination Work in Process (WIP) at actual cost for objects not carrying revenue
14. Derive COS from resource-related billing of dynamic items
15. Derive revenue from resource-related billing and simulation of dynamic items
16. Cost-based POC method without profit realization if planned revenue greater than (>) planned costs
17. Cost-based POC method without profit realization and loss realization

The system can carry out Results Analysis for cost objects automatically. The Results Analysis method that you choose to use depends on your business requirements. The different business objectives and reporting rules for different business transactions denote that you can use several methods simultaneously. The Results Analysis method contains the rule for calculating Results Analysis data.

Decision Criteria

Decision criteria are important for the following reasons:

  • The different legal regulations in different countries determine whether unrealized profits can or cannot be capitalized.
  • Plan costs are necessary for automatically creating reserves for unrealized costs or reserves for imminent losses.
  • When certain conditions are fulfilled (for example, the status is set to technically completed).

With regard to capitalizing unrealized profits, legal regulations, and the applied valuation rules, significant differences can be observed between different countries (for example, between North America and Germany), as well as between the German Commercial Code (HGB) and International Accounting Standards or International Financial Reporting Standards (IAS/IFRS). This situation demands different Results Analysis methods that can be transferred in parallel to FI (but using different accounts).

You can use the Results Analysis method in the following situations:

  • If you do not want to capitalize unrealized profits, choose a Results Analysis method that can be used to create WIP.
  • If you want to capitalize unrealized profits, choose a Results Analysis method that can be used to create stock from which yield (revenue in excess of billings) can be generated.

Some methods of creating WIP and creating revenue in excess of billings also allow reserves for unrealized costs or reserves for imminent losses to be created automatically.

Results Analysis Before Resource-Related Billing

The image depicts a flow diagram illustrating the concept of Work in Process (WIP) in a manufacturing or service context. It shows how a sales order for a service item triggers planned and actual revenues and costs, which contribute to the calculation of WIP. The WIP value is then analyzed against factors like expenses, WIP change, customers, and price differences.

You can use various Results Analysis methods to calculate the costs and revenue of the cost object based on the period, and also from stock and reserves. For sales orders, the system carries out Results Analysis for each sales order item. For projects, Results Analysis is carried out in the billing elements for the entire project hierarchy, including assigned objects. You can set exactly how it works in Customizing. The system settles the revenues and costs of the goods sold (COGS) to CO-PA, and settles stock and reserves to FI and PCA.

Perform Results Analysis Before Resource-Related Billing

ExerciseStart Exercise

Summary

  • Results analysis calculates inventory, reserves for unrealized costs, imminent loss, complaints, and cost of sale.
  • Results are settled to Financial Accounting, Profitability Analysis, and Profit Center Accounting.
  • Percentage of completion is the starting point for calculating accrual values.
  • Period-based costs and revenues are calculated from the percentage of completion.
  • Stock and reserves are calculated in terms of the costs and revenue depending on the constellation of data.

Learning

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