Evaluating Other Actual Postings in CO-PA

The figure, Order-Related Manufacturing: Variance Controlling, shows cost object controlling using the logistic scenario of order-related manufacturing. The controlling view is "controlling by lot size".

When the cost object is created, a preliminary cost estimate is performed automatically to calculate the planned costs for the cost object.

The following types of costs are incurred at different stages of production and processing:

• Actual costs are incurred when materials from stock or activity types of cost centers are consumed.

• Primary costs can be incurred directly from the other system components to the production order.

• Process costs can be incurred by allocating process quantities using the process template.

Because the related costs are posted to the production order at the same time as the consumption of materials and activity, production order costs can be analyzed and reviewed at any time.

When the produced goods are delivered to stock, the cost object is credited with the value of the delivered quantity and the goods are capitalized in the inventory. Depending on the method of price control, this can result in a revaluation of the finished goods inventory. In this example, you use a standard price-controlled material. SAP recommends the valuation of material stock using the material cost estimate for self-finished goods.

With the final confirmation to the production order in a make-to-stock scenario and cost-object method Product Cost by Order, the yield quantity debits the cost object and credits the goods in stock. After finishing the production process or at the end of the period, the variances for the production order are calculated and settled to FI and CO-PA.

You can settle or transfer the production variances calculated in Product Cost Controlling (CO-PC) for both final production orders and schedule headers periodically to CO-PA. The individual variance categories, such as material price variance and material quantity variance, can be transferred separately.

A PA transfer structure consists of one or more items called assignment lines. In assignment lines, you assign a cost element group and a variance category to a value field of the operating concern. To ensure correct settlement to CO-PA, assign each combination of cost element group and variance category to one value field.

The requirements to define a PA transfer structure are as follows:

• Every debit cost element must be in the PA transfer structure. You can either group all the cost elements into a cost element group or define a number of groups for materials, internal activities, business processes, and other overhead costs. These groups are entered in the cost element area.

• Every variance category must be represented in the PA transfer structure. The variance categories are specified by the system and are entered under the source section.

• Each debit cost element or combination of cost element group and variance category can be assigned to only one value field.

Make sure that the following requirements are met for valuation:

• The current standard cost estimate is selected for valuation in CO-PA.

• The cost components of the standard cost estimate are linked to value fields.

Settlement of Variances to CO-PA (2)

In costing-based CO-PA, you can assign these variances to the different value fields according to variance categories and cost elements. To transfer variances, select the Variances flag in the settlement profile assigned to the relevant production order. The costs are again assigned to the value fields in a PA transfer structure, where you can assign variance categories and cost elements to the required value fields.

In Margin Analysis. you define a price difference account on one side, to settle the consolidated price difference categories. The price difference account must be a primary cost element, to settle the price differences to Margin Analysis. This account will be selected in the account determinations for automatic posting (transaction OMWB). On the other side, you define a price differences profile, to settle each variance category to a specific primary cost element.

With this customizing activity, you can refine the FI posting to show the different variance categories for each cost element on different G/L accounts allowing you to show, for example, in your income statement, the reasons for the production differences.

The system finds the profitability segment automatically in order settlement based on the information found in the production order and by using characteristic derivation.

Note

Settlement to Margin Analysis is not a standard but an option. Only the variances calculated in the target version 0 can be settled to a profitability segment.

In cases of complex manufacturing procedures and the need for valuation of stock, you can use cost-bearing and revenue-bearing sales order items for the valuated sales order stock.

In complex Make-to-order (MTO) production, you must be able to monitor the progress of costs and revenues for a product that is manufactured based on the client’s specification.

A typical MTO production scenario is plant construction. Another typical scenario is service. Sales orders for service products need cost object controlling, when period end closing is necessary regarding possible reserves for anticipated losses, work in process (transport), and reserves for missing actual costs.

If the costs and revenues are generated for a sales order item, you can use results analysis to calculate the cost of sales expected on the basis of the existing actual revenues.

To transfer the costs and revenues for the sales order item to CO-PA, you must settle the item. The purpose of settlement is to pass the revenues, cost of sales, and any reserves for imminent loss for the item on to CO-PA for the period.

You can perform results analysis using different methods. These methods include IFRS/IAS (International Financial Reporting Standards/International Accounting Standards) or US - GAAP (United States General Accepted Accounting Principles).

For the non-valuated sales order stock, you always use a cost-bearing and revenue-bearing sales order item. Consequently, in complex MTO manufacturing, you always control at sales order item level. It is recommended that you work with the valuated sales order stocks.

In CO-PA, sales revenues, sales deductions, and costs of goods sold (COGS) are stored at the customer and product level. Many business transactions, such as freight invoices, insurance expenses, or advertising cannot be easily assigned to such an extensive level in CO-PA. This also includes bonus payments to the customer for customer loyalty. These transactions must be posted at a summarized level, such as the division, sales organization, or company-code level and regarding to bonus payment on customer level, not on product level.

Top-down distribution of actual data is a periodic function. This function enables you to distribute the aggregated data to extensive levels, for example, from customer level to customer and product level in CO-PA. The distribution rule can be set with reference data. The figure Top-Down Distribution by Period shows an example. The bonus payment for customers has been posted to the primary cost element 50307800. The distribution rule is based on the revenue which has been posted to the primary revenue element 41000000. The characteristic PRODUCT has been set as the distribution level. In the selection criteria, it is important to know that the top-down distribution cannot be used as a across-distribution for organizational units like company code, profit center, segment, and function area. This function works in much the same way as top-down distribution of plan data.

However, there is one difference between the two. In actual distribution you can only distribute unassigned data. With plan distribution you can decide, whether you want to distribute all data (including the data which has already been assigned to the target characteristics), or you want to distribute only the unassigned plan data.

You can select the values posted to any profitability segments and value fields and then distribute this data to a predefined distribution level. You use the existing actual or plan data as the basis for this distribution. You can also distribute period-by-period or aggregate the period values to smooth out variances.

Costing-based CO-PA gives you the flexibility to take over several valuations for COGS (maximum of six valuations).

If you use parallel valuation (legal valuation together with profit center valuation), you can valuate the valuation views again separately in periodic valuation.

With the correct settings, you can considerably reduce the runtime of the new valuation and the data volume if you want to valuate only one valuation view again.

The new selection criteria, Document Number and Reference Document Number, allow you to valuate the selected documents, reference documents, or intervals between these documents. You can also exclude documents or intervals from the new valuation.

In Simplified Profitability Analysis, the cost and revenue information is always current and is always 100% reconciled with the income statement. This ensures greater transparency and makes the information easy to use. Transparency is achieved by means of the universal journal entry, which represents a single source of truth for financial data. Profitability reporting is based on income statement items, allowing drill-downs on any characteristics, for example the product group or even sales orders.

In addition to income statement items which carry a real account assignment to a profitability segment, a profitability segment can be derived for additional income statement items and persisted in the journal entry. This is based on the "best-guess" principle, using the information that is available and known at that point in time. A refinement of the profitability characteristics at period end is still possible with the closing transactions such as settlement, allocation, and top-down distribution. The technical basis for Simplified Profitability Analysis is Margin Analysis. The profitability characteristics are determined through the operating concern and can be refined by the tools of profitability analysis. When the operating concern is generated, all characteristics not yet available, including customer-specific characteristics, are appended to the universal journal and filled during posting.

The powerful CO-PA derivation tool is also available, allowing completely new evaluations on a timely basis at the point of posting.

Example: An internal order contains acquisition costs, which are not billed to the customer. These costs need to be analyzed together with the product costs in Profitability Analysis. You create settlement rule in the internal order with the assignment of the sales order number in the settlement rule. When a posting is made to the internal order, as for acquisition costs, the sales order number is selected and persisted in the journal entry for the internal order.

By assigning the market segment to primary postings based on such derivations, it is possible to report not only on the account assignment but also on the market segment for certain primary accounts. Derivation of market segments early in the process will generally eliminate the need for some of the period closing activities like the settlement of the internal order to CO-PA.

An income statement item has a real account assignment to a profitability segment in cases such as the following:

• The item is already determined in a logistical document such as a sales order or billing document.

• A manual account assignment is performed via the CO-PA account assignment screen, for example for manual FI postings.

• For the G/L account referenced in the income statement item, automatic account assignment to a profitability segment has been defined in Customizing.

For income statement items without a real account assignment to a profitability segment (for example, items assigned to an order, WBS element, or sales order item), an attributed profitability segment can be determined when the journal entry is created. This functionality can be activated in Customizing.

In both cases the available data is enriched, for example by accessing CO-PA derivation, and the result is written to the income statement item based on certain restrictions.

In SAP Simple Finance, income statement items can carry a real account assignment to a profitability segment. This profitability segment is normally determined in the sending application (sales order or a billing document, for example). Additional income statement items can carry a so-called attributed profitability segment.

As a prerequisite for attributed profitability segments, the corresponding G/L account must be of one of the following account types:

• Primary Costs or Revenue

• Secondary Costs

The derivation of attributed profitability segments must be activated in Customizing, and depends on the account assignment of the income statement item which can be of the following types:

• Cost Center

• Internal Order

• Project

• Sales Order

• Production Order

The corresponding IMG activity can be found in CO-PA-Customizing under: Controlling→Profitability Analysis→Master Data→Activate Derivation for Items without Profitability Segment.

The program logic depends on whether real or attributed account assignment is involved:

1. Income Statement Item with Real Account Assignment to Profitability Segment:

   In this case, a profitability segment has already been determined by the sending application and the profitability segment number has been transferred to G/L. When the income statement line item is created, the combination of characteristics is read and moved to the item according to certain rules. Examples:

   • Goods issue item or billing document item in a sell-from-stock scenario

   • Manual FI posting to profitability segment

   • Settlement of a cost object to Profitability Analysis

2. Income Statement Item Without Assignment to Profitability Segment:

   In this case, an attributed profitability segment – if activated in Customizing, as previously mentioned - is determined only at the time the income statement item is created. The requirement is to fill as many characteristics in the item as possible to enable maximum drill-down-reporting. This is achieved by taking the CO-PA relevant data from the income statement item as a basis and performing the following steps which are executed automatically in this case, depending on the account assignment type of the item, example: INTERNAL ORDER.

   For account assignment to internal order:

   • If a settlement rule to a profitability segment exists in the order, the corresponding profitability segment data is read and written to the income statement item.

   • If no settlement rule exists, but a sales order item is referenced in the income statement item or the master data of the order, then:

     • If a settlement rule to a profitability segment exists in the sales order item, the corresponding profitability segment data is read and transferred to the income statement item.

     • If no settlement rule exists in the sales order item, but the sales order item does carry a profitability segment, the income statement item is enriched with the corresponding characteristics.

     • If no profitability segment exists in the sales order item either, certain fixed attributes such as customer and product are copied from sales order header and item, and in addition CO-PA derivation is called. The resulting characteristics are written back to the income statement item.

   • If no sales order item is found, but there is at least a unique sales order assigned in the master data of the order, the customer is copied from the sales order header, CO-PA derivation is called, and the derived characteristics are transferred to the income statement item.

   • If not even a sales order is found but the current document posted is an SD billing document, the customer and product are copied from the billing document, CO-PA derivation is called, and the income statement item is enriched with the resulting data.

   Further information about the program logic for other objects like projects you can find in the HELP.SAP.COM.

• Order-related manufacturing involves variance calculation for cost objects.

• Settle production variances periodically to CO-PA using variance categories.

• Ensure correct settlement by assigning each combination to one value field or account, respectively.

• Periodic valuation transfers actual costing values to costing-based CO-PA.