Using Purchase Order Accruals

Carla wants to evaluate the purchase order accrual functionality, understand the configuration, and see if there are current business scenarios that could use this business functionality.

It sometimes happens that a purchase order is placed but goods or services are not received or not invoiced, which means a liability to the supplier and an expense is incurred, or an invoice is received for future periods in which the booked expense reflects an asset of the company. It is expected to calculate accruals or deferrals based on the purchase order information.

The purchase order accruals (Application component POAC) and deferrals are for such a case and can help companies:

• Automatically replicate purchase order as accrual objects.
• Automatically based on purchase order planned and actual information to calculate and post accruals and deferral postings.
• Automatically synchronize the purchase order changes to update the accruals calculation.
• Automatically terminate the accruals object when the purchase order is set as final goods received or final invoiced.

What types of purchase orders need to be accrued?

According to IFRS, accruals may be posted if there is a potential debt to some 'external' legal entity (for example, to a supplier).

Accruals need to be posted for costs that have already been incurred but were not yet posted in accounting. Consequently, accruals are only relevant for purchases where costs occur.

PO (purchase order) with Valuated GR (goods receipt) - In this case, accruals are only needed if the GR has not been posted despite the material being already received.

Accruals are usually not relevant for the purchasing of the following:

• Products that are put into stock, as no costs are associated to such purchase order items. For example, raw material that will later be used for producing other products.
• Products that represent a fixed asset, for example a laptop. Their value is posted to a balance sheet account. The costs will occur later during depreciation postings.
• Purchase orders that represent an inter-company stock transfer: they are not related to an external supplier, so no accruals are needed.

After you create a purchase order, for example, in the Manage Purchase Orders app, the transfer occurs in the following cases.

The purchase order is automatically transferred into Accruals Management, depending on the configuration settings. In Accruals Management, an accrual object is created for each purchase order, with accrual sub-objects corresponding to the purchase order items. Using this data, the system calculates the accrual or deferral amounts for each purchase order item. Simulations of these amounts are also possible, and an optional review and approve process can be performed. At month end, an accrual or deferral run can be initiated to post all accruals or deferrals for the relevant business transactions.

Press the play button to see how to create a purchase order with a non-valuated goods receipt.

When a purchase order (item) is created, the system determines whether accruals are potentially relevant for it. If yes, then the system transfers and creates an accrual (sub)object for the purchase order (item) in Accruals Management. This transfer and creation of accrual objects for a purchase order can be done either:

• Offline, after the purchase order was created. Existing purchase orders are transferred into the Accruals Management using the SAP Fiori app, Schedule Accruals Job.
• Online, when the purchase order is being created in materials management.

Press the play button to see how to post a goods receipt for a non-valuated purchase order.

According to IFRS accruals may be posted if there is a potential debt to some 'external' legal entity (for example, to a supplier). The logic/algorithm of this debt and the related accrual amount is specific for each use case.

Accruals Management especially supports the following procedure:

The system calculates two amounts: Planned costs and Actual costs in the following scenario:

The amount that has been 'received' already.

For example, the amount of service that was received or goods delivered by a supplier for a purchase order item up to a certain key date. The application Purchase Order Accruals uses by default the delivery schedule of the purchase order item to calculate this amount. In other words, the system assumes that the deliveries were indeed received on the dates as planned in the delivery schedule. These amounts are stored in the Accruals Management in an accrual item type that is referred to as Planned Costs (PLNCT).

Independently of the planned costs, the system calculates the actual costs that have already been posted. For example, for non-valuated goods receipts, the actual costs are posted by the supplier invoice. Thus, the system selects all invoices that have a posting date before the key date. These amounts are stored in Accruals Management in an accrual item type called Actual Costs (ACTST).

The system calculates the accrual amount as plan minus actual: The difference between planned and actual costs represents the debt to the supplier - of course only if this difference (plan minus actual) is greater than zero. The system calculates this difference and stores it in an accrual item type called Accruals (ACCRL).

For each purchase order, you can display the monthly accrual amounts the system calculates using the Fiori app, Display Purchase Order Accruals.

Press the play button to see how to display a purchase order accrual.

At the end of each period, a reviewer can adjust the accrual amounts (or planned costs) that the system proposes for the current fiscal period. As a prerequisite, the proposal amounts must be generated by scheduling the job Purchase Order Accruals - Propose Periodic Accruals. This action also generates work items in the Fiori app, My Inbox, for the purchase order owner when you use workflow in the review step.

The review can be performed in the following ways:

• For the purchase order owner, use the My Inbox Fiori app to Review Purchase Order Accruals
• (Optional): For the controller, use the Fiori app Review Purchase Order Accruals – for Cost Accountant.

Press the play button to see how to propose periodic accruals.

Press the play button to see how to review periodic accruals.

Press the play button to see how to approve periodic accruals.

Finally, the accruals will be posted at the end of each period. The accrual amounts can be posted using the job template, Purchase Order Accruals - Post Periodic Accruals, using the following SAP Fiori app: Schedule Accruals Jobs.

Press the play button to see how to post periodic accruals.

The accrual postings are posted as journal postings to the General Ledger. The Display Purchase Order Accruals app can be used to display the posted accrual for each purchase order.

Press the play button to see how to display posted accruals.