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Highlighting the Different Principles of Production Costs (Period-End closing or Event-Based production costs)

Objectives

After completing this lesson, you will be able to:

outline the principle of event-based production cost posting and its context.
outline the principle of period-end closing additional postings and its context.
identify the timeline at which event-based postings are created or, exceptionally, manually triggered.

Note

SAP introduces a new standard, among all for product costing, implemented with scope item 3F0- Event-Based Production Cost Posting. This is now the default implementation setting in SAP S/4HANA Cloud, Public Edition, and it is compulsory if you want to work with the Universal Parallel Accounting (UPA) feature in SAP S/4HANA Cloud, Private Edition.

This scope item offers 2 approaches:

Settlement based on business events (Event-Based Order with Event-Based Production Cost Posting (primary approach))
Manual Settlement (Event-Based Order with Manual Settlement (alternative approach))

The period-end closing production costs approach can still be present (scope item BEI—Period-End Closing) in existing systems, even if it has been deprecated from SAP S/4HANA Cloud 2408. In such cases, you can manually switch the settings to event-based production cost posting using a procedure provided by SAP.

The retirement phase for BEI is planned for SAP S/4HANA Cloud release 2602.

Event-Based Production Cost Posting

Introduction

The Event-Based Production Cost Posting solution emphasizes capturing costs, which are part of the production costs, as they occur during various production events. It provides real-time insights and enhanced information for product cost collectors, process, and production orders, using the production accounting methods product cost by period or product cost by order. This approach enables real-time product costing and parallel valuation to align with both group and local accounting standards, supporting the concept of parallel accounting (detailed in the next lesson).

This method allows businesses to track costs associated with specific production events more immediately and in greater detail, offering a more granular view of production expenses: event-based posting links cost entries to business events such as goods issues, goods receipts, and operation confirmations.

The need for manual additional calculations of overhead costs, work-in-process (WIP), variance, and settlement is eliminated (covered later in the course). SAP S/4HANA event-based production costing ensures permanent consistency with financial accounting (FI) as it is fully integrated with the unified journal table ACDOCA. Details regarding real-time production WIP capitalization and real-time variance settlement documents are updated simultaneously within ACDOCA.

Error Handling Monitor

It is still possible to review event-based errors that need to be reprocessed, using post-process Fiori apps, to ensure that the costs of goods manufactured are capitalized as WIP or posted as variance correctly.

Period-End Production Cost Posting

Another way to evaluate costs and perform calculations in production accounting is to recognize them, not on the fly but at period end.

In the legacy Period-End Closing-Closing Plant (BEI scope item-Deprecated) approach, which could still be activated in some systems, costs are collected and analyzed at the end of each period. This means that regardless of whether the production is order-related, process manufacturing, or repetitive manufacturing (REM), the costs are accumulated and reviewed periodically. It is the traditional approach with the period-based calculation of work in process (WIP) and variances that are launched at the closing period. This approach will gradually disappear.

However, note that with scope item 3F0 and its Event-Based Order with Manual Settlement alternative approach, it is also possible to provide event-based posting in a selective way, at period-end or even more frequently each time the production cycle arrives at the end, identifying the orders with a Result Analysis Key "Non-Event-Based". It then offers an option to calculate, on request, for all business events at once:

Overhead costs if some
WIP if unfinished products are identified
Variance manually (for example, at period-end) if the order has a delivered status

This alternative calculation can be applied, instead at each business event, in case you:

Have rather short-living production cycles and do not necessarily want to see capitalized WIP after every logistic posting.
Have many additional postings on the orders (for example, supplement missing components and re-open orders) that could generate many additional settlement documents and reversal documents.

Approaches Comparison

The table below summarizes the different elements introduced about Event-Based Product Costing, for both product cost by order or by period methods.

Table summarizing the different approaches (Linked to scope items 3F0-Event-based Order with Event-Based Production Cost Posting and BEI Period-End Closing-Plant) and their main characteristics

For further details, please refer to the following:

Event-Based (3F0) versus Period-Based (BEI) in Production Costs of Manufacturing Orders | SAP Help Portal

Event-Based (3F0) versus Period-Based (BEI) for Product Cost Collectors | SAP Help Portal

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