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Key Concept
SAP Profitability Analysis (CO-PA) supports two forms of profitability computation: costing
based and account based. Account-based CO-PA reconciles with FI, whereas costing-based
CO-PA has higher flexibility and computational capabilities that provide businesses with
supporting tools and dashboards to make decisions such as make versus buy, promotion
strategy, advertising spend focus, and distribution optimization spend.
Management accounting serves the core needs of internal business managers by improving decision
support to efficiently manage internal business processes for achieving organization goals. For large
organizations, the management accounting framework is laid out at the corporate level and is rolled
out to its affiliates in various regions and countries. This approach ensures that the affiliate goals
are commensurate with the vision of the organization.
An example of such a framework is requiring principles used to compute the profitability of an
affiliate or a product line to be in line with the principle used for external profit-and-loss (P&L)
statement reporting. This framework calls for reconciliation of management profitability reports with
the published P&L statements. SAP costing-based Profitability Analysis (CO-PA) provides an efficient
set of tools to compute profitability of business at various levels of granularity in dimensions
pertaining to customers, product range, and geographic locations. However, costing-based
profitability reports do not tie with FI. For companies that want the internal reports to tie to external
published profitability statements, SAP offers account-based CO-PA, which has reduced
computational capabilities. For example, valuation and top-down distribution functions are not
available for account based CO-PA.
To have the best of both worlds, I use costing-based CO-PA and report profitability using a
characteristic general ledger (G/L) account. I explain how to create the G/L account characteristic,
provide logic to update this characteristic for various business scenarios, and generate a profitability
report mockup using Excel based on the data from costing-based CO-PA tables.
Costing-based CO-PA reports by value fields, but account-based CO-PA reports by general ledger
accounts. Based on performance implications, SAP limits the maximum number of value fields to
200 in costing-based CO-PA (SAP Note 1029391). However, there is no such limit to the number of
characteristic values. I explain an innovative solution to address the requirement to build complete
product-level profitability reports.
Note
Most companies have more than 200 lines (accounts) in their externally published P&L
statements. Because costing-based CO-PA can generate product-level P&L reports only with
a maximum of 200 lines (value fields) for management accounting, reconciliation of
management and published profitability statements becomes a tedious task. For example,
consider a scenario in which a company sells only two products: A and B. Adding the dollar
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value of the line electricity expense from the profitability reports of products A and B should
result in the same dollar value in the electricity expense line in the published P&L statement.
Thus, the reconciliation of the full reports ensures that internal or management reports follow
the same principles of externally published statements and vice versa.
These reports mimic the layout of externally published profit-and-loss (P&L) statements using
costing-based CO-PA functionalities such as top-down distribution and valuation. I use accounts as
a CO-PA characteristic to complement the value fields to address the 200 value fields limitation and
have costing-based CO-PA reconcile with FI. With this approach I prevent duplication of data in
account- and costing-based CO-PA tables and improve system performance.
This solution can be realized by leveraging the characteristic derivation (COPA0001) and actual data
enhancements (COPA0005) customer exits available in CO-PA. I describe various scenarios that
feed data into costing-based CO-PA tables and update the account characteristic via leveraging
COPA0001 and COPA0005. I explain some scenarios and demonstrate the posting logic in the SAP
system. I also discuss how to generate complete product-level profitability reports. I use the lineitem reporting functionality in which the account characteristic complements the value field and
creates a report mock-up using the data in costing-based CO-PA tables.
Figure 1
Table TKEDP
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Figure 2
Table TKEPT
Note
In this article references to the SAP General Ledger are to the module formerly known as the
new G/L.
Note
Introduction of the G/L account as a characteristic increases the number of CO-PA segments.
For example, consider a scenario in which the total number of CO-PA segments without the
G/L account characteristic is N, and you have 300 P&L accounts in an operational chart. You
now have 300*N CO-PA segments. The table CE4xxxx (where xxxx is the operating concern)
has its size increased 300 times. Therefore, I recommend that you negotiate with business
over the reporting dimensions to lower N by eliminating nice-to-have characteristics from the
CO-PA cube.
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Guide > Controlling > Profitability Analysis > Master Data > Define Characteristic Derivation. The
methods that are used in the derivation step are termed as derivation types. The characteristic
derivation consists of many derivation types such as:
Derivation rule
Table lookup
Moves
Clear
Customer enhancement
Now I discuss a typical set of scenarios for which you need to populate the G/L account
characteristic. I use different derivation types for G/L account characteristic derivation for each of
these scenarios.
Figure 3
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Now you need to assign the valuation strategy to an operating concern. The point of valuation (PV)
is set to 01 for real-time valuation of actual data (Figure 4). The record type (Rec.) in CO-PA
indicates the type of business transaction from which the data is transferred to CO-PA. Because the
Sales and Distribution (SD) data flows to CO-PA during billing, I choose record type F (billing data).
Figure 4
Note
I have discussed data flow to CO-PA separately using various scenarios. Some scenarios I
use as examples involve additional configuration or master data maintenance only and do not
need the user exit.
With the above configuration the enhancement COPA0005 is triggered. The enhancement helps to
modify how actual data is updated in CO-PA via the FI/CO interface. The enhancement consists of
function module EXIT_SAPLKEII_001, which is called when a line item is created in CO-PA from the
FI/CO document. It is executed after the characteristics are transferred from the sender document,
but before the values are transferred and derivation of characteristic values is carried out. Thus, it
can be used to split the line items that are posted to CO-PA from a billing document and for the
split lines for which a G/L account characteristic is determined.
Note
The user exits are activated in all operating concerns as soon as the CO-PA enhancements
are activated. Thus, I recommend that you include additional check codes in the user exit, so
that the code logic is functional for the intended operating concerns only.
To trigger the Characteristic Derivation enhancement COPA0001, you create a derivation step of
derivation type customer enhancement by using transaction code KEDR or by following menu path
SPRO > SAP Customizing Implementation Guide > Controlling > Profitability Analysis > Master Data >
Define Characteristic Derivation. As you can see in Figure 5, enhancement COPA0001 has function
module EXIT_SAPLKEAA_001, which can be used to define source code in include ZXKKEU011. The
code logic is to look for the G/L account in the accounting document generated from the billing
document to populate the respective G/L account characteristic in CO-PA.
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Figure 5
Note
I discuss data flow to CO-PA using various scenarios. The data flow to CO-PA happens
differently for different scenarios. Production Variance Settlement or Project System
settlement scenarios are beyond the scope of this article. However, similar logic can be used
for those types of settlements using record type E (single transaction costing) and C (order or
project settlement).
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Figure 6
Click the Condition tab. In this tab you can maintain a condition that is prerequisite for this
derivation to work. For example, I want this derivation to work only for Controlling Area ASM1, so I
maintain condition Controlling Area equals ASM1 for the derivation to trigger. This can be done by
entering CO-PA in the Origin column, KOKRS in the Name column, = in the Operator column, and
ASM1 in the Value column (Figure 7).
Figure 7
The Move derivation type for G/L account derivation for a condition that
is always true
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Note
CO-PA assessments do not affect the FI module when you use classic General Ledger
accounting. However, with the SAP General Ledger, when you perform CO-PA assessments,
real-time posting is made to FI when the sender cost center is assigned to a profit center that
differs from the profit center derived for the receiver CO-PA segment. My point is in reference
to the automatic reconciliation postings in SAP General Ledger profit centers when the cost is
allocated from cost centers to CO-PA segments. The profit center in cost center master and
profit center derived for CO-PA segment are different.
Figure 8
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Figure 9
Click the Receiver Tracing Factor tab. In this tab you maintain the receiver tracing factor for the
profitability segment with the G/L account characteristic of 65000, the same as the sender cost
element of 65000 (Figure 10).
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Figure
10
Note
Consumptions can be posted to a cost center, and overhead cost assessment as described in
scenario 3 can be used to determine the account from the cost element.
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Figure
11
After you populate the fields necessary for top-down distribution shown in Figure 11, you are ready
to set up instructions for processing. To complete this process, click the Processing Instructions
button on upper left section of the screen shown in Figure 11 or press the F6 key on your keyboard.
In the screen that appears (Figure 12) note that for the Account Number characteristic, the radio
button is under the Copy Value column. Selecting this button ensures that the characteristic values
from the distributing CO-PA lines are retained in the distributed CO-PA lines. Click the execute
icon
or press the F8 key to execute top-down distribution.
Figure
12
The next screen that appears (Figure 13) shows the results of the top-down distribution run.
Because you had the characteristic WWACT account number set to Copy Value in the Processing
Instructions, the account characteristic from the distributing line (first row) is retained in the
distributed lines (second and third row).
Figure
13
After you populate the G/L account characteristic for the various scenarios using the various
techniques that I described, you can use custom reporting logic in SAP ERP Central Component
(SAP ECC) or SAP Business Warehouse (BW) to generate profitability reports by account, thus
mimicking the externally published P&L reports. I demonstrate how the results can be realized using
a smaller set of data extracted from a CO-PA line-item display via transaction KE24. To execute
transaction KE24 click the spreadsheet icon highlighted in Figure 13. The output can be extracted
into an Excel spreadsheet. Using the data in Excel format, I have used the Pivot table functionality to
generate the profitability report using G/L accounts in a venture to report with layout similar to
externally published statements as shown in Figure 14.
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Figure
14
Ashim A. Nanda
Ashim A. Nanda is a managing consultant in SAP FI/CO working with IBM
Global Business Services. He has more than eight years of experience with
implementation, global rollout, and maintenance projects for clients in the
pharmaceutical, telecommunication, automotive, and high-tech industries.
Ashim holds an MBA in finance and systems from Xavier Institute of
Management, India, and a degree in electrical engineering from University
College of Engineering, India.
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