SAPexperts - Calculate Actual Costs Across Multiple Company Codes Using A New Business Function in SAP Enhancement Package 5 For SAP ERP 6

4/1/14
SAPexperts | Calculate Actual Costs Across Multiple Company Codes Using a New Business Function in SAP Enhancement Package 5 for SAP ERP 6.0
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Calculate Actual Costs Across Multiple Company Codes Using a New

Business Function in SAP Enhancement Package 5 for SAP ERP 6.0
by Janet Salmon, P roduc t Manager, SAP AG
Dec ember 1, 2010
SAP experts/Fi nanci als

The mate rial ledge r records the flow of goods from the ini tial purchase of the raw material to the fina l sal e of
the fini shed product. I t assigns any price diffe rence s incurred duri ng purchasing a nd production to the product
sol d or at least it does provided that the goods fl ow re mains within a singl e com pany code. Unti l SAP
enhancem ent package 5 for SAP ERP 6.0, a ma teria l sol d to another company in the sa me group w as treated as
an externally procured material. Inste ad of the actua l costs for the mate rial purchased being transferred to the
affiliated company, onl y the mate rial price was recorded i n the mate rial ledge r. Le arn how to record both the
legal vi ew (i n whi ch the purchase d good is treated as an e xternal purchase for lega l reporting purposes) and the
group vi ew (i n whi ch the actual costs for the purchased good are passed on to the other compa ny and spl it into
the ir cost compone nts for group reporting purposes) a nd how to capture the intercom pany markups in your cost
com ponent spl it.
Key Concept
In group valuation, act ual c osts are recorded as if t hey were incurred within a single entity . They are recorded without
the profit markups that are charged when the individual companies buy and sell goods from one anot her as if they were
not related (somet imes called arms length trading). This view is us ed for corporat e dec ision making and controlling and
allows organizations to see the actual cost s broken down into t heir cost components (e.g., raw mat erials, energy,
labor, overhead, and freight ) across all units. The l egal valua tion, on t he ot her hand, records the int ercompany
transact ions as sales and purchas es by each unit that must be report ed to the appropriat e jurisdic tion for t ax purposes.
In today s global supply chains, it is common for several plant s to be involved in manufacturing a single product and for
these plants to belong to different legal entities. Its also c ommon for organizations t o have a c entral dis tribution center that
is being supplied by multiple plants t hat belong to different legal entit ies. From a group ac count ing point of view, y ou should
treat the flow of goods between t he plants and distribution center as a s ingle flow, as if the goods were simply moving
around t he same factory . From a legal accounting point of view, however, the flow is broken becaus e goods are being sold
by the one plant t o the other plant or dist ribut ion c enter. In this case, the one plant bills the other plant for the goods
delivered and generally adds a profit mark-up.
While this busines s sit uation is common, companies have only recently started to ex plore the potential of group c osting
wit hin S AP ERP. One reason is that in their early implementations, organizations made decisions that constrained their
ability to us e this function. One cons traint is that group cost ing c an only take place within a single controlling area. In
many early SA P ERP implement ations, organiz ations set their controlling areas at more or less the same level as t heir
company codes , meaning that they could not view the whole supply chain in managerial acc ounting (CO) but only that part
of the c hain that was within each cont rolling area. Now, many organizations are using landscape transformation services to
migrate to a single controlling area.
Another const raint was that the internal invoice that handled t he billing between t he two companies had to be created using
electronic data interchange (EDI). This was part ly a technical issue because t ransaction MIRO does not support the group
valuation, but is also a people issue because the acc ounting clerk proces sing the invoic e should s ee only the legal
valuation (sales price) and not t he group valuat ion (cost of goods manufactured).
Now organizat ions have matured sufficiently and have automated their billing proces ses t o replace manual processes wit h
EDI. And, of cours e, there was the functional gap in the proces s: The mat erial ledger did not account for group valuat ion for
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act ual c osts, but treat ed goods purchased from affiliated companies as if they were externally procured goods. This gap
has been clos ed in SAP enhancement pac kage 5 for SAP ERP 6.0 us ing t he busines s function Cros s-Company Code
Stock Transfer & A ctual Cost ing (LOG_MM_SIT). I will show you how to set up group c osting and walk you through the
steps involved. Ill st art with preparatory steps before making any postings and then show you the demo steps in the
mat erial ledger.
Step 1. Identify the Customers and Vendors Involved in the

Intercompany Process
Start by creating customer and vendor records for eac h of the plants part icipating in the int ercompany process. Y ou need
to creat e vendor master records for each supplying plant and customer mas ter records for each receiving plant. To create a
vendor master, use transaction XK 01 or follow menu path Logistics > Materials Management > Purchas ing > Mast er Data >
Vendor > Cent ral > Create. E nter the name of the vendor (e.g., 4444) and the c ompany code for the supplying plant . In the
General Data section, c lick the Control flag. Fi gure 1 shows the vendor master for the s upply ing plant. The control data
links the supplying plant to the receiving plant via the entry in the Cus tomer field (e. g., 1186). The entry in t he Trading
partner field (e.g., 2000) identifies the c ompany ID to which t he plant belongs for cons olidation purposes (see t he Group
Cos ting and Consolidation s idebar).
Fi gure 1
The vendor ma ster control da ta shows the intercompany customer and trading partner
You see the s ame s creen in revers e if you look at the cust omer master for the receiving plant . To creat e a c ustomer
mas ter, use t ransaction XD01 or follow menu path Logistics > Sales and Distribution > Master Data > Bus iness Part ner >
Cus tomer > Create > Complete. Ent er the name of the c ustomer (e.g., 1186) and the c ompany code for the receiving plant
and clic k the Cont rol Data t ab. Figure 2 shows t he customer mas ter for the rec eiving plant. The control data link s the
rec eiving plant to the supplying plant via the entry in the Vendor field (4444 here). The ent ry in the Trading partner field
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(1000 in this example) ident ifies the company ID to which the plant belongs for consolidation purposes.
Fi gure 2
The customer maste r control data shows the intercompa ny ve ndor and trading partner
Step 2. Set Up Group Valuation in Accounting

Nex t, ac tivat e group valuation alongside legal valuat ion (which is always pres ent by default). In legal valuation, the
int ercompany sale is recorded as a pay able by the rec eiving company and a receivable by the s upply ing c ompany. In group
valuation, the transact ion is rec orded as if it were simply a s tock trans fer. The c osts are t ransferred to t he ot her c ompany
broken down into t heir cost components (e.g., raw mat erial cost s, labor c osts, energy costs, and overhead). Group
valuation is activated by setting up a currency and valuat ion profile and assigning it t o the cont rolling area. To create a
group valuation view, follow IMG menu path Controlling > General Controlling > Mult iple Valuation Approaches /Transfer
Prices > Basic Set tings > Maintain Currency and Valuation Profile.
In this example, Im working with the currency and valuation profile ID01. Click ID01 and choose Details. Fi gure 3 shows a
currency and valuation profile that handles legal valuation in the c ompany code currency , group valuation in the group
currency (i.e., the controlling area c urrency), profit center valuat ion in the group currency , and a second legal valuation for
parallel cost of goods manufactured. I disc ussed this type of valuat ion in my artic le P rovide Parallel Product Costs for
Inventory Val uation in the S AP Ge neral Ledger.
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Fi gure 3
Currency and valua tion profi le
Now link the currency and valuation profile to y our c ontrolling area by following menu path Controlling > General Cont rolling
> Multiple Valuation Approac hes/Transfer Prices > Bas ic Settings > A ssign Currency and V aluat ion P rofile to Controlling
Area. Material prices for legal valuat ion purpos es are stored in the Accounting view of the material master. However, to us e
the group valuation, profit center valuation, and parallel cost of goods manufactured, y ou need to activate the material ledger
for each of t he plants participat ing in the intercompany proces s to capture the additional values. To activate the mat erial
ledger, follow IMG menu path Cont rolling > Product Cost Controlling > Act ual Costing/Mat erial Ledger > Activate V aluat ion
Areas for Mat erial Ledger. Figure 4 shows t hat t he material ledger is act ive for plants 1000 and 2000 in this example.
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Fi gure 4
Activate the material l edger
Onc e the material ledger is active, values in group valuat ion and profit center valuation are also visible in the material
mas ter (Figure 5).
Fi gure 5
The Accounting vie w of the m ateri al ma ster shows lega l, group, and profit center
val uation
Step 3. Set Up the Stock Transfer Process

Now you set up the stoc k transfer order process to handle the delivery process . This process was described at length in
Ashim A. Nandas article Ca ter to Arm s Le ngth Standards with Autom ated Intercompa ny Transfe r Pri cing
Design, so I wont reiterat e the basics. However, you should review the new options for valuating stoc k in trans it in the
bus iness func tion LOG_MM_SIT, since you need these st eps t o ens ure t hat t he material ledger is able to establish the
relationship between delivered material and received material. The new intercompany transfer process ensures that the
iss ue and the receipt are captured in the s ame document.
Figure 6 shows the new options for this process in more detail.
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Fi gure 6
New opti ons for posting stock in transit in enha nceme nt pa ckage 5
The firs t variant (variant 0) already exist s in SAP E RP and uses a one-st ep delivery to direc tly t ransfer ownership of the
goods from the sending plant to t he receiving plant. Movement t ypes 645 and 101 are exec uted in one step when the goods
iss ue is made with reference to t he delivery.
However, the physical flow of goods may tak e day s or even weeks , so you might need a two-step delivery for s tock in
transit, where ownership of the t ransit stock can be trans ferred from the supplying plant to the receiving plant en route.
Regardless of when the trans fer of ownership tak es place, you must ensure that the material value and quantity are vis ible
at all t imes. From SAP enhancement pac kage 5, there are three new process variants for t his t ransfer:
1. Senders transit s tock: The value and quant ity of the material in transit is s hown in the sending plant until the
mat erial phys ically arrives at the rec eiving plant. Then a goods rec eipt is performed and the value and quantity are
transferred t o the receiving plant.
2. Ownership for the material c hanges en route: This might happen when the material is loaded onto a ship. The goods
iss ue is then post ed to the senders t ransit stock. W hen t he ship arrives at t he harbor in the des tinat ion c ountry, an
employee at t he receiving plant t riggers the transfer to t he receivers t ransit stock. Then t he materials are loaded
ont o a t ruck. As s oon as the truc k arrives at the warehous e of the receiving plant the goods movement t o the
rec eivers free st ock c an be performed. This transfer takes place us ing t ransaction VLPOD.
3. Rec eivers transit stoc k: The value and quantity of t he material is shown in t he receiving plant while in transit . Thus,
the goods iss ue of the material from t he sending plant res ults in a direc t pos ting to the in-trans it st ock of the
rec eiving plant. A s soon as the t ruck arrives at the receiving plant , the material value and quant ity c an be transferred
to the receivers free stock .
Step 4. Set Up the Billing Process

Then det ermine how the selling company (vendor 4444) is going t o bill the receiving company (customer 1186) for t he goods
delivered. To chec k your ent ries for t he intercompany billing proces s, follow menu path Sales and Distribution > Billing >
Int ercompany Billing > Automatic Posting to Vendor Ac count (SAP EDI). In short , you are using two price conditions: PR00
to handle the legal valuation wit h profit markup and KW00 to handle the group valuation. Pric e condition KW00 pic ks up the
value of the material in the sending plant and uses t his value as the invoice value on t he receiving side in group valuation.
This value is not a single material price, but t he st andard cos t component split: The ac tual is as signed during multi-level
mat erial ledger settlement at period c lose.
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Note
You can find further details about the intercompany billing process in SA P Not es 31126 (Intercompany billing - posting
to vendor acc ount using EDI) and 659590 (EDI: St ock t ransfer and cross-company sales).
Step 5. Store the Profit Markup in the Cost Component Split

If you defined a profit mark -up in the legal valuation (based on price condition PR00), then you need t o identify a cost
component that stores t his mark-up during interc ompany billing. Note that in t he material ledger, this markup is actually
stored as a delta in the legal valuation along with t he sender and receiver information. In s tandard costing, you have to use
the group view to capture intercompany mark ups. To as sign this mark-up to a cost component, y ou have to extend your
cos t component split. To ext end t he cost component st ructure, follow menu path Cont rolling > Product Cost Controlling >
Product Cost Planning > Basic Set tings for Material Costing > Define Cost Component Structure. Choose y our existing
cos t component structure (01 in my example). Create a new cost component for t he markup (310 in my example) and s et
the Company Code flag under the Delta Profit for Group Cos ting heading (Figure 7). It is also important to c heck the Roll
up Cost Component flag to ensure that the profit mark up is rolled up as t he material is moved through t he supply chain.
Fi gure 7
Cost com ponent structure
You should also review the documentation for the Business Add-In (BA dI) Control of Cross -Company Transfer, which you
can find at IMG menu path Controlling > Product Cost Controlling > A ctual Cost ing/Material Ledger. You may wish t o use a
BAdI implementation to determine how t o handle t he markups . The default is that all mark ups are as signed to a single c ost
component (e. g., 310) but you can use a BAdI to direc t some markups to a different cost component, as required.
The following options are available:
ROLLUP_COST_COMP_S PLIT: Cont rol t hat t he cost component split is als o transferred across company c odes in
the legal view
REV AL_MA RKUP_AT_ACTUAL_COSTS : Control that the interc ompany profit is calculat ed on the plan costs of t he
sender and not using the act ual c osts
DIS PLAY_COST_COMPONENTS : In trans action CKM3 (material price analysis), c ontrol that all cost component s not
relevant to invent ory valuat ion are display ed (and not jus t the cost component for the interc ompany profit)
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GET_MARK UP_COMPONE NT: Control that the intercompany profit is assigned to any cost component not relevant
to inventory
MODIFY_MARKUP : Calculat e the intercompany profit in accordance with a separate algorithm
Now lets move on to the demo sequence in t he material ledger.
Observe Intercompany Sales from a Legal Perspective

I will now show you how the value flow for a stock transport order and it s int ercompany invoice are represented in the
mat erial ledger from a legal pers pective. In this example, plant 1000 has purc hased material RH-3S -02 from plant 2000. You
can access this sc reen by clicking the Mat. Pric e Analysis butt on in Figure 5 or by using transact ion CKM3 and entering
the material, plant, and period.
First, lets look at the sit uation for the material in the supplying plant (2000). If you are an expert in t he us e of the material
ledger, the first difference you notic e in Figure 8 is that ins tead of the rec eipt being labeled s imply as a purc hase order
(i. e., as if it came from outside the organization), the line t itle is Purchas e order (grp) t o indicate that the goods have been
purchased from a plant in the same group. This means that you c an separat e ext ernal and intercompany purchas es at a
glance. If you look at the lines below, you can see t hat t wo goods t ransfers have t aken place for 6 kg and 5 kg of the
mat erial (i.e., the bot tom t wo lines). Note the document numbers for thes e two lines. You als o see the line Consumption for
Nex t Level RH-3S-02/1000, which repres ents the flow from t he supplying plant t o the receiving plant.
Fi gure 8
Sal e of goods in l egal valua tion
Now lets look at the s ame material in the receiving plant (1000) in Figure 9.
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Fi gure 9
Purchase of goods in le gal valuation
Starting at t he bottom of the dis play, two deliveries have been received: 6 kg were purc hased directly from plant 2000 and 5
kg were trans ferred from a t ransit stock in plant 1000. Note that the doc ument numbers are ex actly the same as the ones
in Figure 8. To see det ails of this posting, double-c lick the goods receipt line for the 6 kg. Figure 10 shows the goods
rec eipt from plant 2000 (i.e., the supplying plant) t o plant 1000 (i.e., the receiving plant). The twin lines in this document
are important as t he material ledger uses t his link t o det ermine which company has purchased goods from an affiliated
company when rolling varianc es through the supply chain during multilevel pric e det ermination at period clos e.
Figure 10
Material ledger documents for goods re ceipt
Ret urning to the Material Price A nalys is sc reen, you can s ee that two invoices have also been received, resulting in further
variances (shown in the Pric e diff column). You can s ee from the green st atus flags in t he Period Status field in Figure 9
that the material ledger set tlement has als o been performed for the period. This has res ulted in t he creation of the Receipts
from Lower Levels line, but the value for t his line is zero. This is because t he rollup of the price varianc es took place, but in
this scenario, the lower levels refer to another company you only see t hese values in group valuation or as a delta value
in the c ost c omponent s plit. Again, to see details, double-clic k the Receipts from Lower Level line. Fi gure 11 shows t hat
EUR 0 have been rolled up as pric e differences from t he lower levels (i.e., the plant in the other company c ode).
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Figure 11
Mul tilevel price determ inati on in lega l vie w
Remember, however, that when you configured the cost component split , you created a cost component (310) to store the
differences c oming from the plant in t he affiliated c ompany. If you now return to t he Material Price Analysis screen (Figure
9) and s witch to t he cost components (View field), you see the break down of the act ual c osts into their cost component s
(Fi gure 12). If you now scroll to the far right (if y ou have a large number of cost component s, they will not all be visible on
the init ial s creen), you see the Delta Company Code c olumn. This field st ores the details of the interc ompany markups or
deltas from t he ot her c ompany code. Note that this is in a different color to indic ate t he special nature of this cost
component.
Figure 12
Cost com ponents in lega l vie w with profit m arkup (del ta company code )
Observe Intercompany Sales from a Group Perspective

Now lets look at the s ame information from a corporate perspec tive. To do this, switch to the group valuation by choosing
Group currenc y, group valuat ion in the Curr./Valuation field (Figure 9). In Fi gure 13, y ou see the same five lines as in
Figure 9, but this time EUR 33,06 is s hown in the Rec eipts from Lower Levels line. This is because the price differenc es
from the source plant have been rolled up and update the price and c ost c omponent s plit in the rec eiving plant during
mat erial ledger settlement. In ot her words, you are s eeing actual costs for material RH-3S-02 as if the supply chain were a
single flow without the break for the intercompany transfer.
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Figure 13
Purchase of goods in group valuation
Again, double-clic king the Receipts from Lower Level line takes you to the res ults of multilevel price determinat ion (Figure
14), but this time you can s ee that EUR 33, 06 have been rolled up from the plant in the other company.
Figure 14
Mul tilevel price determ inati on in group vie w
The group view gives unequalled t ransparenc y int o the cost s in your supply chain. However, note that owing t o the highly
sensitive nat ure of this informat ion, you s hould rest rict acces s to the group valuation view. You can use authorization object
K_TP_VALU to establish which users are authorized to view this information. This authorization object allows you to set per
controlling area which users are allowed to see the group valuation view (VALUTYP = 1).
Group Costing and Consolidation
The proc ess of eliminat ing interc ompany profit markups is one of the main steps in the c onsolidation process , whether
you cons olidate in SAP BusinessObjects Planning and Consolidation, S AP Busines sObjects Financ ial Consolidation,
SAP Strategic Enterpris e Management Business Consolidation Sy stem (SEM-BCS), SAP Business Consolidation
(EC-CS), or an ext ernal tool. During c onsolidation, t he legal view for each unit is extracted to t he consolidation sys tem
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and then the inter-unit eliminations are performed based on rules within the c onsolidation sy stem.
This approach differs from group costing in two important aspec ts. The first is that in group cost ing, the group view
(without the markup) is transferred to the other unit as t he intercompany billing document is post ed. It is thus
immediat ely available t o corporat e controllers with t he appropriate authorizat ion, rather than being calculated during the
consolidation proc ess at period c lose.
The second is that a group c osting solution is not necessarily global. (A cons olidation solut ion, by it s very nat ure,
mus t provide a consolidated view of all units, regardless of their business.) You might design your sys tem t o have
separate cont rolling areas for st rategic busines s units that do not have significant goods movements with ot her units
belonging to the s ame organization. In short, while group costing gives y ou more transparency into your intercompany
processes, it does not remove the need for a consolidation solution, sinc e there are legal requirements for your
consolidated financial statements over and above the elimination of intercompany profit.
Janet Salmon
Janet Salmon joined SAP AG in 1992. After s ix months of training on R/2, she began work as
a t ranslator, becoming a tec hnical writer for the Product Costing area in 1993. As English
speakers with a grasp of German c osting met hodologies were rare in t he early 1990s, she
began to hold clas ses and became a product manager for the Product Costing area in 1996,
helping numerous international organiz ations set up P roduc t Cos ting. More recently, she has
worked on CO content for SAP NetW eaver Business Warehouse, Financial Analytics , and rolebas ed portals . She is c urrently c hief product owner for management accounting and t he author
of the S AP PRESS book t itled Cont rolling with SA P P ractical Guide. She lives in S peyer,
Germany, with her husband and two children.
Janet will be a present er at an S APexperts Live session at Financials 2014 in Orlando on
March 1821. For information on t his s ession click he re. For information on Janet's other
ses sions , click he re. To register for this conference clic k here.
See more by t his author

You may contact the aut hor at janet.dorothy .salmon@sap.com.
If you have c omments about t his article or publication, or would lik e to submit an artic le idea,
please c ontac t the edit or.
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SAPexperts - Calculate Actual Costs Across Multiple Company Codes Using A New Business Function in SAP Enhancement Package 5 For SAP ERP 6

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SAPexperts - Calculate Actual Costs Across Multiple Company Codes Using A New Business Function in SAP Enhancement Package 5 For SAP ERP 6

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Calculate Actual Costs Across Multiple Company Codes Using a New

SAP experts/Fi nanci als

Step 1. Identify the Customers and Vendors Involved in the

Step 2. Set Up Group Valuation in Accounting

Currency and valua tion profi le

Activate the material l edger

Step 3. Set Up the Stock Transfer Process

Step 4. Set Up the Billing Process

Step 5. Store the Profit Markup in the Cost Component Split

Cost com ponent structure

Observe Intercompany Sales from a Legal Perspective

Sal e of goods in l egal valua tion

Purchase of goods in le gal valuation

Material ledger documents for goods re ceipt

Mul tilevel price determ inati on in lega l vie w

Observe Intercompany Sales from a Group Perspective

Purchase of goods in group valuation

Mul tilevel price determ inati on in group vie w

See more by t his author

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