SAP Material Ledger Period-End Closing

By John Jordan

Table of Contents

1. Introduction
2. No Period-End Processing
3. Single-level price determination
4. Multiple-level price determination
5. Glossary

Introduction

The three period-end options you have when you activate SAP Material Ledger are:

1.  No Actual Costing - no period-end processing
   
   
2.  Single-level price determination
   
   
3.  Multilevel price determination

Here's more details of each option:

No Period-End Processing

If you’ve activated SAP Material Ledger, and you’re not using actual costing, no period-end processing is required. A Material Ledger document will post for every inventory-related transaction in the legal valuation approach in company code currency. Activating SAP Material Ledger, in this case, gives you additional inventory reporting that you access with Transaction CKM3 or via the following menu path:

Accounting • Controlling • Product Cost Controlling • Actual Costing/Material Ledger • Material Ledger • Material Price Analysis

The Material Price Analysis in Figure 1 is displayed.

Figure 1: Material Price Analysis

This allows you to access all material transactions in a period. Transactions are grouped by Category, which you can progressively expand to display all transaction documents within a Category.

Now let’s look at single-level price determination.

With S/4HANA, Material Ledger is mandatory, but you have the option to activate Actual Costing.

Single-level price determination

Single-level refers to an individual material and its procurement process. A simple example with three levels within the material ledger includes purchased materials, subassemblies, and finished products. When you use actual costing, all materials are valuated with a preliminary periodic unit price PUP that remains constant during a given period. This price can be, for example, a standard price or an actual price from the previous period determined by the material ledger.

During a period Material Ledger posts differences to a price difference account and updates them separately for each material. At the end of a period, you use single-level price determination to assign the variances for each material. This allows the cumulative price differences to be assigned proportionally to the ending inventory quantity and the material consumption of the period.

To carry out period-end processing in SAP Material Ledger you create an actual costing run with Transaction CKMLCP or via menu path:

Accounting • Controlling • Product Cost Controlling • Actual Costing/Material Ledger • Actual Costing • Edit Costing Run

Enter a costing run name, description, and period, and then select the Actual Costing Run option. An actual costing run is displayed as shown in Figure 2.

Figure 2: Actual Costing Run

The the actual costing run layout is similar to the standard cost estimate CK40N costing run.

You first assign plants to the actual costing run, and then you follow the Flow Steps on the left.

Since SAP S/4HANA 1610 there are five flow steps instead of the previous eight. 

These following four steps are now combined into the Settlement step in SAP S/4HANA:

 Single-level price determination
Multilevel price determination
Revaluation of consumption
WIP revaluation

 In the Selection step in Figure 2, all materials that have a Price determination of 3 as well as all activity types in plants that have an activity consumption update (ActAct) indicator of 2 are selected for processing.

The system calculates periodic unit prices for the period and updates them in all valuation approaches in material price analysis. The price in company code currency in the material master is also updated for the period.

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Multiple-level price determination

During multilevel price determination you assign the differences calculated during single-level price determination progressively to the next-highest levels of the production process using a multilevel actual quantity structure, which is a type of actual bill of material (BOM). For example, purchase price variances PPV for raw materials are rolled up to subassemblies and then to finished products.

The system calculates periodic unit prices for the period and updates them in all valuation approaches in the material price analysis. The system also updates the price in company code currency in the material master for the period.

At period-end during actual costing, you have the choice of either:

  - Revaluate inventory with the actual price - Periodic Unit Price PUP
The material stock account is debited with the proportional price differences, and the price difference account is credited with the same amount.

  - Don't revaluate inventory and post price differences to an accrual account. If you don't revalue inventory with the actual price, the amount that would have been posted to the material stock account is posted to an acrual account.

Price differences allocated to consumption remain on the price difference account at this point. You decide to revalue inventory or not according to which financial G/L accounts are posted to during automatic account determination with configuration Transaction OBYC. To proceed with multilevel price determination, execute the remaining steps following single-level price determination shown highlighted in Figure 2 above.

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Glossary

SAP Fiori

SAP Fiori is a web-based interface that can be used in place of the SAP GUI. SAP Fiori apps access the Universal Journal directly, taking advantage of additional fields like the work center and operation for improved variance reporting.

Settlement

Work in process (WIP) and variances are transferred to Financial Accounting, Profit Center Accounting (PCA), and Profitability Analysis (CO-PA) during settlement. Variance categories can also be transferred to value fields in CO-PA.

Settlement Profile

A settlement profile contains the parameters necessary to create a settlement rule for manufacturing orders and product cost collectors and is contained in the order type.

Settlement Rule

A settlement rule determines which portions of a sender’s costs are allocated to which receivers. A settlement rule is contained in a manufacturing order or product cost collector header data.

Setup Time

You need setup time to prepare equipment and machinery for the production of assemblies, and that preparation is generally the same regardless of the quantity produced. Setup time spread over a smaller production quantity increases the unit cost.

Simultaneous Costing

The process of recording actual costs for cost objects, such as manufacturing orders and product cost collectors in cost object controlling, is called simultaneous costing. Costs typically include goods issues, receipts to and from an order, activity confirmations, and external service costs.

Source Cost Element

Source cost elements identify costs that debit objects, such as manufacturing orders and product cost collectors.

Source List

A source list is a list of available sources of supply for a material, which indicates the periods during which procurement is possible. Usually, a source list is a list of quotations for a material from different vendors.

You can specify a preferred vendor by selecting a fixed source of supply indicator. If you do not select this indicator for any source, a cost estimate will choose the lowest cost source as the cost of the component. You can also indicate which sources are relevant to MRP.

Standard Price

The standard price in the Costing 2 view determines the inventory valuation price when price control is set at standard (S). The standard price is updated when a standard cost estimate is released. You normally value manufactured goods at the standard price.

Subcontracting

You supply component parts to an external vendor who manufactures the complete assembly. The vendor has previously supplied a quotation, which is entered in a purchasing info record with a category of subcontracting.

Tracing Factor

Tracing factors determine the cost portions received by each receiver from senders during periodic allocations, such as assessments and distributions.

SAP Universal Journal

The efficiency and speed of the SAP HANA in-memory database allowed the introduction of the Universal Journal single line-item tables ACDOCA (actual) and ACDOCP (plan). The Universal Journal allows all postings from the previous financial and controlling components to be combined in single items. The many benefits include the development of real-time accounting. In this book, we discuss both period-end and event-based processing.

Valuation Class

The valuation class in the Costing 2 view determines which general ledger accounts are updated as a result of inventory movement or settlement.

Valuation Date

The valuation date determines which material and activity prices are selected when you create a cost estimate. Purchasing info records can contain different vendor-quoted prices for different dates. Different plan activity rates can be entered per fiscal period.

Valuation Grouping Code

The valuation grouping code allows you to assign the same general ledger account assignments across several plants with Transaction OMWD to minimize your work.
The grouping code can represent one or a group of plants.

Valuation Type

You use valuation types in the split valuation process, which enables the same material in a plant to have different valuations based on criteria such as batch. You assign valuation types to each valuation category, which specify the individual characteristics that exist for that valuation category. For example, you can valuate stocks of a material produced in-house separately from stocks of the same material purchased externally from vendors. You then select procurement type as the valuation category and internal and external as the valuation types.

Valuation Variant

The valuation variant is a costing variant component that allows different search strategies for materials, activity types, subcontracting, and external processing. For example, the search strategy for purchased and raw materials typically searches first for a price from the purchasing info record.

Valuation Variant for Scrap and WIP

This valuation variant allows a choice of cost estimates to valuate scrap and WIP in a WIP at target scenario. If the structure of a routing is changed after a costing run, WIP can still be valued with the valuation variant for scrap and WIP resulting in a more accurate WIP valuation.

Valuation View

In the context of multiple valuation and transfer prices, you can define the following views:
– Legal valuation view
– Group valuation view
– Profit center valuation view

Work Center

Operations are carried out at work centers representing; for example, machines, production lines, or employees. Work center master data contains a mandatory cost center field. A work center can only be linked to one cost center, while a cost center can be linked to many work centers.

Work in Process

Work in process (WIP) represents production costs of incomplete assemblies. For balance sheet accounts to accurately reflect company assets at period end, WIP costs are moved temporarily to WIP balance sheet and profit and loss accounts. WIP is canceled during period-end processing following delivery of assemblies to inventory.