Results Analysis for Internal Orders

Work In Process Calculation for Internal Orders

Business Scenario :

In a manufacturing company, Internal Orders are used to manage Licence costs, so that these costs can be easily separated from Research costs, and other general expenses. Internal Orders of a certain order type are being used to manage the profit/loss incurred on account of buying/selling licences. For example, a licence is managed for a period of 10 years, and the corresponding profit or loss recorded on piecework payment basis is settled to CO-PA periodically. WBS elements are not involved in this business scenario.

In the master data of such Internal Orders, the following is maintained:

1. RA Key - 

2. Settlement Cost Element - 

3. Settlement Rule -

Step 1. Create Results Analysis Key.

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Create Results Analysis Keys

You can copy the SAP delivered RA Key 000001 to create a custom RA key.

Step 2. Create Cost Elements.

Just for the sake of simplicity, I am creating only 3 Cost Elements of Category 31 here.

In S/4 HANA, Cost elements of category 31(Order/project results analysis) cannot have a Company Code view.

9311001 (Fixed Costs)

9311001 (Variable Costs) 

9311003 (Technical RA Cost Element)

Step 3. Define Results Analysis Versions

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Define Results Analysis Versions

The checkbox "Transfer to Financial Accounting" has to be selected only after all the configuration has been done.

Step  4. Define Valuation Methods for Results Analysis

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Define Valuation Methods for Results Analysis

Step 5. Define Line IDs

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Define Line IDs

Line ID is nothing but something to which the G/L accounts to which contain the costs/revenue are mapped. 

Step 6. Define Assignment for Results Analysis

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Define Assignment for Results Analysis

In this step, the line IDs created above are mapped to the cost elements which will be used for making actual postings on the Internal Order.

Step 7. Define Update for Results Analysis

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Define Update for Results Analysis

In this step, the line IDs created above are mapped to category 31 cost elements. These category 31 cost elements will be used to write the results analysis data. 

Step 8. Define Posting Rules for Settlement to Financial Accounting

IMG Path - Controlling>Product Cost Controlling>Cost Object Controlling>Product Cost by Sales Order>Period-End Closing>Results Analysis>Define Posting Rules for Settlement to Financial Accounting

Here you specify the G/L accounts in Financial Accounting to which the results analysis data is settled. You assign a results analysis cost element or a group of results analysis cost elements to two G/L accounts.

On the basis of the settlement of the results analysis data, a posting document is generated in Financial Accounting.

•Data is written to the balance sheet.

•Data is written to the profit and loss statement.

On the basis of this posting, an additional document is generated in Profit Center Accounting if the order is assigned to a Profit Center.

Settlement is made by period on the basis of

•The allocation structure in the settlement rule of the internal order

•The posting rules that you define in this step

All cost elements under which results analysis data to be settled are written (such as reserves for unrealized costs, work in process, cost of sales) must be listed in the allocation structure. They must also be assigned to G/L accounts by the posting rules.

Settlement of data to Profitability Analysis is controlled by a PA allocation structure. In the PA transfer structure you list the results analysis cost elements for the revenues, reserves for imminent loss and cost of sales. Then you assign these cost element groups to value fields (see Create PA transfer structure).

You can assign the results analysis data to the G/L accounts at the following levels:

•For each results analysis category

The following results analysis categories are created on the basis of the assignment of the costs to line IDs:

◦WIPR - work in process with requirement to capitalize costs

◦WIPO - work in process with option to capitalize costs

◦WIPP - work in process with prohibition to capitalize costs

The above configuration steps are enough for performing Results Analysis, and calculating WIP for an Internal Order.

Let us now see using an example how WIP is calculated for an Internal Order.