Issue

The purpose of this document is to provide an assessment of the two valuation approaches that we have currently in Syensqo. These are,  the revaluation on actuals with the use of the Material ledger and the so-called semi-standard approach. The objective is to collectively, business and IT,  assess what will be the approach that will be implemented in the S4 in relation to the above.

This document explores in detail the product cost approach and the integration with the manufacturing.

Decision

Background & Context

We currently have two systems with two different valuation approaches and ways of working. These differences stem from mergers and acquisitions (M&As), where the acquired organizations used different valuation methodologies. Additionally, there were fiscal requirements that necessitated deviations from standard operating procedures. In this document, the two approaches are referred to as follows:

• • Re-valuation on actuals with Material ledger for PF1
  • Semi-standard for WP1

PF1 - An overview of the revaluation on actuals with Material Ledger

The Material Ledger consists of two main functionalities: actual costing and parallel valuation. A common misconception about the Material Ledger is that it refers solely to actual costing because actual costing tends to get the most attention. Therefore, when hearing the term “Material Ledger,” many immediately think of actual costing, not parallel valuation. Conversely, when the actual costing functionality is mentioned, it’s usually referred to generically as a “Material Ledger functionality.”  Furthermore, the Material Ledger falls within the CO menu, but it has as much impact on the FI module as it does in the CO module because of its impact on the inventory transactions that are posted to the general ledger

Actual costing generates a Material Ledger document and valuates all goods movements within a period at the standard price (preliminary valuation). At the end of the period, you calculate the actual price for each material based on the actual costs of the period. You call this actual price the periodic unit price, and you can use it to revaluate the inventory and COGS (and other consumptions) for the period you are closing. In addition, you can use this actual price as the standard price for the next period.

The revaluation on Actuals with Material Ledger makes it possible to use an actual cost system in addition to the standard cost system, because the values of the standard cost cannot be readjusted during a subsequent allocation. The Revaluation on actuals program with ML creates postings to the general ledger and relevant cost objects.

Assumptions

• Currently we have two different approaches for assigning company codes to controlling areas in the two systems. These are, 
• PF1: single controlling area 
• WP1: Four controlling areas by Region (Europe, APAC, North America, South America) + one for Financial companies, total five controlling areas
• In S4 we anticipate having a uniform enterprise structure. Especially on lower controlling objects like cost centers, profit centers, segments etc
• In S4 we will have a single costing approach for all Legal entities. Local deviations are expected due to local fiscal requirements.
• The product cost system will be S4
• The implications of Universal Parallel Accounting, whether positive or negative, on the valuation question are not considered in this KDD. There will be another KDD to address Universal Parallel Accounting's new features and their overall implications for product costing.
• Manufacturing is using Manufacturing Execution Systems (MES) as well as planning systems, specifically Dynasys, and in the future, Kinaxis. MES and in some instances spreadsheets and manual input feeds SAP processes and production orders with confirmations and consumptions. 
• Currently, in PF1 the confirmation is on std quantities and hour
• Currently, In WP1, some plants confirm actual quantities and hours, while others do not.
• Std prices are calculated in both systems
• Activity prices are entered manually. Although in WP1, there is an activity calculation process, the capacities are loaded manually. Please see below on the additional information sections  

Constraints

• In S4 material ledger is mandatory. but his does not imply that actual cost is mandatory.
• If the transfer price functionality is implemented then actual costing has to be activated. Transfer price functionality is addressed to a separate KDD with the same title.

Impacts

Business Rules

Options considered

Option A: 

Option B: 

Option C: 

Option D: 

Evaluation

	Option A	Option B	Option C	Option D
Criterion 1	Pro Con	Pro Pro	Pro Con	Pro Con
Criterion 2	Pro Con	Con	Pro Pro	Con Con
Criterion 3	Pro	Con	Con	Pro

See also

Change log

Workflow history