Responsibility area: Supervise Inventory Valuation
Table of contents
Scope
ERP
WP2
Frequency
References
- ZWFA100A
- KE30
Forms
Attachments
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1. Objective and Scope
1.1. Objective of this Operation
The purpose of this document is to explain how to reverse the automatic Inventory Revaluation done by the system in the current period and repost the inventory revaluation in previous period split it into Variable / Fixed / Depreciation in COPA.
1.2. Scope
This procedure is applicable to all WP2 companies.
This Procedure is not applicable to WP2 companies using Material Ledger (Brazilian and Korean companies).
2. Definitions
3. Tasks description
3.1. Periodicity
This procedure should be executed in the monthly closure on D2. For December yearly closure, a specific procedure must be followed (see I perform the year-end Inventory revaluation reverse).
At period-end closing, stocks are reevaluated on the 1st day of the month after the closure (calculation of new Standard Cost Estimate).
This revaluation must be transferred to the period of the closing, and split into VC/FC/DEP (Variable Cost / Fixed Cost / Depreciation Cost).
As result, Stock revaluation in the Profit & Loss Statement is done by material / plant / Profit Center (deriving into IECRA) & divided into VC/FC/DEP on the period of the closing, instead of just into VC in the following month.
3.2. Responsibilities
SBS Finance Operations:
- After calculating and releasing the standard price for period M+1 via CK40N, the revaluation postings are reversed in month M+1 and re-posted in month M, divided into VC/FC/DEP.
Management Accounting Service Unit Expert Costing:
- Responsible to validate the posting scheme in table ZWFAT151. IS will update this table in the ERP after PE validation.
3.3. I run the inventory valuation reverse
The costing run (CK40N) release generates a revaluation variance (difference between the new and the old standard cost), which is posted as variable cost variance in the new month, and updates the cost of inventory in stock. But this is not the ideal solution:
- Some variances are due to changes in standard fixed cost and depreciation (due to changes in routing or product version, for instance), not just VC, so the standard solution might lead to distortion in Contribution and EBITDA analysis;
- The inventory revaluation is posted on the new month, when group procedures establish having an updated inventory cost at month’s closing;
Therefore, the following actions must be ensured:
- Maintain posting scheme table: ZWFAT151 (by Management Accounting Service Unit Expert Costing).
- Processing Stock revaluation reverse: ZWFA100A – always in background.
Which are divided in 3 phases:
- Reverse of Revaluation of stock issued from Costing run (in period M+1)
- Posting on Revaluation of stock into period M (100% VC)
- Split of the revaluation of stock into VC/FC/DEP in period M
The posting scheme table is maintained with the transaction ZWFAT151
This table is common to all controlling areas. It determines the accounts on which the « Reverse » and the « Valuation » will be posted depending on the original revaluation document (document type PR issued from costing run). It needs to be updated only if there is an accounting change.
Source keys (in grey in print below):
- ValCl: Valuation Class for the materials
- G/L account: G/L account determined by valuation class
- PK: Posting Key issued from reference document – to be reversed
Target key (in white in print below):
- G/L account: Target G/L account
- PK: Target posting key used in the « Valuation »
- PK Reverse: Target posting key used in the « Reverse »
ZWFA100A is a transaction executed at company code level which:
- Anticipates the revaluation from the new month to the closing month, using manual P&L and inventory adjustment accounts (two postings, one reverting the revaluation on the new month and the other posting it in the previous [closing] month), registering this in KE30 report ZZZ-SOLV04 line D50 (the original posting made by CK40N in the new month is done in line D52);
- Splits the revaluation into VC, FC, Depreciation (using lines D50, E50, F50 in KE30 report ZZZ-SOLV04), in the closing month.
- All postings at plant / material level, impacting their respective profit centers (and as a consequence their IECRA).
Closing period inventory is revaluated at updated standard cost, and the P&L gets accurate contribution, gross margin and EBITDA figures.
STEP 1
Start the transaction ZWFA100A
Inventory valuation reverse: initial screen
The transaction can be launched in test as many times as required, to check the proposal before actual processing.
STEP 2
You can look for an existing variant by clicking on 
Select the variant and 
Enter the period to be reversed: When you enter 07/2015, the revaluation of stock on 01.07.2015 will be reversed & posted on 30.06.2015.
Execute
If you don't have the variant you can make the selection :
Company code on which the reverse has to be applied
Period to be reversed: When you enter 07/2015, the revaluation of stock on 01.07.2015 will be reversed & posted on 30.06.2015
Valuation class in test mode only, the valuation class can be selected. In real mode, it is not necessary. All Revaluation doc. are treated.
Document Type of the original Revaluation doc to be reversed (PR : issued from Costing run)
- Reference object: 0
Costing type: 01 - Standard cost est.
Costing version: 1 (same as the one of Costing run)
Valuation variant: issued from Costing Run
Document type: used in the postings periods M & M+1
Execute
STEP 3
The inventory valuation reverse is displayed
You can find the details of the report in this file Details of ZWFA100A Output Screens
3.4. I control the result of the calculation
STEP 1
Start the transaction KE30 (make sure you are in the right controlling area) and select the report 
Run Profitability Report: initial screen
STEP 2
Enter
Reporting Currency = 10
Fiscal year
Company Code
Select "Classic drilldown report"
Execute
If you have a warning message, click 
STEP 3
Check the amount in in the value field D52 that should be the same as the result of the transaction ZWFA100A.
If it is confirmed, the transaction ZWFA100A can be executed in real mode.
STEP 4
Once the transaction ZWFA100A is executed in real mode
In M, D50 shows both the full reversal of current month revaluation to previous month and the posting this month of the Variable Cost portion of next month’s revaluation.
NOTE: To have the correct amount of the Variable Cost, you will have to open the line items and select what was posted by the program.
In M, E50 / F50 show only Fixed Cost / Depreciation portion of next month’s revaluation.
As a rule, in M+1 the reverse D50 is the exact absolute value of D52. Some aggregate differences may occur, however:
- Individual revaluation due to individual CK11N costing runs
- Costing run reversals;
- Lack of standard cost for the material in one of the periods;
- Other manual postings in D50 line.
By principle we can make this check directly in KE30 because there are no additional postings in Value Fields D50+E50+F50 and D52.
Anyway, if there are differences between these Value Fields, it needs to be analyzed in KE24 if there are additional postings.
D50+E50+F50 vs D50 only
As you can see above, by principle, we can say that D52(M+1) = D50(M)+E50(M)+F50(M)
Although, using the concept of Semi-standard cost, the normal is to have the variation mainly in variable costs (CV), which is posted in VV D50.
If there was NO price change in activities such as MACHI, AMO and MANH neither in the quantities used, it is normal to have "0" in value fields VVE50 (CF) and VVF50 (DEP).
Non Processed documents by ZWFA100A
In case you have an error in transaction ZWFA100A and there is documents not processed by transaction.
After process transaction ZWFA100A, if you have the error below, please proceed as follows:
STEP 1
On Month M, post a FI Document (Ref. 1000009578) and reverse on the following month M+1
This posting will also impact COPA (98351010 account) in value field D52.
Please use the correct accounts, according with the type of material:
| Posting Key | G/L account | Description |
|---|---|---|
40 | 37000109 | FINISHED PRODUCT ADJ |
| 50 | 98153010 | PROD STK VAR. |
| 40 | 37000209 | TRADED ADJ |
| 50 | 98153971 | VAR.ST GOOD STD |
| 40 | 31000109 | RM STOCK ADJ |
| 50 | 98153972 | VC-VAR.ST RM STD |
| 40 | 37000409 | INTERNMEDIATES ADJ |
| 50 | 98153110 | STK VAR. ST.SET |
STEP 2
On Month M, post a COPA manual correction, to change the value field from D52 (step 1) to D50.
Please note in this case, the amount was totally consider as VC and therefore, only posted in value field D50.
STEP 2.1
If the costs of the material needs to split into VC+FC+DEP, we need to post in value fields D50+E50+F50.
To check this split, go to CK13N at Month M+1,and see the amounts related to VC, FC and DEP:
STEP 3
On Month M+1, cancel D52 and move to D50 using the original posting as reference (in COPA only)
