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Introduction

 

SECTION 1 Construction of the P&L

 

TO BE UPDATED WITH AFTER SPS PROJECT

Business Financial Consolidation (BFC)


P&L statements and BFC interfaces are produced through

  • CO-PA for sales data (by country, partner, etc.)
  • CO-PCA for other P/L reporting items
  • Material ledger for COGS (split VC / NVC / DEP)

 

A specific transaction in PF1 (ZZF_BFC_COLLECTIVE) is used to extract the data to send to BFC, from the different sources.
The assignment of financial accounts and cost elements to BFC reporting items is done via sets of accounts (centrally managed) (GS03 - Display Set)

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Logistics Organizational Unit representing the place where either materials are produced or goods and services provided.

Identification of production and non production plants.

Use in CO:

  • Organizational Cost Centers standard hierarchy 
  • Profit Centers standard hierarchy 
  • Cost Object Hierarchy (first 2 levels in the structure) 
  • Materials: To identify the ones relevant for costing and to be updated during the Project (Accounting / Costing views). 
  • Material Ledger activation (customizing).

1 digit code identifying the country inside Solvay ERP.

Use in CO:

  • Reporting Profit Centers codification at PIF level (position before last)

It is used in the codification of the Cost Centers (=first two digits) in PF1.

The establishment code is a combination of a legal company on a site

  • SM = cy 0001 SCH
  • XR = cy 0270 Solvay Quimica, Italian in Rosignano
  • SV = cy 0306 Solvay Portugal, Prod Quim.

The codes are part of the enterprise structure and managed by Core Tables 

The establishment code can be displayed with PF1 - ZPRI Display table ETAB

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SAP t-code

KA03 - Display Cost Element

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SAP t-code

KAH3 - Display cost element group

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The Result (Reporting) Profit Centers are the basis for Group reporting

All elements for BFC statement are extracted from the Profit centers (except NETV, QTV and TPT which are extracted from CO-Profitability Analysis -> CO-PA). To make this extraction work (through interfaces), all objects in CO must be assigned to a profit center;
  • Material (plant level, Costing view)
  • Cost centers
  • CO orders
  • PM orders
  • PP orders
  • Cost collectors
  • WBS
The Result Profit centers are depending on the Profit center group “CHEFCHEOPS”. These profit centers are generally assigned to all the ERP companies;
The non reporting Profit Center are in group “CHEF_CNTRL

 

 

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The person responsible of a cost center is accountable for the elements allocated in the cost center

The companies using SRM7 for purchasing should have a SRM7 user ID (=BIP user ID) entered in this field, starting with 5, such as 50000000

To display the list of person responsible use the report PF1 - SRM Validators in cost centers

Usually the name & description of a cost center is free but in some cases there can be special needs.

An assessment cycle is used in SAP to assign all primary cost elements and secondary cost elements from a sending cost center to the receiver cost center.When you want to transfer costs from one cost center to another through an assessment cycle, sap use a secondary cost element and accumulates all the primary cost and secondary cost and send it to the receiving cost center.

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A distribution cycle is used in SAP to transfer primary costs from a sender cost center to receiving controlling objects. The original cost element remains the same. 

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COPA Assessment cycle assesses costs from a Cost Center to COPA Value Fields. 

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[ Cost center - Creation Rules ] [ Cost allocation - Rule ] [ Pricing - Rule ] [ Payroll expenses allocation ] [ Reporting assessment - rule ] [ Intercos - cycles ] [ Technical cost center usage ] [ Statistical key figures usage ] [ Working File 3 ]

 

 

Cost center - Creation Rules

 

Rule 1

It is not allowed to create a cost center for less than two employees

Rule 2

An employee is assigned to one cost center only

Rule 3

Threshold of minimum amount per year of primary expense.

 

 

 

Cost allocation - Rule

 

Recommendation: minimize the number of CC allocation

  • For Production costs: allocation between organizational CC and another organizational CC
  • For non Production costs: allocation from organizational CC to reporting CC

Exception

  • Utilities
  • Insurance (IAS 19)
  • R&I: allocation from CC to WBS
  • Intercos: from organizational CC to organizational CC other company

General rule:

  • All type of expenses - different than Manufacturing  Costs (Indirect/Direct) and R&I - go directly to BFC (at different reporting cost center) and to only 1 BFC heading.

 

 

Pricing - Rule

 

General rule:

  • “No pricing” rule: allocations between organizational cost center, within the same legal entity (same GBU normally, but could be also between 2 GBUs) should be done at cost.

 

 

Payroll expenses allocation

 

General rule:

  • Payroll expenses shouldn’t be posted to technical cost center if HR/Payroll system is integrated.
  • An employee is assigned to only one cost center

 

 

Reporting assessment - rule

 

General rule: A minimum level of detail is required for assessment to reporting cost center:

  • For gross margin => Cost center reporting at “PIF” Level (see codification below)
  • Below gross margin => Cost center  reporting at “Division” level (see codification below)
  • Below EBIT => Cost center reporting at “Company” level (see codification below)

 

 

Intercos - cycles

 

General rules:


1. For GBU cross charge

  • Change the cycle usage: evolution from actual amounts to planned amount
    • Objective: anticipate the launch of cycles (from D2 to D-1) and reduce problems in D4
  • Create and standard cost center for Cross charge (in order to align to method of CBS)

2. For CBS

  • Create a specific Cost Section (160) for SBS invoicing

 

 

Technical cost center usage

 

Technical Cost Center can be used for the following cases:

  • Use case 1: to centralize primary costs for corporate needs (e.g.: Insurance, IAS 19…)
  • Use case 2: to post costs not directly linked to the organizational structure (e.g.: other non recurring expenses)
  • Use case 3: to collect the result of income miscellaneous (e.g.: sales of scrap…)
  • Use case 4: if the organization cost is not defined in the Cost Section narrative

Reminder: in all cases, the request has to be approved by the Central Costing Expert after approved the request by GBU. 

 

 

Statistical key figures usage

Definition: “Statistical key figures” provide information on non-monetary data such as the number of employees, number of machines, capacity usage, market information…and can be used for internal cost allocations.

Recommendation: minimize the usage of SKF or avoid it (if possible) 

2 conditions are identified to use the “Statistical key figures”

  • Volumes of target CC
  • High frequency (e.g.: every month) of update 

 

Working File 3

Overview of Working file 3

Working File 3

All the companies harmonized in Sympa Model after a period of 2-3 months where some adjustment are done; 

Controllers should have access to their WF3. If you do not have; please request it

  • Each year by the end of October you will be requested to review your allocation keys by RCOM. And this will be part of an Internal Control.
  • Review of the roles and transactions access by the users has been done in January-16.

Cycles PF1 - Example

Cycles - codification PF1

Expand to see the last version of the cycle model in Gdrive:

Definition

Cost object in Product Cost by Period that collects the periodic actual costs incurred in the production of a material. When a cost collector is used, the product is the main cost object. 

Use

Product cost collectors are independent of the production type. This means that costs can be collected on product cost collectors in the following production environments:

  • In order-related production (using production orders) to analyze the costs by period rather than by lot;
  • In process manufacturing (using process orders) to analyze the costs by period rather than by lot;
  • Repetitive manufacturing: product cost collectors are used as cost objects. 

Cost collectors are independent of the production type. This means that costs can be collected

 

CO-Product Costing Object - Structure

KKPHIE - Insert a new Cost Object

KKF8 - Display Product Cost Collector

CS03 - Display Material BOM

CA23 - Display Rate Routing

 

 

 

CO-Product Costing Object - Basic Schema

 

 

 

CO-Product Costing Object – Example – 1/3

KKP4 - Display Cost Object Hierarchy

 

 

CO-Product Costing Object – Example – 2/3

 

 

 

CO-Product Costing Object – Example – 3/3

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  • Splitting structure is used in cost center planning to define which cost elements are considered for calculating which prices of activity types, when a cost center has more than one activity associated to it, and the price is not manually determined (most of the cases in production cost center). Splitting structure links Cost elements (and its amounts) with activities types of a given production cost center.
  • During the costing process, actual price calculation of the activity types is run. In other word, activity types are reevaluated with actual prices of the month. The splitting structures provide the reference (actual price) for the reevaluation of activity types. This reference has to be defined for each cost center to do so a splitting structure has to be associated to each cost center. 

 

For example, costs posted in the cost center D232410900 are considered as Variable or fixed and then allocated to the corresponding activity with the splitting structure that is based on the hierarchy XCS-ALL

 

 

  • It is done at CC level.  
  • The level of complexity is determined by the different types of activity types used in production CC.
  • The right design of the splitting Structure/Activity Types  is a preliminary step to have the Cost Component structure as detailed or as simple as we want.

 

The most common splitting structures are Z1 and Z2. They are based on the Rules - Cost element Group XCS-ALL

The splitting structure can be displayed with OKES - Display splitting structure

 

 

  • When a production CC is not included in a splitting structure… then the amount is split by the number of Activity types and it is allocated to each of them. Eg: 1000 with 3 act types >> 1000/3

You can check if the cost center is included in a splitting structure with KS03 - Display cost center

In the example the cost center D232410900 is included in the splitting structure Z1 

 

 

  • If there is a posting in a CC in a given cost element linked to a activity type; but there is no posting of that activity type: the system will  generate an error in the Product Costing step (activity type revaluation) and the balance of the cost element will remain in the cost center
  • If there is posting of an activity type without any posting in the cost elements associated to it: actual price revaluation will  bring its price to zero.

  • Cost Component structure are used to classify within the cost collector which cost elements are fixed, variable or Depreciation. But not only this. The level of granularity depends on the GBU election (election of Cost Component), but it has to be coherent with activity types. It links them to material ledger classification.
  • It is customized at Company level. 
  • The level of detail provided and its complexity is determined by the different types of activity types used in production CC.
  • The right design of the Splitting structure / Activity Types  is a preliminary step to have the Cost Component structure as detailed or simple as we want.

 

There are currently 12 different Cost Component Structures. The most popular one is Z1 that is a very basic one; its main purpose is to be able to split cost in VC-FC-Depr as requested by BFC

 

Each Cost component Structure can have different Cost Components elements:

Cost component  Element  is categorized as Fix or Variable / this is the base for interface to BFC

Each Cost Component element is compounded by the amount posted in the Cost collector in a given set of Cost elements

There are other cost components structure

 

ZF used by Special Chem  (Not always)

ZC  used by Soda Ash US

ZY used by Specialty Polymer (not always)

 

 

 

The cost components structure must be consistent with the splitting structure

  • The Cost Components Structure can be very detailed, but if it is not consistent with the activity type and the Splitting structure, the result won't be as detailed as expected. 
  • In this example, Fixed Costs in the production CC are only used in one activity type: ZZPROD. So we can not get more detail. 

 

 

 

 

Root cause analysis for the contribution margin readability: split building between «Variable costs» and «Fixed costs» 

 

PRG vs ML: Main Differences


  • PRG provides the product Costing at Cost Object hierarchy (Group of Materials)
  • Material Ledger Provides it at Material code Level
  • PRG provides info about Utilities consumption and other SKF
  • Material Ledger does not
  • Material Ledger is integrated and is the basis for the Cost of Good Sold.

 

SECTION 2 Usage of different reports to explain PL

Use PF1 - KE30 - Report Z1KCHEOPS to have a report of Sales (R10000) & variable logistic costs (R12910)

 

 

PF1 Data have been merged in BW – production - WBP to facilitate the analysis of GBUs using WP1 & PF1. For more details, you can visit RtR PE Reporting

Access WBP and Open a data source or workbook or go to BW - Analysis Workbook Guide for more details regarding BW

To have the P&L in BW you can use the report ZZKPL_M01_BASIC_02

 

 

STEP 1

In WPB, Select the report ZZKPL_M01_BASIC_02

 

 

STEP 2

You can enter:

  1. The period (compulsory)
  2. GBU
  3. Company code
  4. Partner Business Unit

 

 

 

STEP 3

Create your report with your selection with criteria available

For further information on the characteristics and its attributes better contact to DMR Reporting team

 

 

The P&L is displayed 

 

 

STEP 4

You can detail a BFC heading.

For instance, have the Non proportional costs of production:

  • by material 

 

  • by business area

 

 

Other reports that can be used

ReportDescription of the report

ZZKPL_M01_CONSO_01

P&L - Consolidation Report.

Not used at legal entity level but used by GBU controllers. It is set-up with the consolidation methodology used in BFC

ZZKPL_M01_CONSO_03

P&L - Consolidation Report

Integrated Margin. It considers the Margin taking in account the production cost at Origin. Only available for SpP and Soda Ash (active also for Peroxide but not validated yet with GBU controller).

 

 

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