Provide Parallel Product Costs for Inventory Valuation in the SAP General Ledger

  • by Janet Salmon, Product Manager, SAP AG
  • October 23, 2009
See how to take the parallel accounting functionality available in the SAP General Ledger and apply it in CO. You can use it to calculate multiple activity rates and multiple inventory values for your finished goods at period close. This means that although your logistics flows (e.g., goods movements and order confirmations) continue to be captured at standard cost at the time of posting, you can calculate different activity rates and apply them to your finished goods inventories using the Material Ledger at period close.
Key Concept

Parallel accounting is the process of storing values in the SAP General Ledger that are derived according to different accounting approaches. Parallel accounting affects many parts of the balance sheet, including assets, inventory, and work in process (WIP). For asset valuation, parallel accounting means performing depreciation according to multiple approaches, and updating the SAP General Ledger accordingly. For inventory accounting, it means valuing finished goods inventory to take account of these depreciation approaches via the activity rates.

As accounting standards change, one of the dilemmas implementation teams face is whether to make top-line adjustments in their consolidation package to reflect the differences between the two approaches, or whether to adopt parallel accounting approaches in the underlying SAP ERP Financials processes in their SAP ERP Central Component (SAP ECC) system.

If you opt to capture the parallel accounting approaches in the Financials processes, you might still have integration issues. For example, you can set up Asset Accounting (FI-AA) to feed multiple approaches to depreciation into the SAP General Ledger, but then face the roadblock that it is not possible to take multiple valuations into CO, where only version 0 is supported for actual costs.

Companies with an obligation to present their financial statements according to multiple accounting principles, such as International Financial Reporting Standards (IFRS) and local Generally Accepted Accounting Principles (GAAP), find themselves having to settle on a single accounting approach in CO. They then use workarounds to determine differences according to the other accounting principle.

Janet Salmon

Janet Salmon joined SAP in 1992. After six months of training on R/2, she began work as a translator, becoming a technical writer for the Product Costing area in 1993. As English speakers with a grasp of German costing methodologies were rare in the early 1990s, she began to hold classes and became a product manager for the Product Costing area in 1996, helping numerous international organizations set up Product Costing. More recently, she has worked on CO content for SAP NetWeaver Business Warehouse, Financial Analytics, and role-based portals. She is currently chief product owner for management accounting. She lives in Speyer, Germany, with her husband and two children.

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Comments

4/4/2013 10:16:39 PM
Vinod Ramchandani

Very Helpful !!

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