Reconcile Costing-Based CO-PA with FI and Generate Full Product-Level P&L Reports

  • by Ashim A. Nanda, Managing Consultant, Global Business Services, IBM
  • October 24, 2013
Ashim Nanda explains how to reconcile costing-based Profitability Analysis (CO-PA) with FI using the G/L account as a characteristic.
Key Concept
SAP Profitability Analysis (CO-PA) supports two forms of profitability computation: costing based and account based. Account-based CO-PA reconciles with FI, whereas costing-based CO-PA has higher flexibility and computational capabilities that provide businesses with supporting tools and dashboards to make decisions such as make versus buy, promotion strategy, advertising spend focus, and distribution optimization spend.

Management accounting serves the core needs of internal business managers by improving decision support to efficiently manage internal business processes for achieving organization goals. For large organizations, the management accounting framework is laid out at the corporate level and is rolled out to its affiliates in various regions and countries. This approach ensures that the affiliate goals are commensurate with the vision of the organization.

An example of such a framework is requiring principles used to compute the profitability of an affiliate or a product line to be in line with the principle used for external profit-and-loss (P&L) statement reporting. This framework calls for reconciliation of management profitability reports with the published P&L statements. SAP costing-based Profitability Analysis (CO-PA) provides an efficient set of tools to compute profitability of business at various levels of granularity in dimensions pertaining to customers, product range, and geographic locations. However, costing-based profitability reports do not tie with FI. For companies that want the internal reports to tie to external published profitability statements, SAP offers account-based CO-PA, which has reduced computational capabilities. For example, valuation and top-down distribution functions are not available for account based CO-PA.

To have the best of both worlds, I use costing-based CO-PA and report profitability using a characteristic general ledger (G/L) account. I explain how to create the G/L account characteristic, provide logic to update this characteristic for various business scenarios, and generate a profitability report mockup using Excel based on the data from costing-based CO-PA tables.

Costing-based CO-PA reports by value fields, but account-based CO-PA reports by general ledger accounts. Based on performance implications, SAP limits the maximum number of value fields to 200 in costing-based CO-PA (SAP Note 1029391). However, there is no such limit to the number of characteristic values. I explain an innovative solution to address the requirement to build complete product-level profitability reports.

 

Ashim A. Nanda

Ashim A. Nanda is a managing consultant in SAP FI/CO working with IBM Global Business Services. He has more than eight years of experience with implementation, global rollout, and maintenance projects for clients in the pharmaceutical, telecommunication, automotive, and high-tech industries. Ashim holds an MBA in finance and systems from Xavier Institute of Management, India, and a degree in electrical engineering from University College of Engineering, India.

 

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Comments

11/9/2013 2:11:21 PM
Vishwanath Krishnamurthy

Dear Ashim Nanda,

Thanks for a wonderful article.

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