What You Should Know About the SD Higher-Level Item Category's Influence on Financial Reports

  • by Mitresh Kundalia, Director — SAP Practice, Quality Systems & Software
  • March 15, 2003
The item category of a sales document primarily controls how the sales item is processed within SD. However, some of the settings have a significant influence on the FI module.

The "higher-level" and "lower-level" item category relationships in a sales order are among the most commonly misunderstood settings in R/3. You might think that the item category (see the sidebar, "SD Item Category") of a sales document is purely a Sales and Distribution (SD) function. It’s true that it primarily controls how the sales item is processed within SD. However, some of the settings have a significant influence on the FI module.

If you take the steps required to activate higher vs. lower relationships in a sales order, you also create the possibility for two different approaches to gross margin analysis in CO-PA. This allows you to bring profit values into CO-PA in two ways — the revenues and costs of the finished good or the revenues and costs of each of the components of the finished product.

In simple terms, the lower-level item (or sub-item) is assigned to the higher-level item (or main item) to form a hierarchy structure. Accordingly, item categories are assigned for both the items: a higher-level item category for the main item and a lower-level item category for the sub-item.

Mitresh Kundalia

Mitresh Kundalia heads the SAP practice at Quality Systems & Software (www.QSandS.com), a consulting firm specializing in SAP S/4HANA, SAP General Ledger, and complex System Landscape Optimization (SLO)-type reorganizations. Mitresh is widely acknowledged as a leading SAP expert, with multiple publications and an SAP-PRESS book to his credit. He has published more than 50 peer-reviewed articles and white papers, and he has given presentations at various SAP conferences and events. Mitresh is the chief solutions architect of General Ledger Migration Optimizer (GLMO), a leading product to accelerate and jump-start the SAP S/4HANA and SAP General Ledger initiatives; SAP Data Reorganization Optimizer (SDRO), an SLO-type product for managing complex system landscape reorganizations; and Group Currency Activation and Conversion (GCAC), a product suite to manage introduction of parallel currencies and conversion of data in a live SAP system. 

Mitresh will be presenting at the upcoming SAPinsider Financials 2018 conference February 12-15, 2018, in Las Vegas. For information on the event, click here

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