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). QS&S is a leading business and technology consulting firm that specializes in delivering superior IT solutions using SAP products. Mitresh is widely acknowledged as a leading SAP expert and has worked on various SAP assignments, including strategic planning, fresh implementations, upgrades, and post-go-live support projects. With an MBA degree in finance, Mitresh manages SAP projects with a special focus on customer-focused solutions, management reporting, profitability analysis, SAP General Ledger, and business intelligence. He is a regular contributor at SAP events and publications and technical advisor to leading journals.

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