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Account Based COPA – Simplification with Simple Finance

A typical pain point for most projects has been the underlying differences in Costing Based COPA and the P&L in Financial Accounting. Most of the customers used costing based COPA with one of the reasons being getting a break up of Cost of Goods Sold.

 

Typically in Costing based COPA, the values for key figures like Revenue, cost of goods sold, variances, overheads etc get stored in value field in CE1* tables. This essentially used to map the accounts such as revenue and sales deductions to value fields in costing based COPA. Additionally there were restrictions on the no of value fields in costing based copa with around 200 fields (SAP OSS Note 1029391).

 

The account based COPA on the other hand uses cost elements to store the same values for various attributes like revenue, cost of goods sold, and so on. However, the posting logic in traditional account based COPA was such that cost of goods sold and variances could only be mapped to a single GL Account/Cost element. This was one of the basic reasons why most SAP customers preferred using Costing based COPA over Account based COPA. Another major challenge with using Costing based COPA was the frequent reconciliation issues between COPA and GL. For eg, typically, the COGS was booked in the GL at the time of Outbound delivery and the same value flowed into Costing Based COPA at the time of billing. So if the PGI and Billing were far apart in two different posting periods, you typically had challenges in reconciliation of differences.

 

With SAP Simple Finance, life has been simplified for the Finance folks. SAP mandates the use of Account based COPA with Simple Finance and does away with the limitations of traditional account based COPA providing the same detailed information for Cost of Goods Sold, Production Variances & invoice quantities which till now existed only with costing based COPA. Of course, the costing based COPA can continue to co exist with the new Account based COPA

 

The traditional way of storing the characteristics in COPA irrespective of using Costing based COPA or Account based COPA was to store the data in a row in a data base structure. Every time the typical COPA reports were run, the system would query each data record and than aggregate to arrive at values which had been queried. With HANA, the data is stored in columns and so only the relevant column is queried, This brings in tremendous performance improvement. One of the ways in which SAP Customers used to tide over the performance related issues with COPA Reports was to create secondary indexes on the way in which reports were done. So this is some thing which is not required with the capabilities of HANA.

 

With Simple Finance, comes a new posting capability that allow SAP Customers to report the Cost of Goods Sold at the same level of details as available in Costing based COPA.  Typically, the postings on the GL used to happen at the standard price at which the material was valuated and the break up of the standard cost was available through Costing based COPA.  With Simple Finance comes the capability to link the cost components in the standard cost estimate to individual GL Accounts for each cost component. There is no restriction now on the no of accounts and the level of detail can be the same as the one available in cost component structure. The configuration path for the same in Simple Finance environment is:

 

IMG> Financial Accounting (New)>General Ledger Accounting (New)>Periodic Processing> Integration>Materials Management>Define Accounts for Splitting the cost of goods sold

 

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Another major reason with SAP Customers preferring Costing based COPA over Account based COPA was the ability of costing based COPA to provide the break up of Production Variances, which posted to a single GL Account. However, with Simple Finance comes the ability to assign a GL Account for each variance category and you can have the same break up in Account based COPA on Simple Finance. The required configuration path for the same is:

 

 

IMG> Financial Accounting (New)>General Ledger Accounting (New)>Periodic Processing> Integration>Materials Management>Define Accounts for Splitting Price Difference

 

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Here in similar to COSG split you have to define a Schema and assign a GL Account for each Variance category.

 

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Most of SAP customers using costing base COPA choose not to report the quantity in logistics, but convert them into their own reporting units. This was typically done through an enhancement to record this kind of conversion. COPA0005 was the enhancement which has been used in most customers. However, with Simple Finance, the COEP table has additional quantity columns which can be used for these kind of reporting requirements. The IMG path for the same is:

 

Controlling>General Controlling>Additional Quantities> Define additional quantities

 

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The usage of Account based COPA in Simple Finance ensures that there are no more time consuming painful reconciliation required to be done anymore. Additionally, the customers get the same kind of reporting capabilities hitherto seen with costing based COPA making life simpler for Finance users.

42 Comments
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  • I don’t know why simple finance strongly recommend accounting-based CO-PA still.

    It is impossible for me get the value from SD price condition with statistical information in case of accounting-based CO-PA.

    Because I don’t make GL account for SD price condition with statistical information.

    • Hi

      I think the representation of Statistical Condition in GL is a step in right direction. Ideally as per Accounting best practices, below are the cases in which revenue should be represented as gross:

      1. You are the primary obligor in a sales transaction. If you are providing a service, shipping the product, such revenue should be recorded at gross. This means that any thing which is represented as discounts on your invoice but not booked on GL, should ideally be recorded in GL.

      2. This is also the true in case, you hold the title to inventory before you ship the same to the customer. This means that there is no other party who is primarily responsible for delivering the product. So in line with the same, you should book the revnue at gross and deduct your discounts on the GL

      Hope that answers your questions to an extent.

      Regards

      Sanil Bhandari

      • Thank you for your reply.

        I have one question.

        If I use accounting-based CO-PA, is it possible for me to get individual GL Accounts for each cost component of the actual after material ledger closing?

        • In case of actual costing using material ledger closing for materials with price determination ‘3’ and price control ‘S’, You should use costing-based CO-PA for you to transfer actual cost component into co-pa after material ledger closing.

          • Hi Big Choi,

            What you comment is an important problem, because you should always activate accounting-based CO-PA and costing-based CO-PA in Simple Finance, and create a Z report to combine information.


            I will be attentive to your comments.


            Regards,

            José Luis

  • Hi,

    very informative blog. We are planning migration to SFIN; by the way I have a doubt. Currently, we are using Costing based COPA and t-code KEPM to plan customers net sales. How to cope with it using costing based COPA=

    ?

  • Very informative blog and the information provided by you has clear the confusion about why costing based COPA is replaced with account based COPA in simple finance.

    Thanks for sharing .

  • Hi Sanil,

    Thanks for providing detailed explanation with screenshots.

    While we were able to achieve the account split for COGS in case of normal sales (Mvmt 601), this account split is not happening for delivery against Interco STO (Mvmt 643) although its hitting the same COGS account.

    Is there any technical limitation? We are on S/4 HANA with SFin 2.0

    Regards,

    Som Perla

  • Sanil

    We use during delivery
    Dr. unbilled shipment -Delivery
    Cr. Inventory

    During Billing

    Use VPRS and copy to ZPRS (Non Stat, Accrual ) map to a cogs account with CE
    use another Condition type for clearing….

    Now with the new change how to bring this COGS in Billing because

    SFIN

    Dr. COGS
    Cr. Inventory

    Dr. Raw Mat
    Dr. Lab
    Cr. COGS

    No COGS entry in Billing

    This results in Timing issue.

    how to resolve?
    Can you help

  • Sanil
    Thanks for your response. but you agree the concept what I explained being followed by many clients right for years right?  How will they then achieve this?
    Don’t you agree still there is still a timing issue with this SFIN hana method.

    Do they have to change to PGI instead of Billing which may have lots of training issues.

  • Hi

    PGI is still a transaction in OTC Cycle. There is no change in that in S/4HANA from ECC. The requirement is the way accounting is done for COGS recognition. The standard functionality of COGS Break up will work only on PGI and that is a system design. The reason for COGS Recognition at the time of billing could be one of the reasons:

    1. Ensure that the cost is recognized at the same time in GL and COPA if you are using costing based COPA today. However, with S/4HANA Finance, a better approach is Enhanced Account based COPA, in which the AB COPA ensures that values flow into COPA when the GL is posted so there are no differences. So that way the COGS functionality is correct

    2. Additionally, many companies also have a account practice to recognize revenue at the same time as Delivery. So if that is the case, the standard functionality of COGS Split at the time of PGI will not work as it is a system design. There is nothing wrong in the design and your accounting flow is working as expected. If you need a change, you may look at the option of a suitable enhancement, which might be possible

    Regards

    Sanil Bhandari

  • Thanks, Sanil,
    One question in cost based when release billing revenue and cogs create in COPA Doc,
    In the S4/Hana when delivery save , COGS in PA create but billing not release.
    In the S4/Hana  always delay between revenue and cogs is it correct?

    • Hi Ali

      In Costing based COPA, the COGS is recognized at the time of Billing through VPRS Condition type and cost is recognized in GL at time of PGI. To tide over the same, you can create VPRS as a statistical accrual condition type and assign COGS Account and Stock in Transit Account in VKOA. So your accounting entry would look like:

      PGI

      Stock in Transit Dr
      To Stock – FG

      Billing

      Customer A/c Dr
      COGS Dr
      To Revenue
      To Stock in Transit

      This way in Costing based COPA and GL, the values should always match.

      However, in S/4HANA Finance, there is a functionality to get a COGS Split by assigning the GL Account to various levels of Cost Component Structure. There is a built in restriction that this will work only if COGS is recognized at time of PGI. But if you are using AB COPA, than there should not be an issue of reconciliation since both COPA and GL values will always be reconciled.

      Specifically, if you have IFRS 15 requirement for revenue recognition where the revenue should be recognized only based on Performance Obligation, which in MTS scenario will be delivery, you should look at RAR Component available in S/4. This should also enable you to recognize cost and revenue at the same time and in line with the accounting principle should you choose to use AB COPA in S/4HANA Finance. The below link should give you an insight into RAR

      https://blogs.sap.com/2016/09/13/revenue-accounting-and-recognition-rar-part-1/

      Thanks & regards

      Sanil Bhandari

  • Hi Sanil, Very Nice Document!!

    I have a question from revenue/cost recognition perspective, we move COGS to revenue  recognition module through SD line item statistical cost condition(e.gVPRS). Then we would like to defer the cost with correction postings and then recognize it later along with revenue. So, is it possible that COGS deferred with correction postings and recognition postings can follow the same split functionality as per cost split configuration profile.

    Thanks/Abhinay

  • Dear Mr. Sanil,

     

    Thank you so much for sharing.

    I’ve one question… is there anyway to get a Balance Sheet Account in COPA, they want to post a GL at billing and report on it with all the sales dimensions

     

    Thank you.

    Best regards,

    Abdullah Galal

    • Hi

      Couple of things:

      1. You can use COPA Characteristics on specific Balance sheet GL Accounts like WIP etc. This is pretty much possible in Account Based COPA in S/4HANA Finance
      2. Can you please list down the GL Accounts, which are balance sheet in nature and you need them to flow into COPA. How come they will be part of your P&L reporting in COPA

      Regards

      Sanil Bhandari

  • Hello Sir,

    as you mentioned in your blog regarding define additional quantities

    Controlling>General Controlling>Additional Quantities> Define additional quantities

    My requirement is in VBAP table I need to acvtivate VOLUM field but the issue I am facing is VOLUM field is greyed out ,I have followed your instruction by configuring additional quantities but still I am not able to activate VOLUM field.

    is there any other customization I need to do.

    Thanks in Advance.

     

  • Hi Sanil,

    The article nicely explains the new functionalities coming in Account based COPA.

    I have a question regarding Quantities. In Costing based COPA, quantity info gets updated in CO-PA. Now this info is as per Sales Documents and using additional quantities different quantity info can be updated provided the conversion is maintained in Material Master.

    In account based COPA, my first question is – How do we get the Quantity info. does additional quantities – config with no dimension take care of it?

    Can you please help me understand.

    • Hi Srikanth

       

      Thanks for the update. There is a new configuration path, where you can maintain the update of additional quantity:

      IMG>Controlling>General Controlling>Additional Quantity>Define Additional Quantity fields

      Here you can maintain Controlling area specific conversion units.

      Additionally, if you want aggregation of quantities and than use that as a basis for top down distribution and cost allocations, you can also look at using the BADI, FCO_COEP_QUANTITY as well.

      Rgeards

      Sanil Bhandari

       

  •  

    Hi,

    All instruction above was followed.  Our client is using account-based COPA.  Profitability segment is derived during sales order creation.  During PGI the COGS account is split accordingly and profitability segment contained characteristic.   Now during billing document creation no profitability document was created and the profitability segment field in the sales account is off.

    What could be the missing set-up on this kind of issue.

    Thanks.

    Marivic

    • Hi Former Member

       

      The only reason I could think of is that your revenue GL Account is not created as a cost element. It should have a cost element category as 11 or 12. Additionally, the field status variant for GL and posting key must allow PSG.If all of these are met than for the controlling document, you should be able to see the PSG in KSB5

      Thanks & regards

      Sanil Bhandari