Distribution, Periodic Reposting and Assessment

Distribution

The following information is passed on to the receivers:

The original, primary, cost element is retained.
Sender and receiver information is documented with line items in the CO document

 Assessment

The following information is passed on to the receivers:

The original cost elements are grouped together into assessment cost elements (secondary cost elements).
The original cost elements are not displayed on the receivers.

Sender and receiver information is displayed in the CO document

CO allocations work in the same manner but there are differences regarding
which type of sender is accepted and the way postings are done.

The following should be considered when selecting the method to apply:

1. Senders

Distribution and Assessment will only accept Cost Centers as senders whilst
Reposting will accept all CO objects

2. Posting Method

Distribution and Reposting will only post primary cost elements whilst Assessment will allow posting of both primary and secondary cost elements.

Also Distribution and Reposting will show the costs in the receiver under the original cost element whilst Assessment will use an assessment cost element.

DISTRIBUTION CONTAIN PRIMARY COST AND IN ASSESSMENT THE

SECONDARY COST ELEMENT CARRY THE PRIMARY COST

In Distribution we can distribute only Primary cost but in Assessment both primary as well as secondary cost can be allocate

Performance wise assessment is better since detail line items not written.

Detail drill down is possible in distribution only in assessment only unclean DR and CR written

Distribution, Periodic Reposting and Assessment

DISTRIBUTION

Distribution was created for transfer primary costs from a sender cost center to receiving controlling objects. During distribution, only cost centers or business process can be used as sender.

A distribution receiver can be a cost center, WBS element, internal order, cost object, or a business process.  You can restrict the number of receiver categories in customizing.

Primary Postings (such as, energy costs) are collected on a cost center, and allocated at the end of the period by means of the user-defined key.

You can only distribute primary costs.  During this process, the original cost element remains the same.

Line items are posted for the sender as well as for the receiver, enabling the allocation to be recorded exactly.

You can reverse distributions as often as required.

You use the Cycle-Segment method to define sender-receiver relationships.

PERIODIC REPOSTING

Differences between periodic reposting and distribution are due to information content and performance.

For periodic reposting, no separate credit record is written on the sender for the cost element in the summary report.  Instead, the totals record for the cost element is reduced on the debit side, which means that the original debit amount can no longer be checked there ("unclean credit").

However, during distribution, the system writes a totals record for the credit ("clean credit"). The information on the receiver is the same for periodic reposting and distribution ("clean debit").

Compared with periodic reposting, during distribution, the system also updates the partner in the totals record for the sender. This means that the partner can be displayed in the information system on the totals record level.

As fewer totals records are written during periodic reposting, performance is better than during distribution.  

ASSESSMENT

Assessment was created to transfer primary and secondary costs from a sender cost center to receiving controlling objects.

During assessment, cost center or business processes can be used as senders.

The receivers for an assessment can be a cost center, WBS element, internal order, cost object, or a business process. You can restrict the number of receiver categories in customizing.

Primary and secondary posting are allocated at the end of the period by the user-defined key.

During assessment, the original cost elements are summarized into assessment cost elements (secondary cost element category = 42). As the system writes fewer total records, the assessment has a better performance than periodic reposting and distribution.

The system does not display the original cost elements in the receivers.  Therefore, assessment is useful if the cost drilldown for the receiver is not important.

 Similar to distribution, the partner is updated in the totals record during distribution
 You can reverse assessments as often as required. You use the Cycle-Segment method to define sender-receiver relationships.

A: Its easiest to demonstrate this by way of an example

 Lets say we have three cost elements with the following amounts to be allocated:

 A Electricity $2000 B Water $3000 C Canteen Costs $4000

With assessment cycles the system groups all three together and summarizes the balance of 9000$ onto a separate cost element e.g. D.In order to allocate the costs to a receiving cost centre. Hence your sender cost element is D in your CO reporting and not A,B,C With distributions the costs are allocated from the original cost elements. Hence your senders are A,B,C

Only Balance in Local Currency

When this option is selected, the balance of that particular account will display the balances only and only in local currency even though it has transactions dealing with foreign currency. Simply speaking, that account balance does not display total of the foreign currency.

The indicator must be set in cash discount and GR/IR clearing accounts.
It must not be set in reconciliation accounts for customers or vendors.

The indicator is usually set in balance sheet accounts that are not managed in foreign currencies and not managed on an open item basis.

"Transaction figures are only managed for amounts converted to the local currency."
For example, here INR is local currency.

Documents      INR                 USD        AUD      EUR

Doc 1             500.00             12.00                

Doc 2             1100.00                        30.00    

Doc 3              800.00                                      16.00

Balance            2400.00           NoDisp    NoDisp    NoDisp

This indicator indicates that balances are updated only in local currency when users post items to this account.

You can set this indicator for accounts in which you do not want the system to update transaction figures separately by currency.

Setting this indicator for accounts managed on an open item basis affects the clearing procedures. See the example below.

Set the indicator in cash discount clearing accounts and GR/IR clearing accounts. It cannot be set in reconciliation accounts for customers or vendors. Setting it in all other instances is optional.

It is usually set for particular balance sheet accounts including:

Accounts which are not managed on an open item basis and not kept in foreign currencies.

Accounts which are managed on an open item basis and have the same types of items posted in different currencies, but always allow clearing to be made if the local currency amounts correspond.

Simple Overview of Product Costing

SAP Product Costing deals with Plan Costing + Actual Costing of Finish products or Services.
CO comprises Product Costing + cost accounting integrated with FI.

It uses Integrated Cost Accounting.

Product costing also has 2 phases depending on the Mfg Scenarios.

If you are a normal mfg comp, making goods to stock & sale, you have to first do planning of the costs of products initially as a STD COST of a product. This is used in many phases in SAP CO accounting.

In simple terms, you cost a product by different methods depending on different LIFE CYCLE phases of product. These are Development of new product. Growth stage by modifying it. Mature stage (mass prod). Decline Retirement of that product from Mfg+Mktng)

The whole CO process starts with these PLANNED costs of products & ends with totaling the STD Costs for Actual Production.

This is a simple STD cost Accounting system, in which the end result is calculating Variance bet Planned & Actual & analyzing those for further corrective actions.

Product costing is well integrated to FI, but only where overhead cost accounting is used.  Otherwise normally it used only for settlement. All these actual costs of Prod are finally settled/offset to FI or Profitability segments. SAP CO is a very vast & complicated module of all.  It needs deep understanding of the subject.

Product Costing

Identified Need: You need to accurately determine the costs incurred in producing the goods and services that your company provides.

Business Process to meet that Need: Product Costing
Product Costing helps a company know the costs incurred by its products in order to successfully manage its product portfolio. The product cost accounting business process calculates cost of goods manufactured (COGM) or cost of goods sold (COGS) broken down by each step of the production process.

How Do I Implement this Process with SAP Solutions?
mySAP ERP (Product Cost Controlling, CO-PC) enables a company to determine the costs incurred to make its products or to provide its services. It uses cost information gathered about the product automatically in other SAP applications (e.g., using the bills of material (BOMs) and routings in Production Planning).

Business Area Vs. Profit Center Vs. Profitability Segment

What is the difference between Business Area, Profit center & Profitability Segment? 

Business area is an organizational unit which corresponds to the specific business segment or area of responsibility. Identification of business area helps in segment reporting of a company in its financial statements. Business areas can be identified based on the products of the company or based on geographical area.

Profit centers are internal areas of a company that have the responsibility for achieving target profits or productivity goals.

The objective of business area is more for reporting purposes whereas profit center allows to analyze areas of responsibility and to delegate responsibility to decentralized units (eg., the various divisions within a company). Thus, profit center are basically treated as "companies within a company" and ensures effective control.
Profitability Segment corresponds to market segment. The market segments can be defined as products, product groups, customers, customer groups, geographic areas, etc. For example, a company may wish to analyze profitability for a specific group of products that the company sells to a particular customer (or group of customers). When setting up CO-PA, the company will have broad flexibility to choose whichever characteristics are relevant for defining the company's market segments. Each unique combination of characteristic values (e.g. sales of product A to customer X) defines a profitability segment.

Another viewpoint:

Difference between Profit Center and Business Area

Business area will have many profit centers. For example Vehicle is a business area in a company. Vehicle can be cars and Bikes etc. Here Vehicle is business area and Cars and Bike are profit centers. In broad Vehicle is a profit center. But as it has sub areas those are profit centers. So profit centers cannot be replaced with business area and vice versa. We can replace business area by Profit centre, only condition is that it should be in same controlling area. The business area is more like a business unit of a company. You can have multiple profit centers within a business area.

Main distinguish factor is that distribution and assessment is possible in profit center but not in business area.

One more distinction is that Business area need not be attached to any organization structure. But profit centers can be created only under the controlling area. Business area can be across controlling area.

Business area concept is used for making strategic decisions by the management whereas the primary purpose of profit centre accounting is responsibility accounting.