Transition to Event-Based Production Accounting in...

GraceZou · ‎2023 Oct 12

Co-authored by @olivia_wang and @GraceZou.

Introduction to Event-Based Production Accounting (3F0)

As outlined in Janet Dorothy Salmon's great blog The Differences between Traditional and Event-based WIP and Variance Calculation, Event-Based Production Accounting (3F0) is the leading innovative production costing solution in SAP S/4HANA Cloud Public Edition, which has the following advantages:

Eliminates period-end closing activities in Production Accounting: manual overhead cost calculation, WIP calculation, variance calculation and settlement are not needed anymore.

Contributes to real-time profit and loss: the production WIP and variances are captured immediately at the time when business event happens rather than at period end.

Fully integrated with unified journal in Financial Accounting: the production WIP capitalization and variance settlement document details are directly updated in unified journal table ACDOCA. There are no more CO-specific tables, which might cause potential inconsistency with FI.

Fully enabled with Universal Parallel Accounting: the production WIP and variances are calculated for each currency (company code currency, group currency, and one freely defined currency in Public Cloud Edition) without currency translation and for parallel ledgers.

Modern Fiori experience with smooth filter, navigation, and drilldown experience.

3F0 has already been the default scope item for Production Accounting in SAP S/4HANA Cloud Public Edition since year 2021 for newly implemented customers. After that, SAP announced the retirement of scope item BEI (Period-End Closing - Plant) in the release S/4HANA Cloud 2408, which means legacy customers using BEI are suggested transitioning from BEI to 3F0 soon.
BEI is deprecated due to the following reasons:

BEI is incompatible with Universal Parallel Accounting, which is compulsory on public cloud. The classic WIP calculation, variance calculation and settlement only take care of leading ledger with two currency types. There would be a risk of imbalance in the non-leading ledgers and the currency types other than company code currency and controlling area currency if you have made ledger-specific material prices or activity cost rates. Different prices in different ledgers could be caused either by a parallel accounting requirement or a mistake in the non-leading ledger price maintenance.

BEI has the long-standing performance issue in variance calculation and rounding difference issue in WIP calculation, which cannot be resolved due to old technical limitations.

BEI is not as user-friendly as 3F0 in navigation and drilldown functions due to old Web GUI technical limitations.

3F0 has achieved equal feature parities as BEI. Meanwhile, 3F0 provides event-based posting in a selective way, offering an option to determine WIP and variance manually (e.g., at period-end) instead of at each business event for the customers that:

Have rather short-living production cycles thus do not necessarily want to see capitalized WIP in every logistic posting.

Have many additional postings on the orders (e.g., supplement missing components and re-open orders) after the orders are with status DLV/TECO, which could foresee large number of additional settlement documents and reversal documents.

3F0 is the strategic investment solution for continuous feature enhancements, meaning any WCR or CIP requests raised by customers will only be implemented in 3F0.

When to Deprecate BEI?

BEI is deprecated in a phased approach as follows:

1. Deprecation announcement phase (From S/4HANA Cloud 2308 ~ end of 2402)

SAP notifies all existing BEI customers about the deprecation plan.
SAP provides explanations and transition guidance for BEI customers.
SAP only approves activating BEI for new customers with valid business reasons (e.g., missing feature parity in 3F0)
Customers are expected to try out 3F0 with already supported scope, start the transition, and provide feedback to SAP.
- What are the missing feature parities in 3F0 compared with BEI in running your business?
- What system behaviors you are not satisfied with 3F0 and need improvement?

2. Retirement phase (From S/4HANA Cloud 2408 ~ end of 2508)

SAP completes feature parity of 3F0 compared with BEI, according to what has already been listed on the roadmap and the feedback collected from customers.
SAP marks BEI apps as Deprecated and scope item BEI as Retired in 2408.
SAP gives no more approval of activating BEI after the upgrade to 2408.
SAP monitors and communicates with the customers who are still actively using BEI, e.g. creating large amount of new non-event-based orders, to notify of the last call of 3F0 transition.
Customers are expected to close classic orders and product cost collectors (PCCs) and switch all order types to 3F0 using event-based RA keys RSEBW/ORDMS and PCCEB/PCCMS at the earliest convenience by the end of year 2025.

3. Obsoletion phase (From the release of S/4HANA Cloud 2602)

SAP will prevent creation of new non-event-based orders using classic RA key MBMF01 and PCCs with classic RA key MBMF03 with an error message when having confirmed that all customers have completed the transition.
SAP will prevent the use of classic WIP/variance calculation and settlement GUI apps (and their equivalent jobs) with an error message when having confirmed all customers has completed the transition.
SAP will remove all product capabilities delivered in scope item BEI when having confirmed no customers are actively use them.

How do I know I am running with BEI?

Check your configuration in the following configuration activities in Manage Your Solution:

Define Order-Type-Dependent Parameters for Production Orders
Define Order-Type-Dependent Parameters for Process Orders
Define Cost-Accounting-Relevant Default Values for Order Types and Plants

If you are using BEI, the results analysis (RA) key MBMF01 is assigned to order types for your production orders and process orders and MBMF03 to product cost collectors.
Accordingly, you use the following apps to carry out period-end closing activities:

What does it look like after I transition to 3F0?

1. In 3F0, it's recommended to use event-based production cost postings, in which WIP/variance calculation and settlement are linked to logistic business transactions. To use this, you assign processing key RSEBW to your order-type-dependent parameter. The business events that trigger settlement are:

Goods Issue

Activity Confirmation

Goods Receipt

Technical Completion of Order

You can check the postings with the following analytical apps in real time:

In case posting exceptions happen, for example, due to configuration error or postings from other business transactions cannot be handled in an event-based manner, the following apps help you identify and solve them:

For an overview about event-based production accounting, including production order creation, business events such as goods issue and receipt, and event-based posting analysis, watch the video Introducing Event-Based Production Cost Posting:
https://sapvideoa35699dc5.hana.ondemand.com/?entry_id=1_hx6j4j4c

2. The alternative approach in 3F0 is to settle WIP/variance manually whenever production is finished. To use this, you assign processing key ORDMS to your order-type-dependent parameter.

You run job Manual Settlement: Event-Based Order and PCC in app Schedule Product Costing Jobs so that WIP/variance calculation and settlement are all executed in one job run.

After manual settlement, you can also check the postings with the following analytical apps: Note: 3F0 orders with manual settlement triggering type are not shown in app Postprocess Event-Based Posting - Product Costing.

How to transition?

Familiarize yourself with comparisons of applications, catalogs, configuration activities, period-end closing steps, supported scenarios etc. between 3F0 and BEI, see help pages:

Event-Based (3F0) versus Period-Based (BEI) for Manufacturing Orders

Event-Based (3F0) versus Period-Based (BEI) for Product Cost Collectors

Create a customer case under component XX-S4C-OPR-SRV or X4-CBC-PRX to request activating scope item 3F0, which comes with the event-based processing keys (formerly known as RA keys) RSEBW for manufacturing orders and PCCEB for PCCs respectively.
Note: 3F0 is activated by default for customers with an initial release of SAP S/4HANA Cloud 2105.
Then, complete the following preparatory transition steps:

1. Assign WIP source accounts and WIP account determination rules for 3F0 in configuration activity Event-Based WIP and Variance Posting (103940).
The following two steps are only relevant for customers who want to calculate overhead surcharges using costing sheet for orders.

2. Set up an event-based costing sheet (mandatory for overhead surcharges) in Define Costing Sheets (102922). Note that the "Event-Based" checkbox must be selected for the costing sheet.
3. Assign the event-based costing sheet to valuation variants (those used in the planning costing variants in order-type-dependent parameter) in Define Valuation Variants per Plant (102608). You can take reference to the standard costing variants PYR1 and PYR2.

Next, perform the essential transition step: switch to the assignment of costing variants with event-based costing sheet and the event-based processing keys to your order types.

Switch to event-based processing key for manufacturing orders

RSEBW is delivered for enabling event-based product cost posting for manufacturing orders and ORDMS for manual settlement of 3F0 orders. You can view the settings in configuration activity Event-Based WIP and Variance Posting. It specifies the WIP calculation method, variance split categories, and valid posting receivers as follows:

Note: These event-based processing keys are pre-delivered in 3F0 Best Practices content and cannot be changed.

Depending on your settlement triggering requirement, to assign RSEBW or ORDMS to your order types for manufacturing orders, use configuration activities Define Order-Type-Dependent Parameters for Production Orders and Define Order-Type-Dependent Parameters for Process Orders. You can assign RSEBW or ORDMS to a new order type or change from old RA key MBMF01 to RSEBW or ORDMS for an existing order type for all plants:

In this step, also specify the planned costing variant (e.g. PYR1) that is assigned with the event-based costing sheet earlier.
For detailed guidance, see Transition from Period-Based to Event-Based for Manufacturing Orders.

Results

After flipping the key assignment and making all necessary configuration changes, the following occurs:

Any new orders created with the order type are event-based orders, which no longer need manual calculation and settlement for WIP and variances. Instead, posting and calculation of WIP, overhead, and variance are initiated in real time by business events such as goods movement, activity confirmation, goods receipt, and order completion. You can view the data in analytical apps such as Analyze Production Costs - Event-Based.

Existing classic orders created before the switching are still non-event-based orders. For these orders, production cycle can still be completed with BEI steps (overhead calculation, WIP calculation, variance calculation and settlement). When all these orders are closed, the transition is completed.

This is a simple transition without data migration. You can switch the assignment of order types at any time during the period without hard period cutoff. Before all the classic BEI manufacturing orders are closed, period-end steps for both 3F0 and BEI are needed. After the period that those legacy orders are fully closed, BEI steps are not needed anymore.

Switch to event-based processing key for product cost collectors

PCCEB is delivered for enabling event-based product cost posting for product cost collectors. You can view its settings in configuration activity Event-Based WIP and Variance Posting. It specifies the WIP calculation method, variance split categories, and the valid posting receiver as follows:

Note: These event-based processing keys are pre-delivered in 3F0 Best Practices content and cannot be changed.
To assign PCCEB or PCCMS to your order types for PCCs, use configuration activity Define Cost-Accounting-Relevant Default Values for Order Types and Plants. You can assign PCCEB or PCCMS to the existing PCC order type for all plants:

In this step, also specify the planned costing variant that is assigned with the event-based costing sheet earlier.
For detailed guidance, see Transition from Period-Based to Event-Based for Product Cost Collectors.

Results

After switching the key assignment and making all necessary configuration changes, the following occurs:

Any new PCCs created with the order type are event-based, which no longer need manual calculation and settlement for WIP and variances. Instead, posting and calculation of WIP, overhead, and variance are initiated in real time by business events such as goods movement, activity confirmation, and goods receipt. You can view the data in analytical apps such as Product Cost Collector Details - Event-Based.

Existing classic PCCs created before the switching are still non-event-based. For these PCCs, the production cycle can still be completed with BEI steps. When all these PCCs are closed, the transition is completed.

Note: If necessary, for example, you've set different material/activity prices for various ledgers, you can also settle classic PCCs in multiple ledgers with the job Production Settlement in Parallel Ledgers in the Schedule Product Costing Jobs app.

How do I do my daily work during the transition?

The following diagram shows the daily work as a production cost accountant before, during, and after transition:

Best practice is to set up a new order type for 3F0 orders instead of reusing the old order type. To distinguish between BEI and 3F0 orders, you can check the order headers (in apps such as
Monitor Process/Planned Orders (COOISPI) and Monitor Production/Planned Orders (COOIS)).

BEI orders have the RA key MBMF01 while 3F0 orders have the RA key/EB key RSEBW or ORDMS and EB Posting indicator as shown below:

BEI Orders (Non-Event-Based):

3F0 Orders (Event-Based):You use different apps and reports to settle and view these orders as described in How do I know I am running with BEI? and What does it look like after I transition to 3F0?
We hope you find the information helpful and are ready to start your journey in exploring and utilizing intelligent product accounting in SAP S/4HANA Cloud.