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UPA and the change in Production accounting from month end to Realtime
Unless you have been living under a rock you must have already heard of the new Universal Parallel accounting that SAP has already released and is generally available for customers.
I have been working in the SAP Controlling area since the last two decades. The onset of S/4 HANA brought in some changes relating to cost elements, allocations Actual costing and material ledger. However, the production and costing side remained unchanged since times immemorial. I haven’t seen a change in the period end closing process (WIP, Variance and Settlement) in the last decade.
This is the most significant change to this process since a long time.
What’s changed:
I am not going to go over all that’s changed in UPA in this post, if you are not familiar with UPA you need to first start with the excellent blog posts by Janet and Sarah on this topic
UPA Overview by Sarah
Inventory accounting in UPA by Janet
Event-based production accounting in SAP S/4HANA is a significant change from the traditional period-based approach, with cost postings now linked to business events rather than period-end processes. This provides real-time insights and simplifies period-end closing.
Here are the key changes:
- Real-time insights: Cost information is up to date, allowing comparison of planned versus actual costs and variance splits.
- Simplified period-end: Traditional period-end activities are removed.
- Parallel accounting: Enables valuation for different accounting standards, using multiple ledgers and currencies.
- Posting: Journal entries are created with each business transaction, replacing legacy tables.
- WIP and Variance Calculation: Calculated immediately upon business events, rather than at period-end.
- Reporting: New Fiori apps offer better cost and variance reviews.
- Costing: Event-based costing sheets are necessary.
- Results analysis key: The RSEBW key is needed for event-based posting.
- Overhead: Material and production overheads are charged immediately.
- Transition: Can be implemented by switching order type assignments, however period end steps may still be needed temporarily for both event-based and period-based processes.
- Settlement: Event-based uses a posting rule, instead of the traditional settlement rule.
The scope item for event-based posting is 3F0, while the traditional approach uses BEI. Event-based is the default in SAP S/4HANA Cloud and is required for universal parallel accounting.
What’s Changed in Configuration/ Setup?
To configure event-based production accounting, several key settings need to be established within SAP S/4HANA, primarily focusing on the 3F0 scope item. These configurations ensure that costs are posted correctly based on business events rather than at period end.
The new IMG Node for EBPA
Here are the essential configuration steps,
- Event-Based Processing Keys: Verify that the event-based processing keys, RSEBW for manufacturing orders and PCCEB for product cost collectors (or ORDMS and PCCMS for manual settlement), are available within the Event-Based WIP and Variance Posting configuration activity. These keys dictate the WIP calculation method, variance split, and valid posting receivers.
Most of the variance and WIP calculation settings are now event based and moved to one single configuration node.
- WIP Source Accounts: Assign WIP source accounts to specify which costs should be posted and capitalized as WIP and define event-based WIP account determination rules to specify the G/L accounts to which WIP or unrealized costs are to be posted. All WIP source accounts from the Define Assignments configuration activity must be included here.
- Event-Based Costing Sheets: Create or use a pre-delivered event-based costing sheet in the Define Costing Sheets configuration activity. Ensure the "Event-Based" checkbox is selected for the costing sheet.
- Valuation Variants: Assign the event-based costing sheet to the relevant valuation variants per plant in the Define Valuation Variants per Plant configuration activity. This is crucial for overhead calculations.
- The valuation variant must have the event-based costing sheet assigned. You can’t assign a non-event-based costing sheet.
- Order-Type-Dependent Parameters: Assign the event-based processing key (RSEBW or ORDMS) and a planned costing variant to the relevant order types (e.g. YBM1) in the Define Order-Type-Dependent Parameters for Production Orders and Define Order-Type-Dependent Parameters for Process Orders configuration activities. For product cost collectors, assign the event-based processing key PCCEB or PCCMS in Define Cost-Accounting-Relevant Default Values for Order Types and Plants. If using RSEBW or PCCEB, the assigned planned costing variant must have an event-based costing sheet assigned to it.
- Account Determination: Ensure that the accounts for posting variances are set up correctly under the Sourcing and Procurement area, within the Automatic Account Determination configuration activity. This includes accounts for price differences (PRD), inventory posting (BSX) and offsetting accounts for inventory posting (GBB).
- Results Analysis Key: When creating order master data, the RA Key (results analysis key) field must be set to RSEBW for event-based production cost posting. The Event-Based Posting checkmark will then be derived automatically.
- Settlement: With the event-based approach, settlement profiles are no longer needed. The settlement type is determined by the event-based processing key. If using RSEBW or PCCEB, settlement is triggered by business events, while ORDMS or PCCMS require manual settlement.
By completing these configurations, the system is set up to automatically post WIP, overhead, and variance in real-time, based on business events rather than waiting for period-end activities.
Event based production Postings during the month
The below table shows how WIP and variances are calculated at various stages of using Event based production accounting.
Original Order Status | Action to the Order | New Order Status | Event-Based Posting Results |
REL (Released) or PDLV (Partially delivered) | Goods issue or activity confirmation | REL (Released) or PDLV (Partially delivered) | WIP increases. |
REL (Released) | Partial goods receipt | PDLV (Partially delivered) | WIP decreases. |
REL (Released) or PDLV (Partially delivered) | Final goods receipt | DLV (Delivered) | WIP is cleared and variance is settled. |
Manually set Complete Technically | TECO (Technically completed) | ||
Manually select Delivery Completed | DLV (Delivered) | ||
TECO (Technically completed) or DLV (Delivered) | Goods issue or activity confirmation | TECO (Technically completed) or DLV (Delivered) | Variance is recalculated and resettled. |
TECO (Technically completed) | Manually revoke technical completion | REL (Released) | Variance is reversed and WIP is recalculated and reposted. |
DLV (Delivered) | Cancel final goods receipt | PDLV (Partially delivered) | |
Manually unselect Delivery Completed |
Now, I am going to create a production order and post a goods issue to show the calculation during the month. We are going to track the progress using the apps below
- Display Line Items - Production Accounting (F7288)
- Work in Process - Event-Based (F3498)
- Analyze Production Costs - Event-Based (F4059)
- Product Cost Collector Details - Event-Based (F6965)
- Analyze Costs by Work Center/Operation (F3331)
- Production Cost Overview - Event-Based (F6248)
- Display Posting Rules - Event-Based (F5228)
Step 1: Create a new Production order
Event based production costs at order creation using the app “Analyze Production costs, Event Based”
At creation, no actual costs posted yet
Step 2: Post Goods receipt and Confirmation for the Production order with minor variances in quantity
WIP Is calculated and posted right at the point of goods Issue
FI Document for WIP Posting
The above screenshot clearly demonstrates advantages UPA and EBPA
- Its shown that WIP gets posted during the month in Realtime across all ledgers
- Every ledger has a separate WIP calculation as the cost estimates by ledger are different. i.e. 0L is Legal, 2L is IFRS, 4G is group valuation.
- WIP is calculated differently for each ledger and valuation.
- The value is different per each ledger because each ledger has a different costing variant, valuation variant, Overhead costing sheet, Different activity prices, and material prices.
- You can also see that 2L ledger is having a different fiscal year variant (V3) instead of K4. i.e for the first time ever in SAP we can have more than one fiscal year variant in controlling. This is only possible with UPA.
- While 0L and 4G post in 2025, 2L posts in 11/2024 (V3 fiscal year variant)
How to manage errors during month end
Since we are moving from a periodic posting of WIP and variances to real-time, we need to think closely about error handling. The below apps allow for monitoring and handling errors during the month.
- Postprocess Event-Based Postings - Overhead Calculation (F5763)
- Order Exception Monitor - Event-Based (F5133)
- Manage Product Costing Errors (F5132)
- Postprocess Event-Based Postings - Product Costing (F3669)
- Schedule Product Costing Jobs (F3683)
- Postprocess Event-Based Postings - Product Costing (Job Template)
- Postprocess Event-Based Postings - Overhead Calculation
- WIP Quantity Calculation for Actual Costing: Event-Based Order and PCC (only if WIP revaluation is needed in Actual Costing (33Q))
Errors can be monitored using the above applications.
Conclusion
Event-Based Production Accounting (EBPA) in SAP S/4HANA represents a significant paradigm shift in how companies manage their production accounting processes. This new approach offers several key advantages:
- Real-time insights: By posting costs as they occur, EBPA provides up-to-date financial information, enabling more timely decision-making.
- Simplified period-end closing: The elimination of traditional period-end activities streamlines the closing process, potentially reducing workload and improving efficiency.
- Enhanced parallel accounting: EBPA supports multiple ledgers and currencies, facilitating compliance with various accounting standards simultaneously.
- Improved cost visibility: New Fiori apps offer better tools for reviewing costs and variances, enhancing cost control and analysis capabilities.
- Automated overhead allocation: Material and production overheads are charged immediately, providing a more accurate picture of costs throughout the production process.
However, implementing EBPA requires careful configuration and a shift in mindset from periodic to event-driven accounting. Companies must ensure proper setup of event-based processing keys, WIP source accounts, costing sheets, and valuation variants. Additionally, they need to establish robust error handling processes to manage issues that may arise during real-time postings.
While the transition to EBPA may present initial challenges, the long-term benefits of more accurate, timely, and flexible production accounting make it a valuable evolution for organizations using SAP S/4HANA. As companies continue to adapt to this new approach, they are likely to discover further opportunities for optimization and improved financial management in their manufacturing processes.
Q&A
Feel free to ask any questions or share your experience in the comments section below. I will try to answer questions as soon as I can. Alternatively, you can reach out to me on my LinkedIn page below. Follow me there for further updates,
https://ca.linkedin.com/in/naveen-pidikiti
