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This Blog is in Continuation with my first blog on Material Ledger. Below is the link for same:


Let us understand the use case/scenarios in Material Ledger valuations.

Multiple Valuations in S/4HANA is the ability to value inventory by more than one valuation method. Example, a company may value their inventory for legal purposes at 100,000 dollars. However, if 10 percent of the inventory cost was due to markup from an inter-company purchase, then eliminating this amount makes sense for group reporting purposes. Therefore, for the same quantity of inventory, two valuation would exists, one for legal reporting and one for group reporting requirements as shown below:

Legal Valuation Group Valuation
$100000 $90000

A company may want their inventory to have different valuation views for several common reasons, for example

  • Legal Valuation - Every company needs to value inventory using a method that complies with the law of its jurisdiction. Country's accounting standard define these valuation rules. Also, every legal entity(each represented as a company code in SAP) records its inventory value separately from any other legal entity,  even though they belong to the same group companies.

  • Group Valuation -  Parent company would normally want to view its inventory position for the whole group, even with legal entities in several countries. Any inter-company profit that results from the sale from one affiliated entity to another should be eliminated.

  • Profit Center valuation -   Profit center valuation is the reverse of group valuation, because, while group valuation treats several companies as one company, an eliminates any inter-company profit, profit center valuation can treat one company as several companies and include an inter-company profit.

  • Parallel cost of goods manufactured - Companies also need to report their financials according to different generally accepted accounting principles(GAAPs), such as US GAAP and IFRS. If parent company uses different GAAP from their home country. In that case, cost calculation need to be conformed to both valuation approaches. Example, Their are different depreciation methods that exist between US GAAP and IFRS. Since depreciation is cost required for calculating actual activity price, used for inventory valuations, two actual activity prices and two inventory valuations for the same material would be required to account for two GAAPs. The parallel cost of goods manufactured functionality allows multiple actual activity prices to be calculated, and the material ledger alternative valuation run (AVR) can calculated the alternative inventory valuation.

Parallel Currency and parallel valuation, are brought together in the ML in the currency and valuation profile.

The currency and valuation profile provides up to three currency/valuation options for viewing your inventory data. We'll need to set up this currency/valuation setting for a ML type. In SAP ERP system, you can simply select the option to copy the currencies from FI and CO; however, in SAP S/4HANA, the currencies of the ML type need to be specifically defined. Transaction OMX2 can be used for this.

Material Ledger Type TP01 has been defined exclusively for use with the plants to be activated for the ML. We can assign a Material Ledger type to relevant plants(valuation areas) by using  Transaction  OMX3.

When a material is created in a plant that is active for ML, the currencies defined for this ML type will be visible in the Accounting tab 1 of the Material Master.

The inventory value appearing in the Material Master is based on the different valuation views multiplied by the current level of inventory.

In SAP S/4HANA, currency and valuation views must be assigned to a ledger because, with the integration of the FI and CO modules in the Universal Journal, the ledger field, which was formerly only used in FI, is now a key field for reporting CO dimensions as well.

Methods for assigning ledgers to parallel currencies/valuation:

Multiple-valuation ledgers

In this method, similar to SAP ERP system, we assign one ledger to all the currency types/valuation views that have been setup up. Following are the features:

- The currency types of all valuation views can be used in ledger.

- Period closing is carried out for all valuation views together.

- You'll need to specify which valuation view you are querying in  reports.

- Fewer  resources are used with multi-valuation ledger approach.


Single Valuation Ledgers

In this method we need to assign one ledger to each currency type/valuation view that has been setup. It is introduced with SAP S/4HANA and makes each currency type valuation view specific to one ledger only. It has following features:

- We can only use the currency types of the valuation view in that ledger.

- Period closing will need to be carried out for each valuation view separately.

- Extracting a complete set of financial results for one valuation view will be             easier, since it will have its own ledger.

- More system resources are used with a single valuation ledger approach.

System view is explained below:

Ledger 0L is a multi-valuation ledger because the valuation view field is blank for it. Therefore, the ledger is valid for all valuation views that are set up, while Ledger 2L, is a single valuation ledger, only assigned to one valuation view, the Group Valuation.

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