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Continuing the blog series on Universal Parallel Accounting in SAP S/4HANA Cloud 2105, where we’ve already looked at Asset Accounting and Overhead Accounting I will now look at the topic from the point of view of Inventory Accounting to explain how materials can be valued differently depending on the requirements encapsulated in the various accounting principles and the need for actual costing in some countries.

Parallel Accounting was already available in SAP S/4HANA Cloud but didn’t cover inventory valuation, the setting of standard costs, or the calculation of actual costs. Universal parallel accounting (short ‘UPA’) now allows the parallel representation of different accounting principles across the whole value flow using ledgers in legal and management accounting and thus enabling different views on the inventory values and product margins depending on the underlying accounting principle.

Figure 1: E2E Value Flow Example and Sources for differences between GAAPs

Material Valuation

The ability to manage ledger-specific material prices applies to both raw materials and trading goods, where the purchase price may be impacted by additional costs for freight, duty, and insurance, and finished goods, where the cost of goods manufactured may be impacted by the different assumptions behind the asset values reflected in the activity prices and overhead rates, as we saw in the previous blog post. Scope item 1ZT will automatically allow you to work with multiple material prices if multiple ledgers are active in your system. Following the upgrade, you will see the existing values in group and company code currency in all ledgers. Going forward you can change the values manually using the Change Inventory Prices app (see Figure 2), using an API or by doing a spreadsheet upload into the appropriate ledger.

Figure 2: Ledger-Specific Inventory Prices for a Raw Material

You will be able to select material prices by ledger in the Manage Material Valuations app and in all related apps, such as Current Material Valuation (shown in Figure 3) and Material Price Analysis. It has always been possible to enter different planned prices or tax prices for the same material, but now we potentially have several material prices being used for the same purpose, namely to set the standard price for the goods movements in each ledger.

Figure 3: Ledger-Specific Standard Cost Estimates for a Finished Good

Standard Costs

When you work with scope item BEG, the settings for Product Cost Planning are determined by the Costing Variant (see Figure 4). Following the upgrade you can choose to have one cost estimate for all ledgers by continuing to reference the old costing variants (PPC1, PYC1 or PYC2) or create a different cost estimate for each ledger by choosing a ledger-specific costing variant, where P00L sets material prices for ledger 0L, P02L sets material prices for ledger 2L and P03L sets material prices for ledger 3L. You’ll need to choose a costing variant whenever you create a material cost estimate with quantity structure manually or create a costing run to cost all materials in a plant. If you want to work with multiple standard prices for your materials to reflect the different valuation approaches, you’ll need to perform a costing run for each ledger to reflect the different cost assumptions.

Figure 4: New Costing Variants to determine ledger-specific standard costs

As well as creating separate cost estimates for each ledger, you’ll need to mark and release the various cost estimates separately for each ledger as shown in Figure 5, where we have linked the company code, the ledger and the costing variant prior to releasing the cost estimates. This will ensure that the inventory values are updated properly in the relevant ledgers and can be viewed in the Manage Material Valuations app.

Figure 5: Allowing Release of Cost Estimate as New Standard Price

If you work in a make-to-order environment, you’ll find new costing variants for the costing of sales orders that follow the same basic principle, the difference being that all inventories are handled as valuated sales order stock which can only be issued to the sales order that triggered the production process. We’ll see how these values are used to calculate production variances in the next blog in this series.

Actual Costs

The use of Actual Costing is optional in SAP S/4HANA Cloud, so you may not have activated scope item 33Q in all locations.

There are thus two possible scenarios to consider:
• You use Actual Costing in all locations and need to create costing runs to cover all ledger/company code combinations.
• You only use Actual Costing in those locations that require it and thus need to perform a costing run only in those company codes where the local GAAPs require actual costs.

Actual Costing will collect any purchase price variances and production variances arising during procurement and production and include the actual activity rates that reflect the true resource usage on the production cost centers.

You should close any costing runs created before the upgrade and create new costing runs for the next period close after the upgrade. The costing run is created with reference to a run template (see Figure 6) that contains the link to the ledger, the associated company codes and determines whether the run applies to a single period or year-to-date. This choice will also affect how you calculate actual activity rates – period-by-period or cumulatively over the year. Notice that templates are created for one or more company codes (see Company Code Assignment tab). When you create a costing run, this assignment will ensure that the costing run covers all plants in the selected company code.

Figure 6: Run Template for Actual Costing

The costing run shown in Figure 7 references the run template to determine the relevant ledger, company code(s) and whether the costs apply to a single period or the year-to-date.

Figure 7: Actual Costing Ledger Run

The process of running Actual Costing does not change substantially, but as we saw in Product Cost Planning you will potentially be calculating actual costs and updating the inventory and cost of goods sold values for each ledger separately.

Balance Sheet Valuation

The balance sheet valuation functions are covered by scope item BEJ and are used to adjust the inventory values in line with the relevant legal requirements before the external accounts are submitted at the end of a reporting period. SAP S/4HANA Cloud supports various valuation alternatives, including the lowest value methods based on market prices, range of coverage and movement rates and FIFO (first-in-first-out) as shown in Figure 8.

Figure 8: Inventory Balance Sheet Valuations

With SAP S/4HANA Cloud 2105, the valuation alternatives for the lowest value by movement rate (LMR) and range of coverage (ROC) can be based on different values depending on the underlying ledger. The other methods continue to read from the leading ledger.


This approach radically simplifies organizations' abilities to handle the requirements of different accounting principles in the area of inventory management and removes the need for significant manual work to reflect the different approaches to deal with different material prices, standard costs, actual costs and balance sheet requirements.

Further Resources

Product documentation: Parallel Accounting in Inventory Accounting

Restriction Note for Parallel Accounting in 2105 Release here

New to the topic? - Check out our latest book: Controlling with SAP S/4HANA - Business User Guide