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Landed Costs different exchange rates

Former Member
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634

Hi all,

a simple example:

1. GRPO with material costs - 2012-02-01 exchange rate 1.2

2. Landed Costs #1 when customs invoice comes in - 2012-02-02 exchange rate 1.4

3. Landed Costs #2 when freight invoice comes in - 2012-02-03 exchange rate 1.0

Since the function Landed Costs cannot deal with different exchange rates, the exchange rate of GRPO plus the exchange rate of the latest entered Landed Costs count.

Is there a best practice on how to deal with this scenario?

Because usually there are not only one or two days between these invoices, therefore there could be some huge differences between exchange rates.

Thanks in advance

Sebastian

Accepted Solutions (1)

Accepted Solutions (1)

Former Member
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Hi,

In landed cost process, the system should allocate expenditure (in local currency) to cost of received goods based on Landed Costs Alloc. Account. That mean all expenditure will be collected and input into AP invoice with G/L account is Landed Costs Alloc. Account. These invoices with different exchange rate do not affect to Landed cost because we use Local currency for allocation. Based on AP payment date' exchange rate, system will post gain/loss to defined account in Determination set up.

Hope this helps,

TVSon

Answers (1)

Answers (1)

Former Member
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Hi Sebastian,

Those different exchange rates are not avoidable. That is why a special account for exchange rate gain/loss will be needed.

Thanks,

Gordon

Former Member
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Hi Gordon,

of course they are not avoidable.

A special account for exchange rate differences is there and it is used by SAP automatically in the invoice / payment flow.

But this wouldn't make sense in case of Landed Costs since it refers only to material / GRPO in first place and not (directly) to accounting relevant documents like invoice / payment. In case of non-perpetual stock there is no account involved at all. In case of perpetual stock I will avoid using Landed Costs in scenarios with foreign currencies.

Beside stock revaluation Landed Cost is the only possibility to adjust the stock value without stock transactions.

Using Excel and custom reports instead of built-in functions like Landed Costs and stock reports is then the only possible solution to work with correct values in B1 - right?

Thanks

Sebastian

Former Member
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Well, customized reports will always give you more options than built-in functions like Landed Costs and stock reports. You just need to be familiar with all tables first.

Former Member
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Hi Sebastian,

Based on my experience so far, I always endorse my client to not using Landed Cost. Well, some of my client insist to use it however.

The reason behind my suggestion is the following:

1. Like you said, we could only use a single exchange rate

2. Maybe you didn't encounter such case in Germany, but in Indonesia here, we usually had to record freight and custom clearance, all in different foreign currency.

3. And the most important thing is, in your example, between GR-PO, custom invoice and freight invoice, all occurred in span of three days. Usually it much longer, which mean, there always a possibility you record the landed cost after the actual inventory maybe already delivered / issued from your warehouse. Hence, instead of the inventory account, the landed cost will post it to inventory variance account. Make sense isn't it, since the inventory that you want to re-evaluate using landed cost doesn't exist anymore.

If you're using a method by accrue the landed cost when you record the GR-PO, in order to avoid #3 as in above, usually you're using assumption value to accrue the value, since you're not yet receive the actual freight / custom invoice. The main reason why we use landed cost is we want to maintain the most precise item cost, but in doing so, we use assumption value to accrue the landed cost. It defeat it own purpose isn't it?

If possible and acceptable, maybe you should consider to post the custom and freight value directly to cost of sales account, in other word, you're not incurred the cost into your inventory value. Less accurate, but easier to maintain and more flexible to real operational activity.

Lastly, if you're using excel and custom report to try to present the most accurate data regarding inventory, what use of it if the figure in your excel doesn't tied up with figures in your SAP? It defeat it own purpose by using SAP. Just my 2 cents.

Best Regards,

Hendry Wijaya