SAP S/4 HANA 1709 – Part IV – Effect on COGS Posting in FI

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SAP S/4 HANA 1709 – Part IV – Effect on COGS Posting in FI

After the previous post, in this part of the series of posts we will try to see the improvements in SAP S/4 HANA 1709 that have Effect on COGS Posting in FI.

Splitting the Cost of Goods Sold

1709 has come up with some improvements in recording the cost component split of cost of goods sold in Financial Accounting (FI).

Business Add-Ins for Splitting COGS

Two Business Add-Ins (BAdIs) are now available for refining the Customizing activity Define Accounts for Splitting the Cost of Goods Sold:

  • FCO_COGS_SPLIT_RELEVANCE enables you to split the cost of good sold under conditions where it would not be possible in the standard system
  • FCO_COGS_SPLIT_RELEVANCE enables you to split the cost of good sold under conditions where it would not be possible in the standard system

Additional Details

FCO_COGS_SPLIT_RELEVANCE

This BAdI allows you to override the standard COGS splitting logic. For example:

  • If you didn’t select Account-Based Split, you can use this BAdI to split COGS in processes other than goods movements based on sales orders
  • If you selected Account-Based Split, you can use this BAdI to exclude certain processes from the split

FCO_COGS_SPLIT_BASIS

With the SAP standard logic for splitting the cost of goods sold, the split must be based on either the unit cost estimate for the sales order item or the standard cost estimate for the material/plant combination. This BAdI enables you to use a different basis for the split. For example, you could use a past or future standard cost estimate or the actual cost estimate of the previous year.

Additionally, if no basis for the split was found by the SAP standard logic, you can use this BAdI to determine an alternative basis for the split.

The BAdIs can be implemented in Customizing under

Financial Accounting > General Ledger Accounting > Periodic Processing > Integration > Materials Management > Business Add-Ins (BAdIs).

COGS Split Posted with Two Journal Entries

The feature of posting COGS Cost Component Split is already available as part of S/4 HANA in one accounting document where COGS account is debited and credited. 1709 has come up with some improvement whereby two different documents are posted for this transaction.

The cost of goods sold is posted to a single account that is defined in the settings for the account determination for material movements. In order to split the costs of goods sold based on the cost components of the underlying material cost estimate, you can activate the COGS split.

When goods are issued, the inventory value is determined and the COGS account is debited. If the COGS Split is activated, the COGS account is credited with the same amount, and for each assigned cost component a separate line item is posted to the assigned account.

Previously, only one journal entry was generated for the COGS split. With this release, two journal entries are generated that affect the COGS account if the COGS split is activated.

Additional Details

As shown in the example below, two journal entries are generated for the COGS split. The Inventory Change account (400000) is defined as the COGS account. The Material and Labour accounts are the target accounts, based on the cost components.

  • The first journal entry debits the Inventory Change account and credits the Finished Goods Inventory account
  • The second journal entry debits the Material and Labour accounts and credits the Inventory Change account

1709 - COGS split

Hope this information proves helpful to you.

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