Valuation in parallel currencies

Excerpt from Material Valuation and the Material Ledger in SAP S/4HANA by Tom King.

The primary function of the material ledger in S/4HANA is to be the vehicle for maintaining inventory valuation in multiple currencies. Corporations that conduct business in multiple countries need to be able to view inventory values both in local currency and in other currencies, according to corporate requirements. The material ledger allows for inventory to be represented in three different currencies simultaneously.

Parallel currency valuation scenario Let’s look at an example company—Universal Writing Utensils, which is based in Belgium. Group currency for the S/4HANA client is set to EUR. The company also has plants in the United States and Mexico, and wants to be able to view inventory for the North American operations in USD, as well as in EUR. In addition, the Mexican plant needs valuation in the local country currency, MXN (Mexican pesos). Universal Writing Utensils does not want to implement actual costing for these plants.

Two global companies have been defined: K101 for Europe and K102 for North America (see Figure 2.1).

Figure 2.1: Universal Writing Utensils companies

Companies are configured under menu path Enterprise Structure • Definition • Financial Accounting • Define Company. Figure 2.2 shows the details of the North American company, K102, which uses USD as the company currency (currency type 60).

Figure 2.2: Definition of company K102

Three company codes have been set up using menu path Enterprise Structure • Definition • Financial Accounting • Edit, Copy, Delete, Check Company Code: K101 for Belgium, K102 for the United States, and K103 for Mexico (see Figure 2.3).

Figure 2.3: Company codes for Universal Writing Utensils

Company codes are assigned to companies via menu path Enterprise Structure • Assignment • Financial Accounting • Assign Company Code to Company. Figure 2.4 shows company codes K102 and K103 assigned to company K102.

Figure 2.4: Assigning company codes to companies

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The methods used for inventory valuation have been transformed with SAP S/4HANA. The material ledger is now integrated with the Universal Journal and is the sole means for valuing materials. This book covers how valuation is managed in up to three different currencies, in parallel, without requiring the actual costing functionality.

Learn how the material ledger interacts with the Universal Journal and how to configure the currencies used for parallel valuation. Investigate various valuation approaches and see how legal, group, and profit center valuation views can be used to help understand company profitability.

Be guided through the configuration steps that enable these multiple valuation approaches. For those who are using or intending to use actual costing, learn how the actual cost is determined and the steps required to set this up to achieve maximum benefit. Find out how the actual costing run works and how alternative valuation runs can be used to provide additional information about inventory values. Review the optional business functions FIN_CO_COGM for parallel valuation of cost of goods manufactured, and LOG_MM_SIT for intercompany stock-in-transit and actual costing to see how they can be used for additional analysis of inventory. Investigate the different forms of balance sheet valuation and how they interact with the material ledger.

– Valuation in parallel currencies, with and without transfer pricing
– Defining currencies and using them with the Material Ledger
– Valuation using standard cost, moving average cost, and actual cost
– Balance sheet valuation methods

Tom King is a graduate of Northwestern University and recently retired as a senior business analyst with a focus in controlling and product costing. He has more than 10 years of experience with the SAP FI-CO modules, primarily as an internal consultant. Prior to that, he was involved with the modeling and design of an Activity Based Costing system using a different ERP system for his company’s European operations. He has spoken at conferences on several CO module topics and is the author of Practical Guide to SAP® CO Templates, SAP S/4HANA Product Cost Planning Configuration and Master Data, and SAP S/4HANA Product Cost Planning – Costing with Quantity Structure.