Configuration of Split Valuation in SAP Product Costing
Define price control for material types
You have the option to configure a default price control by material type in configuration. In this screen, you can also choose whether a price control is mandatory for each material type. This is optional configuration and you can leave the price control field blank if the material type can have either price control (see Figure 3.10).
The configuration for Define Price Control for Material Types can be accessed by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • DEFINE PRICE CONTROL FOR MATERIAL TYPES .
Figure 3.10: Define price control for material types
SAP provides valuation classes pre-configured, but often, custom valuation classes are required. Configuring valuation classes requires several steps. First, you configure account category references which link material types and valuation classes. You assign one account category reference to a material type (see Figure 3.11). There are multiple valuation classes assigned to each account category reference. Therefore, in order to determine which account category references to create, you should have your requirements laid out for material types and valuation classes. The configuration for valuation classes can be accessed in transaction OMSK or through following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • ACCOUNT DETERMINATION • ACCOUNT DETERMINATION WITHOUT WIZARD • DEFINE VALUATION CLASSES.
Figure 3.11: Account category reference definition
You can make your account category references specific to raw material, finished goods, semi-finished goods, spare parts, services, etc. You can also keep your account category references more general as shown in Figure 3.12. This decision should be based on how valuation classes are mapped to material types. Generally, valuation classes are specific to one material type. Therefore, the more material types you use, the more account category references you need.
Figure 3.12: Valuation class assignment to account category ref.
Next you must configure valuation classes by adding a new entry in the table, and assign each valuation class to an account category reference (see Figure 3.13). Multiple valuation classes can be assigned to the same account category reference. You may also choose to modify the description of standard valuation classes for a more relevant definition to your company.
Figure 3.13: Account category reference mapping to material types
Finally, you assign each material type to an account category reference. Material types should be configured prior to this step and you only need to assign material types that you plan to use. SAP provides many material types and not all will be relevant at your company.
Now that all three steps are complete, you have maintained configuration that determines which valuation classes are available for each material type.
The first step in configuring split valuation in SAP is by activating split valuation for your system (see Figure 3.14). This configuration is a simple radio button to allow split valuation in the system. The configuration to activate split valuation can be accessed through transaction OMWO or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • ACTIVE SPLIT VALUATION.
Figure 3.14: Activate split valuation
Next, you navigate to configure split valuation and walk through a three-step process to determine global valuation types, categories, and local definitions. The configuration to configure split valuation can be accessed through transaction OMWC, or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • CONFIGURE SPLIT VALUATION.
In the configuration for global valuation types, you can modify or add valuation types that are available by account category reference (see Figure 3.15). If you recall, we configured account category reference while configuring valuation classes. You also indicate on this screen whether or not external and internal purchase orders are allowed. You can strictly allow or disallow or can have a warning issued.
Figure 3.15: Global valuation types
After configuring global valuation types, return to the previous screen and select global valuation categories (see Figure 3.16). Here, you determine the valuation categories that can be indicated on a material master to allow split valuation. Valuation categories consist of valuation types, so choose a name that explains the type of split valuation types available. For example: refurbishment, status, origin, or in-house vs. external.
You may choose to enter specific valuation types that should be populated on external purchase orders, internal purchase orders, or movements on promotional goods. A mandatory indicator is available for each field, so you can choose whether users are able to overwrite the prompted valuation type or not.
An indicator is available on the far right to determine the valuation type automatically at the time when goods receipts are posted. This option will create a valuation record if no record for this valuation type exists for the material. This option is advised for batch managed materials.
Figure 3.16: Global categories
After configuring global categories, return to the previous page and select LOCAL DEFINITIONS. Single-click on a plant from the list and click CATS. -> OU (see Figure 3.17).
Figure 3.17: Local definitions
You are now on the screen shown in Figure 3.18 to allocate valuation categories to this plant. This step is only required if you are activating or deactivating a valuation category for a specific plant. When you create a new valuation category, it is not automatically activated for all plants. You must manually activate the valuation category at the relevant plants.
Figure 3.18: Allocate valuation categories
Now you can split value material in a plant that has a valuation category active. Navigate to transaction MM02. Select an existing material and navigate to the ACCOUNTING 1 VIEW. Drop down and select a valuation category and save. Then navigate to transaction MM01 and enter the same material. On the screen to enter plant, choose a valuation type for the material, enter relevant details in the accounting 1 and 2 screens and save. Repeat this step in transaction MM01 to extend the material to each relevant valuation type.
Remember that you only want to extend materials to valuation types as needed. Extending materials unnecessarily will cause extra work for warehouse personnel and leaves room for error when the wrong valuation type is selected.
LIFO (Last In, First Out) and FIFO (First In, First Out) valuation methods are to be selected as an additional method balance sheet inventory valuation for tax purposes. The configuration for Activate Balance Sheet Valuation can be accessed through transaction OMWE, or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • CONFIGURE LIFO/FIFO METHODS • GENERAL INFORMATION • ACTIVATE/DEACTIVATE LIFO/FIFO VALUATION (see Figure 3.19)
Figure 3.19: Activate LIFO/FIFO valuation!
It is recommended that you activate both LIFO and FIFO valuation irrespective of which procedure you want to use. This is non-transportable configuration and needs to be selected manually in each system.
You can carry out LIFO/FIFO valuation at the company code level or at valuation area level:
At the company code level, you valuate a material’s inventory in all valuation areas of the company code together. This is also referred to as joint valuation.
At the valuation area level, you valuate a material’s inventory separately in each valuation area within the company code. If you have flagged materials as relevant for LIFO, you can no longer change the settings for the LIFO valuation level.
You can also choose for LIFO/FIFO valuation to be done for the mean receipt price at the valuation area level or company code level. The configuration for valuation level for balance sheet valuation can be accessed through transaction OMWL, or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • CONFIGURE LIFO/FIFO METHODS • GENERAL INFORMATION • DEFINE LIFO/FIFO VALUATION LEVELS (see Figure 3.20).
Figure 3.20: Valuation level for balance sheet valuation
Valuation level for balance sheet valuation warning!
After you configure the valuation level for LIFO and FIFO valuation, you can no longer modify it in configuration. You will need to use the program to modify the database. This program can be accessed with transaction MRLH.
In order to calculate LIFO/FIFO inventory valuation, you must define which movement types are LIFO/FIFO relevant. Selected movement types are considered when the system determines LIFO/FIFO values. The configuration in this table auto-populates based on movement type configuration. You simply select the LIFO relevant movement types in the far right column.
The configuration for LIFO/FIFO movement types can be accessed through transaction OMW4, or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • CONFIGURE LIFO/FIFO METHODS • GENERAL INFORMATION • DEFINE LIFO/FIFO RELEVANT MOVEMENT TYPES (see Figure 3.21).
Figure 3.21: Define LIFO/FIFO relevant movement types
Finally, in order to set up LIFO/FIFO balance sheet valuation, you must configure LIFO/FIFO methods. You can create a method containing parameters for carrying out LIFO/FIFO valuation. You select a sample for each method which contains predefined parameters.
You can choose between below six samples:
01: FIFO valuation of individual materials
02: LIFO valuation of individual materials with annual layers
03: LIFO valuation of individual materials with monthly layers
04: LIFO valuation of quantity-based pools with annual layers
05: LIFO valuation of quantity-based pools with monthly layers
06: LIFO valuation of pools subject to index valuation with annual layers
You also select if LIFO/FIFO valuation should be done based on single receipt and indicate a quantity comparison parameter:
VOM: Compare layer total with previous month
VVM: Compare layer total with month before last
GJE: Compare layer total with previous year
CUR: Compare layer total with current stock
Quantity comparison parameter tip
Typically GJE is selected for LIFO valuation based on annual layers. VOM and VVM are generally selected for monthly layering, but can be used in combination with annual layers. CUR is often selected if LIFO valuation is not linked to a specific posting period or you run it before the end of a period.
The configuration for LIFO/FIFO Methods can be accessed through transaction OMWP or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • CONFIGURE LIFO/FIFO METHODS • GENERAL INFORMATION • DEFINE LIFO/FIFO METHODS (see Figure 3.22).
Figure 3.22: Define LIFO/FIFO methods
If you are using LIFO valuation, there are 4 more configuration steps. You must configure LIFO valuation areas where you indicate a base year for each LIFO relevant valuation area. Next, you configure LIFO pools specific to each LIFO relevant valuation area. You can configure automatic assignment of materials to LIFO pools if desired based on valuation level, material type, and unit of measure. Finally, you define LIFO layer versions in transaction OMWR. The configuration for LIFO can be accessed by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • CONFIGURE LIFO/FIFO METHODS • LIFO.
If you elect to use FIFO valuation, you must configure the relevant FIFO valuation areas. The configuration to Configure FIFO Valuation Areas can be accessed by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • CONFIGURE LIFO/FIFO METHODS • FIFO • CONFIGURE FIFO VALUATION AREAS.
The last configuration step for LIFO/FIFO valuation is configuring the valuation alternatives. The configuration for Configure FIFO Valuation Areas can be accessed through transaction OMWEB or by following the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • BALANCE SHEET VALUATION PROCEDURES • SET UP VALUATION ALTERNATIVES (see Figure 3.23).
Figure 3.23: Define LIFO/FIFO valuation alternatives
When you create a material in transaction MM01, you can select the LIFO relevant checkbox on the ACCOUNTING 2 VIEW and enter a LIFO pool. You can also perform collective maintenance of LIFO on Material Master by running transaction MRL6 or navigating through the easy access menu: LOGISTICS • MATERIALS MANAGEMENT • VALUATION • BALANCE SHEET VALUATION • LIFO VALUATION • PREPARE SELECT MATERIALS.
SAP MM - Account Determination
In SAP MM, procurement process involves cost of goods and services that needs to be paid to vendor by an organization. The cost being paid must be posted in an organization necessarily in a correct general ledger (G/L) account. Every time during procurement to remember the correct G/L account is an impossible thing. So, in SAP system some configuration for account determination is done so that system will automatically determine the correct G/L account that needs to be posted. G/L account is posted when goods receipt is done as well as during clearing invoice verification. Account determination deals with the following terms which are as follows.
Define Valuation Control
Group together Valuation Areas
Define Valuation Classes
Configure Automatic Posting
Define Valuation Control
Valuation areas can be grouped together and can be assigned to one grouping code if they belong to same G/L account. For example different plants under one company code can be assigned same valuation grouping code and vice versa. Before this, valuation grouping code must be activated and this can be done by following the below steps.
Path to Activate Valuation Grouping Code:
IMG => Materials Management => Valuation and Account Assignment => Account Determination => Account Determination without Wizard => Define Valuation Control
On Display IMG screen select Define Valuation Control execute icon by following the above path.
Select Valuation grouping code active tab. Click on save. Valuation grouping code is now activated.
Group together Valuation Areas
In valuation grouping, valuation area and valuation grouping code are assigned to company code. This can be done by following the below steps.
Path to Define Valuation Area and Valuation Grouping Code:
IMG => Materials Management => Valuation and Account Assignment => Account Determination => Account Determination without Wizard => Group Together Valuation Areas
On Display IMG screen select Group Together Valuation Areas execute icon by following the above path.
Here you can define valuation area with grouping code and assign them to a company code. Click on save. Valuation area and valuation grouping code are now defined for a company code.
Define Valuation Classes
Valuation class categorizes the G/L account on the basis of material type. For example raw material will have different G/L account than the finished material as the cost will be different in both the cases. Account reference is also maintained along with valuation class. Account reference and valuation class can be defined by following the below steps.
Path to Define Account Reference and Valuation Class:
IMG => Materials Management => Valuation and Account Assignment => Account Determination => Account Determination without Wizard => Define Valuation Classes
On Display IMG screen select Define Valuation Classes execute icon by following the above path.
Select Account Category Reference tab.
Select New Entries icon.
Provide name of ARef(Account reference) along with its description.
Now go to same screen and select Valuation Class tab.
Select New Entries icon.
Provide name of valuation class, ARef(Account reference) and description of valuation class.
Now go to same screen and select Material Type/Account Category Reference.
Here you can map material type with ARef(Account reference). Click on save. G/L account can be now posted for different material types.
Configure Automatic Posting
G/L account is automatically determined for each of the transaction. This happens because automatic posting are configured in SAP system. Automatic posting can be configured by following the below steps.
Path to Configure Automatic Posting:
IMG => Materials Management => Valuation and Account Assignment => Account Determination => Account Determination without Wizard => Configure Automatic Postings
On Display IMG screen select Configure Automatic Postings execute icon by following the above path.
Select Account Assignment.
Here you can maintain the transaction for which automatic account determination is there. Click on save. Automatic posting is now configured for the transactions.