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A transfer price is a price used to valuate the transfer of goods and services between independent organizational units. The income tax rules in different countries require that the transactions between related legal entities between countries be priced at an arms-length price. An arms-length price is the price that a willing unrelated buyer and seller would agree upon
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Profit center
FI
Company code
Transfer price from the group viewpoint = Transfer price from the profit center viewpoint = Transfer price from the legal viewpoint
Valuation
10
Leg.
0
Grp
30
1 2 10
30 PrCtr.
30
Currency type
Group currency
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Why Parallel Valuation? Allows transfer of materials between independent companies according to a legal reporting requirements (legal view)
Allows you to valuate the exchange of materials within the group using a corporate wide standard cost of goods manufactured with internal profits between group companies being eliminated (group view)
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Group view
Legal view
Profit center 1
Profit center 2
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Valuation Approaches
Legal
Goods movements valuated with sale or purchase price Goods movements valuated with group cost of goods manufactured Goods movements valuated with internally agreed prices
Group
Profit center
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Profit center 1
COOM Overhead costs
Profit center 2
FI
COPA
Purchase Production
Direct costs
COPC
Transfer Sale
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L G P
Direct costs
F L O W
L G P
Overhead costs
V A L U E
Profit center 1
Profit center 2
or
or COPA
FI
COOM
COPC
Stock L G P
Material Ledger
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Different Scenarios
Profit Center Accounting
PCA Cur. PrCtr Cur. Grp Cur. Leg.
or
or
Financial Accounting
Cur. Leg.
Controlling
COOM COPC
Cur. Leg. Cur. Grp Cur. PrCtr
mand.
COPA
opt.
FI
opt.
opt.
FI-AA
PrCtr
PrCtr
Material Ledger
ML
Cur. Leg.
mand.
Cur. Grp
Cur. PrCtr
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Financial Accounting
Cur. Leg.
Controlling
COOM COPC
Cur. Leg.
operational
COPA
FI
FI-AA
Cur. Grp
Cur. Grp
Material Ledger
Cur. Grp Cur. Leg.
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Financial Accounting
Cur. Leg.
Controlling
COOM
COPC
Cur. PrCtr
operational
COPA
Cur. PrCtr
FI
Cur. Cur. Leg.
Cur. Leg.
FI-AA
PrCtr
Material Ledger
Cur. PrCtr
Cur. Leg.
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Raw material
Cost center Semifin. material Finished product Distribution center Sales order
Production order
Production order
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Semifin. material
Finished product
Distribution center
Sales order
Production order
Production order
Company code 1
PrCtr1 PrCtr2 L 75 L G P 70 70 70 G P 70 70 75 L G 70 70
Company code 2
PrCtr3 100 120 L 120 G 90 P 140 L 120 G 90 CCtr 20
Company code 3
PrCtr4
220 240
L G P
220 90 240
75
P 140
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Receivables and Payables are always represented from the legal view because this is the value that they will be cleared in
Same valuation approaches must be in used Asset Accounting as used in FI-GL
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Controlling Viewpoint
One value is stored in the CO actual version (operative), and the other values are stored in other CO actual versions The currency and valuation view chosen for the operative CO version is key. Not all transactions are stored in all chosen valuations, e.g. internal activity allocation, mfg order variance calculation, overhead calculation Can only perform group costing (enterprise standard cost) within one Controlling area
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Purchasing / MM
Multiple inventory values are stored in the Material Ledger Material Ledger is required to store parallel inventory values. Material ledger stores up to three valuation approaches Mutliple values can only be transferred during logistics invoice verification Multiple values can only be transferred across systems using the ALE or EDI interfaces Transfer pricing / paralell valuatoin is invoked during goods movements only
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The valuation approaches stored in the system are defined in the currency and valuation profile.
You can store up to - 3 valuations in - 2 currencies
Inventory is valuated using all active valuation approaches in parallel. The material ledger is a subsidiary ledger in inventory accounting.
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No influence on posting logic or account determination. Parallel values posted to the same accounts.
Parallel valuation approaches are currently only supported for goods movements.
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Simplified Examples
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Goods Issue
Goods Receipt
Distribution Center
Co. Code A
IC Billing
Goods Issue Cost of Sales Inventory L 50 G 40
Sales Company
Co. Code B
Invoice Receipt
50 L 40 G
10 unit difference represents difference between ESC and local standard cost
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Distribution Center
Co. Code A
IC Billing
Sales Company
Co. Code B
Invoice Receipt
Goods Receipt Inventory GR / IR L 130 G 40
50 L 40 G
130 L 40 G
90 unit difference represents intercompany profit in inventory balances and must be eliminated
L Legal Valuation G Group Valuation
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Distribution Center
Co. Code A
IC Billing
Goods Issue Cost of Sales Inventory L 50 G 40
Sales Company
Co. Code B
Invoice Receipt
Goods Receipt Inventory GR / IR L 130 G 40
50 L 40 G
130 L 40 G
Intercompany Billing IC Acct. Rec. Revenue L 130 130 L G 130 40 G Non Operating Profit L 90 G
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Distribution Center
Co. Code A
IC Billing
Goods Issue Cost of Sales Inventory L 50 G 40
Sales Company
Co. Code B
Invoice Receipt
Goods Receipt GR / IR 130 L 40 G
50 L 40 G
Inventory L 130 G 40
Intercompany Billing IC Acct. Rec. Revenue L 130 130 L G 130 40 G Non Operating Profit L 90 G
Invoice Receipt IC Acc. Pay GR / IR 130 L 130 130 G 40 Non Operating Profit L G 90
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Stock Valuation: The information system SAP generally supports two methods of stock valuation, i.e. valuation by means of standard or variable prices. Material Ledger combines advantages of both methods static and stability of standard prices suitable for costing of products with dynamics and flexibility of variable prices, which more faithfully reflect the reality. At the same time the history of real and standard prices gets recorded in time. The tool Material Ledger provides also the possibility of revaluation of stock on the basis of real calculation, which is required by valid legislation in some countries.
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Ram Rishi
Managing Partner
2262, Petworth Court, Unit 202 C Phone : 1 (630) 649 9235, Fax : 1 (630) 689 9455 Ram.Rishi@EnterprizeERP.com
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