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Account Based COPA – Simplification with Simple

Finance

Costing based VS Accounting based


In Costing based COPA, the COGS is recognized at the time of Billing through VPRS Condition type and
cost is recognized in GL at time of PGI. To tide over the same, you can create VPRS as a statistical accrual
condition type and assign COGS Account and Stock in Transit Account in VKOA. So your accounting entry
would look like:

PGI
Stock in Transit Dr
To Stock – FG

Billing
Customer A/c Dr
COGS Dr
To Revenue
To Stock in Transit

This way in Costing based COPA and GL, the values should always match.

However, in S/4HANA Finance, there is a functionality to get a COGS Split by assigning the GL Account to
various levels of Cost Component Structure. There is a built in restriction that this will work only if COGS
is recognized at time of PGI. But if you are using Accounting Based COPA, than there should not be an
issue of reconciliation since both COPA and GL values will always be reconciled.
S
specifically, if you have IFRS 15 requirement for revenue recognition where the revenue should be
recognized only based on Performance Obligation, which in MTS scenario will be delivery, you should
look at RAR Component available in S/4. This should also enable you to recognize cost and revenue at the
same time and in line with the accounting principle should you choose to use Accounting Based COPA in
S/4HANA Finance. The below link should give you an insight into RAR

https://blogs.sap.com/2016/09/13/revenue-accounting-and-recognition-rar-part-1/

A typical pain point for most projects has been the underlying differences in Costing Based COPA and the
P&L in Financial Accounting. Most of the customers used costing based COPA with one of the reasons
being getting a break up of Cost of Goods Sold.

Typically in Costing based COPA, the values for key figures like Revenue, cost of goods sold, variances,
overheads etc get stored in value field in CE1* tables. This essentially used to map the accounts such as
revenue and sales deductions to value fields in costing based COPA. Additionally there were restrictions
on the no of value fields in costing based copa with around 200 fields (SAP OSS Note 1029391).

The account based COPA on the other hand uses cost elements to store the same values for various
attributes like revenue, cost of goods sold, and so on. However, the posting logic in traditional account
based COPA was such that cost of goods sold and variances could only be mapped to a single GL
Account/Cost element. This was one of the basic reasons why most SAP customers preferred using
Costing based COPA over Account based COPA. Another major challenge with using Costing based COPA
was the frequent reconciliation issues between COPA and GL. For eg, typically, the COGS was booked in
the GL at the time of Outbound delivery and the same value flowed into Costing Based COPA at the time
of billing. So if the PGI and Billing were far apart in two different posting periods, you typically had
challenges in reconciliation of differences.

With SAP Simple Finance, life has been simplified for the Finance folks. SAP mandates the use
of Account based COPA with Simple Finance and does away with the limitations of traditional
account based COPA providing the same detailed information for Cost of Goods Sold,
Production Variances & invoice quantities which till now existed only with costing based COPA.
Of course, the costing based COPA can continue to co exist with the new Account based COPA

The traditional way of storing the characteristics in COPA irrespective of using Costing based
COPA or Account based COPA was to store the data in a row in a data base structure. Every
time the typical COPA reports were run, the system would query each data record and than
aggregate to arrive at values which had been queried. With HANA, the data is stored in columns
and so only the relevant column is queried, This brings in tremendous performance
improvement. One of the ways in which SAP Customers used to tide over the performance
related issues with COPA Reports was to create secondary indexes on the way in which reports
were done. So this is some thing which is not required with the capabilities of HANA.

With Simple Finance, comes a new posting capability that allow SAP Customers to report the
Cost of Goods Sold at the same level of details as available in Costing based COPA. Typically,
the postings on the GL used to happen at the standard price at which the material was valuated
and the break up of the standard cost was available through Costing based COPA. With Simple
Finance comes the capability to link the cost components in the standard cost estimate to
individual GL Accounts for each cost component. There is no restriction now on the no of
accounts and the level of detail can be the same as the one available in cost component
structure. The configuration path for the same in Simple Finance environment is:

IMG> Financial Accounting (New)>General Ledger Accounting (New)>Periodic Processing>


Integration>Materials Management>Define Accounts for Splitting the cost of goods sold
Another major reason with SAP Customers preferring Costing based COPA over Account based
COPA was the ability of costing based COPA to provide the break up of Production Variances,
which posted to a single GL Account. However, with Simple Finance comes the ability to assign
a GL Account for each variance category and you can have the same break up in Account based
COPA on Simple Finance. The required configuration path for the same is:

IMG> Financial Accounting (New)>General Ledger Accounting (New)>Periodic Processing>


Integration>Materials Management>Define Accounts for Splitting Price Difference
Here in similar to COSG split you have to define a Schema and assign a GL Account for each
Variance category.
Most of SAP customers using costing base COPA choose not to report the quantity in logistics,
but convert them into their own reporting units. This was typically done through an enhancement
to record this kind of conversion. COPA0005 was the enhancement which has been used in most
customers. However, with Simple Finance, the COEP table has additional quantity columns
which can be used for these kind of reporting requirements. The IMG path for the same is:

Controlling>General Controlling>Additional Quantities> Define additional quantities

The usage of Account based COPA in Simple Finance ensures that there are no more time
consuming painful reconciliation required to be done anymore. Additionally, the customers get
the same kind of reporting capabilities hitherto seen with costing based COPA making life
simpler for Finance users.

The COGS Split functionality will work only at time of PGI and not billing. It is a standard system
design.

PGI is still a transaction in OTC Cycle. There is no change in that in S/4HANA from ECC. The
requirement is the way accounting is done for COGS recognition. The standard functionality of
COGS Break up will work only on PGI and that is a system design. The reason for COGS
Recognition at the time of billing could be one of the reasons:
1. Ensure that the cost is recognized at the same time in GL and COPA if you are using costing
based COPA today. However, with S/4HANA Finance, a better approach is Enhanced Account
based COPA, in which the AB COPA ensures that values flow into COPA when the GL is posted
so there are no differences. So that way the COGS functionality is correct
2. Additionally, many companies also have a account practice to recognize revenue at the same
time as Delivery. So if that is the case, the standard functionality of COGS Split at the time of PGI
will not work as it is a system design. There is nothing wrong in the design and your accounting
flow is working as expected. If you need a change, you may look at the option of a suitable
enhancement, which might be possible

CO-PA Based on accounts - S4/HANA


SAP recommends CO-PA based on accounts for S4 HANA, through this configuration below it is
possible to layer the material according to the elements in OKTZ:
When shipping, the distribution works according to OKTZ.
Doubt, will it be that in closing costs, the difference in price of the material, will be accounted the
breakdown in the same way that was done in the shipment?
Thanks you for help.

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