SD Revenue Recognition-Account settings for deferring COGS

[Former Member]

Hi Experts

In the current process, COGS, cost of goods sold is getting posted into the COGS G/L account, while creation of billing document.

In VF44 transaction, we find option for VPRS cost being captured against every line item & are available for posting along with revenue line.

In that case, if we have to defer the COGS while creating the billing document & would recogonize it while running VF44 alone with the revenue lines, could you suggest me the account setting to be done for the same?

Anticipating earliest responses

Thanks

Banu

[Former Member]

Hello Banu,

Were you able to successfully Defer the cost of sales while realizing revenues using VF44? I have the same situation with my client who is in software business and they would like to defer the cost of sales in the same manner as they defer revenue during PGI and Billing. Later on they would like to move it from Deferred Cost account to the cost of sales account.

Pls let me know how did you achieve this functionality.

Thanks

[Lakshmipathi]

As for as inventory posting is concerned, the control is in OBYC. So in your case, if you dont want to hit the existing G/L account but to a provisional account, then go to OBYC, double click on GBB so that you can see a combination where you need to assign a provisional G/L account there.

Through your existing routine assigned to VTFL (assuming that your requirement is post after billing is saved) you have to write a logic such that once the data is stored in VBRK and VBRP, in the background, the provisional G/L account should transfer the value to actual G/L Account. I am not sure, whether this can be achieved but you can make a try with the help of ABAPer

thanks

G. Lakshmipathi

[Former Member]

I do agree in part with the suggestion of Lakshmipathi. My suggestion would be as follows.

Please assign the provisional GL in OBYC - GBB - VAX - VAY (as per your requirement).

Create two additional condition type for this COGS value in your pricing procedure (let it be xxxx & yyyy).

Assign the account keys to these two condition types (let it be xxxx to xxx and yyyy to yyy).

In VKOA - assign the provisional COGS GL(which is used in OBYC) in provisional GL and revenue GL column of account key xxx.

In VKOA - assign the another provisional GL(which is not used in OBYC) in provisional GL and put actual COGS GL in revenue GL column of account key yyy.

You need to copy the COGS value to these condition types in sales documents.

Then in billing two additional provisional account will be posted with COGS value (Debit - second provisional GL with COGS value & credit fist provisional GL (used in OBYC) with same value. Billing tallied.

Posting in RR - Posting for cond type - xxxx - acct key - xxx - Debit and credit will go to same 1st provisional GL (used in OBYC) and have no impact.

Posting for cond type - yyyy - acct key - yyy - Debit will go to actual COGS GL and credit will go to 2nd provisional GL and correct value will move to COGS GL at the time of RR.

Posting to provisional GL in PGI will be nullified by posting to the same GL in billing and posting 2nd provisional GL in billing will be nullified by posting the same account in the RR document.

Hope, this will help to solve your issue.

[former_member401805]

Dear Renuka79,

I got some issues in implementing RR, your suggestion above looks like a solution for me.

Could you possiby explain more details about how to do the posting for cond type yyyy at the time of RR.

Does that fi doc be created by VF44 or just a manual process?

Thanks in advance

ChiuYi

[Former Member]

hi

820417 - Implementation Guide for Revenue Recognition

779365 - Best Practice document for revenue recognition

REVENUE RECOGNITION

In revenue recog. you can create your billing documents and they will be passed to accountings.But in this case your customer account would be debited and deferred accounts would be credited.

The purpose of revenue recognition is that you can post all the revenues from a deferred account to sales revenue account for a particular period together for all the docs. through transaction VF44.

if you can se your sales docs no. in VF44,then your revenue recognition is successful.Press on collective processing inside VF44 for posting the revenues from deffered acc to sales revenue account.

Configuration part includes the setting of revenue recog. in item category by following the path sd-basic functionsaccount assnmnt/costingrevenue recog.

Then you have to assign G/L accounts.In the first column of assigning g/l accounts ,enter your sales revenue account and in the second column enter deferred revenue accounts.Deferred revenue account is a spcl g/l account.

Don't forget to enter reconcilliation account in your customer master as well.

It may happen that in revenue recog item categories fields may greyed out but you have to get authorization for your id from a basis guy.

:The point at which revenue (income) is credited to a revenue account in General Ledger. There are three possible types

Time-based : Revenue is recognized in equal proportions between specific start and end dates based on the number of posting periods defined at the company level. Revenue recognition for time-based documents can occur before, during, or after the invoice process.

Performance-based : Revenue is recognized based on the occurrence of certain events such as goods issue or the performance of a service. Revenue recognition for performance-based documents can occur before, during, or after the invoice process.

Standard : Revenue is recognized at time of invoice:

CONTRACTS

Lets take standard CQ contract type:

First maintain customer - material info record in VD51 T-code

Secondly maintain pricing for customer / material or only material combination in VK31 / VK11 T-code

Then use VA41 T-code to create a contract

VA42 to change contract

VA43 to display / view contract

In VA41, enter the document type CQ, followed by the sales area details,

Enter Sold to party.

Enter PO number

Enter PO Date

Enter Validitiy from Date

Enter Validity to Date

Enter Material

Enter Quantity say 999,999,999 or any other higher quantity as it is referred again and agaain

Hit Enter.

Save.

regards

balajia

[Former Member]

Banu,

Did you ever get a resolution to your question. We are now investigating the exact same functionality and have the exact same concern about COGS recognition. Since Revenue Recognition can only result in a posting of the revenue amount to be recognized, we do not believe that Revenue Recognition functionality can be used to alkso handle the COGS recognition. We believe a totally custom solution must be developed and we are very concerned about the audit / control risks such a solution presents. We are hoping to find anyone who has addressed this. This seems like such a significant exception to GAAP accounting, we are almost wondering if SAP did not intend for this functionality to be used for normal deliverable products that post to COGS upon PGI.

[Former Member]

Hi Banu,

As per my understanding:

COGS will get posted on doing PGI and not during creation of billing document.

For VPRS it should be a statistical condition type and hence it should not get posted to the revenue.

So the question of COGS differing will not araise.

Regards,

Karthik.

[Former Member]

Hi Karthik

true, I meant to type PGI and typed Invoice.Thanks for notifying..

So in this case when PIGI is carried out, cost is posted into COGS G/L..

until the invoice is raised to customer, the client feels that the COGS should not be posted into corresponding COGS G/L, but to a deferral G/L account. After the invoice is raised, the invoiced amount as per Rev Rec configuration would also be held in a Defferal account. So the client expects the COGS value to hit actual G/L account only when the invoice amount [defferral amount] is realized as revenue using VF44 transaction for posting the revenue value and nullyfying the deferral G/L.

I was trying to understand how to make this possible and what are the account settings required to be done for this purpose.

Waiting for earliest comment on the requirement.

Thanks in Advance

Banu

[Former Member]

Hi,

Unlike Invoice posting block you do not have PGI posting block. Though there may be setting in the G/L itself to avoid posting automatically in case of material movements. But you cannot have two G/L for the posting wherein it hits one G/L and later it automatically shifts to another in the standard scenario. Or else you may have to write some ABAP routine/program/ user exit if available which will satisfy your scenario.

We have one scenario wherein we can raise the Invoice before PGI and at the later date when the customer acknowledges the receipt of the goods we do the PGI and release the Invoice to Accounting.

This we have done through the copy control between Delivery document and Invoice at the Item level.

May be you could also use something like this.

Regards,

Karthik.

[Former Member]

Hi Karthik,

Can you pls brief me how the PGI date was related to release of the accounting document, though invoice is created much earlier than PGI?

I understand that we can block the accounting document release, but could you throw some light on how the PGI date drives the accounting document release and its corresponding settings??

This may help my case as well I suppose.Anticipating your earliest response

Thanks

Banu

[former_member217082]

Hi Banu

As per my understanding what karthik said , As the PGI date only the billing date will be , so the Accounting document date will be the billing date only. that means the PGI date

Regards

Srinath

[Former Member]

Hi Banu,

Actually the PGI does not drive the Accounting document, it is same as the normal scenario except that we do the PGI at later date after invoicing.

This is a standard feature provided in SAP. For this you can set the copying requirements for the Item Category mostly TAN with 11 i.e. 'Head.dlv-rel.w/o GI' . in the TCode VTFL. for the combination of your Delivery & Invoice. Moreover place a Posting block in the Invoice setting so that even when you create the Invoice it is not passed to Accounting.

At the later date when the payment is realised you can actually do the PGI and release the Invoice to the Accounting.

Regards,

Karthik.