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Whats Material Ledger In Addition To Why Is It Mandatory Inwards S/4 Hana

Material Ledger/ Actual Costing is i of the complex tool provided by SAP to cope its inflows in addition to outflows of nub manufacturing related material inwards multiple currency and valuations. In this web log, I have tried to explain this functionality inwards particular with case (mainly Actual Costing).

The case for material ledger is based on the below signal . 

From the fourth dimension of Luca Pacioli, the father of accounting, till today, inventory valuation has been a signal of argue. In countries alongside stable inflation charge per unit it is considered fine to take inventory valuated at touchstone cost. In such countries textile inventory values are usually carried past the SAP organization inward ane currency alongside raw materials valuated at moving average price together with semi-finished too finished goods valuated at measure toll. In countries where currency is not stable together with inflation rates are high it is pertinent to accept inventory valuated at actual costs. In such countries it mightiness likewise live required to record inventory valuation inward more than one currency, ordinarily a local currency too some other more than stable reporting currency similar the USD to point the inflationary affect on the inventory values. SAP supports this requirement of showing inventory valuation inwards multiple currencies at actual price using the functionality of fabric ledger too actual costing. This whitepaper provides an overview of material ledger, actual costing, its setup inward SAP as well as just about known issues based on real life projection experiences.

"Latest trends inwards material management aim for improved together with more than flexible valuation methods in multiple currencies and parallel accounting standards piece simultaneously reducing required organization resources in addition to improving scalability of the business processes. Since the information model of the Material Ledger module supports these business organization requirements, it was chosen as the ground for fabric inventory valuation inward the new SAP due south/4HANA solution."

What is fabric ledger ?
Material Ledger in SAP essentially is a business item wise record showing changes inward stock in addition to prices with each cloth movement inward upwards to three currencies. Material records pertaining to opening stock, goods receipt, account receipt, debits, credits etc get logged in the ledger along alongside the cost and exchange rate differences throughout the month. The currency translations for the 3 currencies come about at historical telephone exchange rates available at the fourth dimension of posting. This ledger amongst a complete record of each single transaction of the textile forms the basis to calculate actual toll for the fabric at menstruum stop. The actual cost therefore calculated inwards SAP is called the periodic unit of measurement toll (PUP) as well as tin can be used to reevaluate inventory. This actual toll can and then besides live treated as measure cost for the next month. 

Before going farther lets empathize actual costing 

Actual Costing
Actual Costing is functionality provided past SAP to calculate actual prices 1-e; PUP (periodic unit of measurement toll) of inventories/ valuated cloth including Raw Material (ROH), Semi- Finished Good (HALB) and Finished Good (FERT). It includes all the actual prices for material inwards detail menses.

Actual Costing Run (CKMLCP) is the calendar month end action, which is used to valuated the inventory inwards residue sheet at actual price (PUP- Periodic Unit Price) by calculating too posting Production variance during the calendar month on the Material which was previously maintained at Standard Price (calculated from CK11N) inwards remainder sheet.

Standard costing in addition to actual costing tin work completely assort from each other without whatsoever conflicts. The exclusively decision to be made is, what price y'all use for material valuation. You can score in addition to unloosen your cost estimations from CK40N every bit measure cost to live used during the flow. After the catamenia is over and you run your CKMLCP yous tin make up one's mind inward the closing entries if you lot want to revalue the inventory (of final month) past the periodic unit of measurement toll.

Note: The transaction CKM3/CKM3N was refactored in addition to right away provides a simplified as well as improved thought of material in plants with active Actual Costing in southward/4 HANA. It replaces the erstwhile CKM3 view Price Determination Structure. The former CKM3 Price History sentiment is yet available via transaction CKM3PH for all material (independent of cost decision command too active Actual Costing). All other views formerly offered by CKM3/CKM3N are no longer available.
One of the Advantages of the Material Ledger is , it  combines the advantages of both types of price controls
  1. S ( Standard cost)
  2. V (Moving Average toll)
In this postal service you lot will acquire how Material Ledger combines the advantages of both MVA as well as Std cost and why is is mandatory in S/four HANA. 
Let us beginning run into the advantages together with disadvantages of  Price command V too southward
S ( Standard toll) V  (Moving Average price)
Adv : Std toll tin can be used as a bench mark toll to analyse the variancesDisadv : As the MAP changes with every goods receipt   as well as bill receipt . it tin non be used every bit a bench score price . So variance analysis is non possible ,
Disadv : Std cost don’t reflect the actual costAdv : MAP reflects the actual cost equally it updates with every goods receipt in addition to account receipt .

Let us  run into what are the cost controls recommended for different types of materials amongst Material Ledger active too alongside out Material Ledger active . Let us accept a look into the tabular array

Price Control in addition to Price conclusion
ML activeML not active
Moving Average price (V)Standard cost (S)
Standard cost (south)
Recommended for Semi-FG Finished goods
Price conclusion
ii Transaction-based
(MVA is used for valuation)
Price decision
3 Single/Multilevel
(Periodic Unit Price is used for Valuation inwards the unopen catamenia)
Recommended for Finished Goods Semi-FG too too Raw Material
Price determination
2 Transaction-based
(std price is used for Valuation. MVA is used for Info purpose)
Moving Average(V)
Recommended for Raw Materials

When Material ledger is non active MAP is recommended for RM as well as Std toll is recommended for Finished Goods  and Semi-FGs   (every bit shown in the ivth column)
When Material ledger is  active Std toll as well as Price decision 3 (ie Single/Multilevel Price conclusion  ) is recommended for FGs , SFGs and RMs (equally shown in the second  column)
It is interesting to encounter that when Material ledger is active  it is recommended to set Std cost  fifty-fifty for  RMs.
More interestingly system make non function Std Price for all periods fifty-fifty though nosotros prepare std cost inward the cloth master.
Answer to why ML is  mandatory inward south/4 HANA . 

Note 2396864 - Material Ledger Obligatory for Material Valuation inward southward/4HANA systems, provides a high grade explanation of the demand for the activation of the Material Ledger functionality together with links to additional notes that furnish the particular you are searching.

Note 2267834 - S4TWL - Material Ledger Obligatory for Material Valuation provides a more than detailed explanation:

"Latest trends inwards textile direction aim for improved as well as more flexible valuation methods inwards multiple currencies together with parallel accounting standards patch simultaneously reducing required organization resource in addition to improving scalability of the concern processes. Since the information model of the Material Ledger module supports these business concern requirements, it was chosen every bit the basis for material inventory valuation inward the new SAP south/4HANA solution."

Material Ledger has ii objectives:

1.) Actual Costing

2.) Parallel Currencies/ Valuation

The latter objective positions the ML every bit a sub-ledger for inventory valuation, together with this is the mandatory office of the ML for SAP due south/4HANA.

If an Organization records inventory on its residuum canvas, so it will postulate a sub-ledger for inventory postings, which provide more granular detail most inventory transactions than yard/L postings (every bit is done with AP, AR and Fixed Assets, which are as well sub-ledgers of the SAP General Ledger.)

The inventory “sub-ledger”  already existed inwards the SAP ERP organization inward the course of the inventory valuation tables xBEW(H), such equally tables, EBEW, EBEWH, MBEW, MBEWH, OBEW, OBEWH, QBEW too QBEWH.

SAP enhanced these tables in SAP S/4HANA just every bit it did alongside the Universal Journal.

They leveraged the existing functionality of the ML to make a cohesive sub-ledger for inventory valuation inwards the SAP southward/4HANA.

The actual Costing functionality is withal optional (as well as this is what causes the well-nigh confusion). Therefore, companies that do non call for to report their inventory together with price of sales at actual cost make non need to activate this functionality.

SAP south/4HANA offers a few new currency options, just more importantly, it offers novel ways of evaluation Material Ledger data. Currency settings available in the Universal Journal is integrated amongst the ML.

Multiple currencies, or parallel currencies, is a functionality that allows companies to tape transactions inward more than i currency for every transaction posted to FI. This  parallel currency functionality has been extended to the ML for whatever inventory transactions, which can live viewed inward Material Ledger reports.

In SAP ERP System, you  tin have one society code currency (Local Currency ane) and upwardly to ii parallel currencies (Local Currency two and Local Currency iii) inward the FI module. We accept the choice of adopting the currencies used inwards the FI module, the CO module, or both, or of assigning currency types individually. The currencies are translated based on the historical rates in the Material Master.

In SAP southward/4HANA, a primal improvement that SAP has made amongst parallel currencies is to permit upwardly to 8 freely definable currencies inward the Universal Journal table, in addition to fixed (local as well as global) currencies every bit follows:

Local : The company code currency
Global: The Controlling expanse currency
Freely defined: Up to 8 currency types
“Freely defined” means that you lot tin can mention the currencies any fashion that makes sense for your concern as well as non rely on SAP’second predefined currency type names.

Also, if creating these currencies for parallel ledger, you lot don’t ask to base these currencies on the currency of the leading ledger( as is the example with an SAP ERP organization)

Exchange rates should live maintained for these extra currencies too organization volition perform the real fourth dimension currency translations of the postings in FI module (and related sub-modules) into these additional currencies.

Alternatively, we could specify that the translation is performed at the finish of the catamenia with the foreign currency valuation programme. As a issue, a fellowship tin can introduce it’second fiscal as well as management reports to different stakeholders inwards unlike currencies, equally needed.

In the ledger settings for a society code, you lot tin configure additional currencies along alongside the local together with global currency types by using transaction FINSC_LEDGER.

Even though 8 additional currencies are allowed inwards the Universal Journal, alone 3 currencies are allowed inwards the ML. Therefore, when defining the currencies inward ML(which is based on the currencies of the leading ledger), you lot’ll require to specify which additional currencies in the Universal Journal should be mapped to the ML. Also, all the valuation areas(plants) that belong to a company code should accept the same currency type settings inward the Material Ledger.

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