Material Ledger in S/4HANA
Coordinated, optimized, flexible - as a sub-ledger integrated into the Universal Journal, the Material Ledger (ML) becomes the sole source of inventory and material valuation.
In S/4HANA, the Material Ledger (ML) is directly integrated into the general ledger via the Universal Journal (ACDOCA) as a subledger for inventory valuation and replaces Material Management (SAP MM) for inventory management.
This ensures the "Single Source of Thruth" approach for material valuation and inventory management. Accordingly, this new data model makes the activation and use of the Material Ledger mandatory for all companies with material valuation and inventory management. Inventory valuation is no longer part of Material Management (SAP MM). Optionally, parallel valuation and actual costing can be implemented and used.
What advantages does the Material Ledger offer your company?
- By activating the Material Ledger and integrating it into the Universal Journal, inventory management is managed directly in the General Ledger. This increases the quality of data and figures regarding the inventory valuation in the general ledger
- The material and inventory valuation, can be managed in up to 3 different currencies
- Material valuation according to standard (S price) and/or moving average price (V price) is still supported
- Alternative valuation methods FIFO/LIFO or lower value principle are supported
- Parallel valuations of inventories and material movements to support different accounting standards, but also according to group and/or profit center approach using transfer prices is possible
- The optional actual cost approach allows a periodic and quantity-related readjustment of inventories and cost of sales according to the periodic allocation prices (actual costs)
- Detailed material price and variance analyses are possible down to work center and operation level with standard reports in S/4HANA Core and with FIORI Apps.
With Material Ledger, SAP enables the following functions:
- Material and inventory valuation can be managed in up to three different currencies. In addition to the company code currency, the inventory and each individual goods movement can be managed in two additional currencies. The conversion into additional currencies is done using the exchange rate in the system at the time of the material movement. This function is often used in high-inflation countries in order to make the influence of inflation on stocks transparent
- Parallel valuation with transfer prices for inter- and intra-company (profit center) transactions and value flows. This function allows you to manage material movements and stock values in three different valuations (legal valuation, group valuation and profit center valuation)
- The objective of actual costing is to determine the actual costs for externally procured and internally produced materials. Taking into account all actual costs, a periodic actual price/ unit price is calculated for each material. The delta between the periodic unit price and the standard price is distributed on the basis of quantity to material stock and cost of sales according to the cause. Optionally, the periodic unit price can be used as standard price in the following period
- Report and analysis of price development and variances per material movement
You should ask yourself the following questions about the functionalities of the Material Ledger:
- Is the parallel valuation and use of transfer prices relevant for inter- and intra-company business scenarios and for different accounting standards?
- Which currencies should be used in addition to the company code currency for material valuation and inventory management?
- Is actual costing desired as an optional approach for recharging inventories and cost of goods sold (COGS) with the periodic transfer prices? This function does not necessarily have to be implemented, especially if standard prices are only to be determined annually
The introduction of the Material Ledger is independent of the industry. All companies with goods movement and inventory management are affected by the introduction of the Material Ledger. With CONSILIO you have the right partner at your side. Together with you, we will develop an individual solution proposal tailored to your needs.
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Material Ledger: Implementation strategy in S/4HANA projects
Coordinated, optimized, flexible - as a subledger integrated into the Universal Journal, the Material Ledger in S/4HANA becomes the only source of inventory and material valuation. But what will change in S/4 from a FICO perspective and what functionalities does the ML support? In this presentation at the CONSILIO Summit 2022, learn more about the capitalization obligation for all companies with material valuation and inventory management, the minimum requirements in S/4 and the necessary customizing steps. Speaker: Ivo Konecny, CONSILIO
S/4HANA - What changes from the Material Ledger perspective?
- Activating and using the Material Ledger for inventory valuation in the general ledger becomes mandatory
- The new data model for material valuation and inventory management is embedded in the Universal Journal (ACDOCA)
- The material price analysis was changed. For example, the cost component split has been integrated into the main view
- The number of steps in the cockpit of the actual price calculation was reduced. Single level price calculation, multilevel price calculation, revaluation of consumption and work in process are combined in one "settlement" step
Material Ledger in your company
What do you have to do now?
Companies planning to migrate to S/4HANA should consider the use and functionalities of the Material Ledger. You must integrate it into your S/4HANA transformation strategy, regardless of whether you used the Material Ledger under ECC. It is not possible to make subsequent changes to various Material Ledger settings, particularly with regard to parallel currencies, without having to set up the system from scratch. It is therefore advisable to develop a concept in advance.
Customers with or without Material Ledger experience should take a close look at the functions of the Material Ledger before an S/4HANA transformation. The decision regarding the use of the Material Ledger should be included in the S/4HANA transformation strategy.
The following questions must be clarified during the preparation phase:
- Which additional currencies or currency types are required for reporting?
- How is the portfolio valued (standard price, GDP or actual cost/periodic standard prices)?
- Are different accounting principles served by parallel ledger functionalities in the general ledger? Do these accounting principles differ with regard to material and inventory valuation?
- Are additional valuation alternatives (e.g. FIFO/LIFO) required?
- Is the optional "actual costing" function with the option of determining the periodic standard price and the periodic subsequent debit of inventories and cost of sales relevant?
