Material Ledger in S/4HANA

• 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

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.

Companies planning a changeover to S/4HANA must deal with the use and functionalities of the Material Ledger. They need to integrate it into their S/4HANA transformation strategy, regardless of whether they have used Material Ledger in the past or not. It is not possible to change the settings of the Material Ledger afterwards, especially with regard to parallel currencies!

Companies should ask themselves the following questions about the functionalities of the Material Ledger:

• Which currencies should be used for material valuation and inventory management in addition to the company code currency?
• Is the parallel valuation and use of transfer prices relevant for inter- and intra-company business scenarios and for different accounting standards?
• Is actual costing desirable as an optional approach to readjust inventories and cost of goods sold (COGS) with periodic transfer prices?

• 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 

• 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.

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