Parallel valuations and transfer prices in S/4HANA

Make optimal use of the new functions that S/4HANA offers with the Material Ledger

In addition to legal transfer prices, SAP offers global corporations the ability to determine group and profit center accounting (PCA) transfer prices in order to consolidate the income statement and valuate inventories according to transfer prices.

Why use parallel valuations and transfer prices?

Corporations want to leverage their investments and global supply chain cost-effectively while evaluating their actual business success. In order to determine this, all transactions between the group's internal business partners must be eliminated in the books during consolidation.
In this context, transfer prices are becoming increasingly important for groups with affiliated companies and complex value chains.

A transfer price is understood as a valuation approach and is used to valuate the transfer of materials and services between the individual legal and organizational units of a group. In multiple valuation, you can view the value of a material from three different valuation views: from the "legal" view of the individual company, from the group view, and from the profit center view. A corresponding transfer price is used for each valuation view.

What challenges do companies face without an appropriate controlling and IT solution?

If the individual companies of a globally operating group work in an SAP system without the SAP solution "Multiple Valuation Approaches", a consolidated result can only be calculated with additional manual effort.
For this purpose, transfer prices per valuation approach and material, plant and customer are analyzed by a central consolidation department and valuated for the group's internal business partners.

With complex business scenarios, many subsidiaries, high transaction volumes and numerous materials and transfer prices, the effort is enormous and the result is often incorrect. If the business partners use different systems, the costs and risks increase further. Is your company located in a country where consolidated reporting is required by law? Then you may have already asked yourself the following questions:

How can we create more transparency in allocations and inventory transfers between related business partners?
How can we ensure that transfer prices are correctly calculated and applied?
How meaningful are transfer prices for the interpretation of reported consolidated sales, cost of sales and inventory valuation?

How can an IT solution support our consolidation process in a secure, time and cost effective way while taking into account complex business variants, high transaction volumes and numerous transfer prices?

The automated IT solution: Parallel valuation approaches in S/4HANA

SAP S/4HANA offers the possibility to show sales or cost of sales and also inventory valuation in addition to the legal transfer prices using group and profit center accounting transfer prices. P&L consolidation and inventory valuation are thus possible in a time and cost effective manner.
Transfer prices are automatically determined in the relevant transactions such as intercompany billing, inventory valuation and movements and are updated parallel to the legal postings in the corresponding valuation views of the FI document in real time and in

the background. Markup between transfer prices is automatically eliminated and posted to a separate account. This creates transparency about the different valuation approaches and a data basis for use in consolidated reporting in S/4 HANA and in SAP Business Planning and Consolidation (BPC).
Transfer prices and parallel valuation approaches can also be implemented ledger-specifically. For each valuation approach, the standard SAP solution includes an inventory valuation with actual prices.

Functions and advantages of the solution: An automatically generated data basis for parallel valuation

The basic idea: Manual activities of the user are reduced to a minimum, the data basis for the parallel valuation is generated automatically.

Central management of all transfer prices and automatic use to transactions
Enhancement of FI documents with additional valuation views
Optional execution of the valuation in parallel books
Automatic markup elimination and posting in corresponding FI document views
Accounting transparency per valuation approach for allocations and inventory transfers between related parties

Income statement and inventory valuation according to group and PCA approach using transfer prices
Faster consolidation process and reduced effort thanks to real-time data
SAP PC integration for complex group reporting

The solution offers optimization potential for group valuation, profit center accounting valuation and related reporting.