Reconciliation of COPA and Financials - SAP

Hi,

After having activated Material Ledger/Actual Costing, first thing we need to verify is 'whether results in financials and COPA are reconcilable or not.
As in standard Costing there is no way to reconcile FI & COPA as COGS is built on Standard Cost in COPA, while in FI, we have Raw/Packing movements on moving average.
Secondly, in Standard Costing, variances are not segregated for 'Inventory' and 'Consumption', rather complete variance is shown against 'Consumption Only', i.e. Sale.
Thirdly, Price of Finished Goods does not carry effect of across period changes, rather than, COGS of all sales is transferred from current active standard cost estimate, that makes it technically impossible to reconcile both FI & COPA.
But after activation of Material Ledger; this is possible, however we need to make sure of couple of things:
First, we should know the reconciling items:

Rule of thumb is, any thing (cost/expense) that is part of 'Production Process' or made subsequently (via allocation or assessment) part of 'Production Process' is taken care of while preparation of Actual Cost Component. 

Any cost/expense other than that is to be taken as 'reconciling item' or difference item(s), like:

• Revaluation of Finished/Semi Finished Goods: Since this cost is charged directly to cost centers (usually), never becomes part of actual cost component.
• Other examples may be 'Price Differences captured during stock transfers or LIV (invoices)', 
• or there may be amount not made part of allocation/assessment cycle, eventually will not become part of 'Actual Overhead Price', so will not flow to production process.
• or amount allocated to a production cost center, where no production activity was performed, such cost will never become part of production process

Since above reconciling items are actually expenses of current period, so we should take these to COPA via allocation cycles. (just a suggestion only)

Precautions before Material Ledger Startup

If you are planning to activate this Material Ledger after go live then certain thing must be taken into account; otherwise you may loose critical information or end up with mess up.
Please make sure of following points before activating material ledger:
1- SAP recommends activation of material ledger at start of period, so that 'quantity structure tool' of material ledger could have goods/value movement of complete period. This is required for multi-level costing.
2- Material ledger should be activated for all plants in a company code; otherwise you will face issues while entering 'logistics invoices' & reconciliation of parallel (additional) currencies with FI-GL.
3- Make sure material ledger must be activated for all currencies of 'FI', otherwise there would be issue in reconciliation.
4- During activation of material ledger, goods movement or materials creation is not possible, so this activity should not be run in parallel, rather while activation all other activities should be closed.
5- Please ensure 'data migration esp. purchase order histories' (if there is any) should be done before activation. As this ensure the translation of purchase history to additional currencies.
6- You should close all manufacturing orders before starting 'production startup of ML'. As previous order do not have connection with quantity structure of ML, so they are not taken into account for multi-level costing, plus, there would be problems in reversing goods movements in such orders; as all previous movements are not translated into parallel currencies at production startup.
7- Above issues will rise in 'cost collectors' as well. so all cost collectors should be closed as well. As system will not allow two cost collectors of same material, all previous collectors should be marked with deletion flag.
8- In case if you will not or cannot close manufacturing orders, you should consider following implications:
    a) Values in parallel currencies (additional currencies) will not be correct.
    b) 'WIP at actual cost' will not be exact for current & preceding periods, however after first period close this issue will be resolved.
9- To enable you to reconcile the parallel currencies between the general ledger and the subsidiary ledger, you must reconcile the first local currency. SAP recommend you do so before the production startup. You can use transaction MB5L or the report RM07MMFI to display inconsistencies in the first local currency. Such inconsistencies are usually caused by incorrect MM postings which occurred before the production startup.
11- You should use transaction CKM9 to check the Customizing setting for the material ledger. This transaction displays incomplete or incorrect settings.
12- In order to start the actual costing with new prices, proceed as follows:
Release the new prices after the production startup and then change the price determination control from 2 to 3. Keep in mind that when you follow this procedure, the price changes are kept on the revaluation account.

System does following things at production startup:

• The system creates material ledger master data in currencies.
• The system creates material ledger master data for sales order materials (database table EBEW).
• The system creates material ledger master data for project materials (database table QBEW).
• The system translates the purchase order history into the second and third currency.
• At production start, the system automatically sets all materials to price determination control 2. You need to use transaction CKMM to change price control of all material participating in actual costing to '3' (single level/muti level).
  

After completion of the production startup:At production startup, material stock values were translated from first local currency into parallel currencies. The totals of the inventory values of the parallel currencies in the material subsidiary ledger may not correspond to the account balances in the general ledger.
For the reconciliation of the FI accounts for the second and third currency with the material ledger, you can use transaction CKMADJUST (if new gl active with inventory related account assignments like business area, profit center etc then use FAGL_ML_ADJUST instead of CKMADJUST).

"If you do not want the material ledger to be productive for all of the valuation areas/plants of a company code, the general ledger and subsidiary ledger cannot be reconciled in the parallel currencies. Transaction CKMADJUST issues error message C+341".




"During the production startup at the start of year, you should bear in mind that the balances of the balance sheet accounts must be carried forward first, otherwise the system issues error message C+313". 




"[For New GL] If differences are also displayed in local currency when you execute the transaction, transaction FAGL_MM_RECON can be used to analyze these differences. To call this report, navigate to the SAP Easy Access screen and choose "Accounting  -> Financial Accounting  -> General Ledger  -> Periodic Processing  -> Closing  -> Check/Count -> Balance Reconciliation:  General Ledger Accounting - Materials Management".

Notes on Performance improvements:
1. Use transaction MR11 to perform account maintenance. As a result, older purchase order items are cleared automatically.
2. Archive purchase order data that you no longer require (archiving object MM_EKKO).
3. If, at the time of the production startup, your system already contains purchase orders with a large number of purchase order history records, you may experience performance problems if you are using an Oracle database.
4. If you use a database with Cost Based Optimizer and set the material ledger as productive for the first time, refresh the table statistics for the following tables (transaction DB20) a few minutes after starting the production startup program SAPRCKMJ (or after starting transaction CKMSTART):
5. To optimize performance, you can execute the production startup at plant level and run several instances in parallel on several application servers.

--Please also refer to SAP notes 596558, 384145, 165844, 175758, 425487