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Chapter 5

Impact of S/4HANA on SAP


Controlling and Profitability
Analysis
We discussed the changes in the GL area due to the SAP
S/4HANA changes in the preceding chapter. In this chapter, we
will discuss the changes on the Controlling side and the changes
in CO-PA in detail. In this chapter, we will cover the following
topics:
 COPA
 Types of COPA – Account-based and Costing-based
 Dataflow to COPA
 Redesigning COPA in SAP S/4HANA
 Key configuration areas of COPA in SAP S/4HANA

Technical requirements
For this chapter, the following is required:
 SAP S/4HANA system

An introduction to SAP Profitability


Analysis (CO-PA)
The business environment is complex, dynamic, and, of course,
competitive. It's all about how to grow and sustain. If
organizations don't innovate and change, they can be shut out of
the market. Now, the question is how to make the right decisions
on change and strategy to move forward, what kind of data is
needed, and how can that data be analyzed and interpreted?
Profitability is one of the key parameter to put success on radar.
In order to play with the transactional data, which results in
profitability, SAP has provided the submodule in Management
Accounting or Controlling, known as CO-PAor Controlling-
Profitability Analysis. For ease of use, we will use the term
CO-PA in this and subsequent chapters, as needed:

Now, we will learn the usage of COPA and how COPA can be
useful to any organization.

Usage of COPA
Let's take a look at how COPA is important to an organization:
 SAP CO-PA is a helpful tool in facilitating organizations to
analyze profitability as per market segments using data
from sales, profit/loss, and costing from various SAP
modules, such as FI, CO, SD, Production, and MM
 CO-PA can be used across the industry
 The data can be analyzed by period, order, or project
 Profitability analysis uses the Cost-of-sales accounting
method
 The market segments can be defined based on need, such as
product, customers, and orders, and they help in decision-
making from a marketing standpoint
 Customer + Product = Market Segment (niche marketing)

Methods of profitability
management
The two accounting methods used for generating profitability
statements are the cost-of-sales method and the period
accounting method. Applying either method to a given set of
business transactions under a given set of laws yields the same
bottom-line result, profit, in concept. The difference is in how
the overall profit and loss (P&L) picture is presented.
Companies must choose to use one of these methods for
generating their legal financial statements. The choice is often
determined by the country-specific legal requirements:
 Cost-of-sales accounting: In this method of accounting,
the revenues and cost are matched. It results in the P&L
statement of the company and helps in conducting margin
analyses. Also, it is optimized for sales, marketing, and
product-management areas.
 Period accounting: In this method of accounting, the focus
is on the view of the activities and periodic change. It
presents revenues and primary expenses that have been
incurred during a period (let's say, one month) and the
changes in stock value levels, work-in-process, and
capitalized activities. It can be optimized for production
and profit-center areas.

Methods of Profitability Analysis in


SAP
In SAP, the customer can choose to use the Profitability
Analysis method based on the need they have. It can be
Profitability Analysis or Profit-Center Accounting, but the
choice of the customer should be based on the answers to the
following questions in both aspects:
 Considerations in Profitability Analysis:

Aspect Consideration/Question

Success of How successful was the sales campaign


marketing projects for a specific product/service?

Revenue and cost What is the impact of the pricing


structure strategy on a set of customers?
Contribution of
Which is the largest and fastest growing
individual market
customer?
segments

Contribution
margin goals of Have the sales force-achieved their
individual sales contribution margin goals?
units

 Considerations in Profit Center Accounting:

Aspect Consideration/Question

Which responsibility areas have


Controlling exceeded their planned profit(s) in the
past?

Return on net Which asset value is assigned to a profit


assets center?

Contribution of
What is the operating profit of a profit
organizational
center or a group of profit centers?
units

Managing internal What is the intercompany transactional


sales and services summary?
The accounting numbers of the organizations will not change
due to using any of the methods; however, the view will change
and, hence, the strategy and the decision-making process will be
easy, based on organizational goals. Reporting may look
different in both methods having the same base and numbers for
calculation.
Reporting comparison in both methods looks as follows:

Aspects in SAP profitability


management and organization units
involved
When the profitability is analyzed in SAP, the various
organizational units and the various modules that are sent the
data for contribution to the analysis are considered:
The definition of key organizational units for quick reference are
as follows:
 The operating concern is the key organizational unit
within CO-PA. It defines the extent of the marketing and
sales information that can be reported in combination by
this component.
 The controlling area is an organizational unit that
provides flexibility to cost-accounting team and has
features such as cost-center accounting and profit-center
accounting, and internal orders company codes are assigned
to controlling areas. Normally, the relationship is one
controlling area to many company codes, given that the
fiscal year and chart of accounts of those company codes
and controlling area are the same.
 The company code is an accounting and generally
represents the legal entity. Financial accounting, which
includes P&L and the Balance sheet of the company, are
prepared at the company-code level.
 Plant represents a production center. The Plant is assigned
to company codes from the purchasing perspective.

Comparative analysis of various


methods
The following table summarizes the comparison of various
methods on several parameters based on which the decision
making of an organization can be based:
CO-PA-
Base of Profit-Center
Account
comparison Accounting
based

Cost-of-sales
Process Period accounting
accounting

Market Organizational
Aim
profitability controlling

Analyzed objects Segments Profit centers

Performance Profit-related Profit-related and


figures key figures Financial key figures
Reconciliation with
Posted values Posted values
Financials

Organizational Operating
Controlling area
aspects concern

Types of CO-PA
SAP has a functionality that provides two types of COPA.
Depending on the usage and requirements, either or both of
them can be used. In this section, we will cover both types of
COPAPA and their key differences. At this stage, it is important
to focus on the differences, as we will talk about the changes in
S/4HANA COPA in a later section.

Account-based COPA
Account-based COPA normally uses cost elements to store
values of various attributes, such as revenue and cost of goods
sold. The limitation in account-based COPA is on the mapping
of cost of goods sold and variances, as they can only be mapped
to a single GL Account/Cost element. Now, let's look at the
logic of how the actual values flow in COPA:
Costing-based COPA
In costing-based COPA, the values for key figures, such as
Revenue, cost of goods sold, variances, and overheads, are
stored in the value field in the CEXXXX* tables. Accounts such as
revenue and sales deductions are mapped to the value fields in
COPA.
Let's take a look at how the values flow in costing-based COPA:
Differences between account-based
and cost-based COPA
Now, let's take a look at how these two types of COPA differ
from each other on various grounds. The important aspect is
how the transaction data is stored. The following figure shows
how the transaction data is stored in different tables in different
types of COPA:
Most of the data flows from Sales and Distribution to COPA.
The following figure shows the differences in data transfer from
sales in both types of COPA:
Now, let's take a look at the overall differences in both types of
COPA:

In the following figure, you can see what the P&L of an


organization looks like when different types of COPA are used,
given the transactions remain the same:
COPA in SAP S/4HANA
In SAP S/4HANA, COPA is named Simplified Profitability
Analysis. In SAP ECC, it was recommended to use Costing-
based COPA due to its reporting capabilities. However, with the
emergence of SAP S/4HANA, SAP recommended using
Account-based COPA, as P&L with contribution-margin
calculations is now available in Account-based COPA although
it was available only in Costing-based COPA earlier. So far,
SAP has moved toward Account-based COPA.

Integration of Account-based CO-


PA to Universal Journal
In Simplified Profitability Analysis, the information related to
costing and revenues is always updated and is fully reconciled
with P&L. This results in using the information easily and
flexibly alongside transparency.
The Universal journal is the evidence of transparency where the
COPA characteristics are part of the ACDOCA table and is a single
source of truth, which allows us drill down on any required
characteristics, such as product group, customer group, and
product family:
Attributed profitability segments
With SAP S/4HANA, a new functionality is added to the CO-
PA bucket, known as attributed profitability segments. In this
section, we will explain this functionality and how it helps the
organization. SAP has the following cost objects:
 Internal order
 Project
 Service order
 Sales order
 Production order
 Cost center
Now, if (except service order) there is a real account
assignment to any of the preceding cost objects, SAP can derive
the statistical COPA segment. This statistical COPA segment is
known as the attributed profitability segment. In the following
scenario, the internal order has the settlement rule as CO-PA:
The following is the settlement rule:

A Sales order is created, and internal order is assigned as 500000,


as follows:
The following invoice is posted to that sales order:

Now, in the Accounting document in the ACDOCA table in the


preceding screenshot, the internal order is there as a real object;
however, the attributed profitability segments are also derived
just as material, customer, Ship to party, and more:

This functionality can be enabled by implementing SAP Note #


2497666 (S-user ID required), as it is not activated in the default
version.

Realignment in CO-PA with SAP


S/4HANA
Before we get into realignment in CO-PA with SAP S/4HANA
topic, let's try to understand realignment.
Realignment means changing (with limitations) the already-
posted document. If you want to add or change characteristics,
realignment can be used. This functionality is available from
SAP S/4HANA 1610 and later releases. Realignment helps in
the following ways:
 Incorporates changes to product, hierarchies, sales, or
customer structure in the posted documents
 Corrects the documents that are posted with the wrong
characteristics
 Data enrichment, by updating the documents (which may
not be available at the time of posting)

Characteristics that cannot be


changed
 Company Code
 Controlling Area
 Functional Area
 Business Area
 Profit Center
 Partner Profit Center
 Segment

Characteristics that can be changed


freely
 Material
 Vol. Rebate Grp
 Industry
 Sales District
 Sales Office
 Sales Group
 Country
 Customer Group
 Material Group
 ABC Indicator
 Form of manufacturer

Characteristics that can be changed


only if the account assignment is not
true
 Sales Order
 Sales Order Item
 WBS Element
 Cost Object
 Internal Order
 Cost Center

Characteristics that are changeable


if the field is initial at the time for
execution of realignment
 Billing Type
 Sales Organization
 Distribution Channel
 Division
 Plant
 Customer
The transaction to execute realignment is KEND. The realignment
characteristics update the ACDOCA table, and, in case of Costing-
based COPA, it also updates the segment tables (CE4xxxx).

Reporting options in CO-PA with


SAP S/4HANA
Traditionally, on KE30, reports were available for CO-PA in
SAP ECC or customers interfaced data to other reporting
systems to get a robust report. Since HANA combines OLAP
and OLTP features, another way to report evolved.
The Fiori app
There are four key Fiori apps related to COPA, as follows:
 Net Margin Analysis
 Profit Margin
 Margin Analysis
 Market Segments

It also provides filter and drill-down functionalities:

Analysis for Office


In Analysis for Office, there are three standard queries available,
and more can be created. It is a flexible and easy way of CO-PA
reporting:

It provides several reporting options and is easy to use, as people


are familiar with Excel:

HANA Live
HANA Live is another way of reporting. It is based on the
browser and provides access to data and standard queries:
COGS split in S/4HANA-based CO-
PA
In the past, Costing-based COPA was recommended since it was
capable of providing a detailed view on the Cost of Goods
Sold (COGS), the breakdown of Cost of Sales to cost
components. However, in SAP S/4HANA, Account-based
COPA offers a similar functionality.

Defining accounts for splitting


COGS
The COGS is posted to a single account, which is defined in the
account determination settings. In this configuration step, we
need to define the settings for COGS postings to split the COGS
amount so that it can post to different accounts according to the
cost components:
 Create new G/L accounts
 Specify a splitting scheme for the COA and assign a cost
component structure
 For each splitting scheme, specify the following
information:
 Account to which all costs of goods sold are posted

according to the account determination settings


 Cost-component structure

 COGS account-assignment for the cost component

Defining additional quantity fields


This configuration allows the aggregation of quantities across
product lines, which can be used as drivers for CO allocation:
 Assign a dimension to the additional quantity fields
 If aggregation of quantities is needed, use those as drivers
in allocation or top-down distribution and specify a
standard unit of measure
 Implement the logic to fill in the additional quantity fields
in BAdI FCO_COEP_QUANTITY

Defining accounts for Splitting Price


Differences
In this configuration step, the settings for splitting variance
categories into General Ledger (GL) accounts can be defined.
This allows a detailed analysis on price differences in the P&L:
1. Create new G/L accounts.
2. Under Define Accounts for Material
Management in Configuration Accounting Display, choose
transaction PRD Cost (Price) Differences.
3. Assign the G/L accounts where the price difference is
posted.
4. Specify a splitting scheme at the controlling-area level with
the chart of Accounts.
5. Enter the value of the cost element or the cost-element
interval/group, and the variance category. Once that is
done, you need to assign the G/L accounts, which were
created fresh.
6. Multiple cost elements and/or variance categories can be
reflected within the same G/L account.
7. Select the default checkbox. If the target account field is
empty, the system automatically posts to the default G/L
accounts.
8. Assign the splitting scheme to your company code and
enter a valid from date.

Material Ledger in SAP S/4HANA


With the introduction of SAP S/4HANA, the Material Ledger
activation is mandatory now, and any transactions starting with
MBXX (such as MB1A and MB1C) are replaced by MIGO.
The MBEW, EBEW, MLHD, MLIT, and CKMLLP tables are technically not
available; however, they will be available as compatibility views
so that the existing customizations can run successfully.
The Material Ledger (ML) now replaces the tables that were
used previously for inventory valuation, so there might be
relevant data in the present SAP ECC system for Material
Ledger. Material Ledger will now be treated as a new subsidiary
ledger for inventory valuation, but actual costing needs to be
activated for this. If ML activation is needed in ECC before
moving to S/4HANA, the conversion of Inventory Valuation
and Purchase Order history tables to Material Ledger tables is
needed. Conversion gives the learning period to the users and
business for material ledger. If Actual Costing is activated in
SAP ECC, the Actual Costing Run (CKMLCP) will be
revamped when you move to S/4HANA.
The ML is now a part of the conversion steps for S/4HANA, so
the ML activation will be included in the migration process.
It is important to understand how the ML functionality can be
used for organizational benefits. The advantages of the multi-
valuation or single-valuation ledger approach, company-code
transfer pricing, profit-center transfer pricing, alternative
valuation run to cumulate prices over several periods, and
revaluing inventory according to FIFO and LIFO can be reaped.
While migrating from SAP ECC to S/4HANA, there is an ML
migration cockpit. For more information, refer to SAP Notes
2694618 and 2352383 (S-User ID
required): https://support.sap.com/en/index.html.

Significant changes in Controlling in


SAP S/4HANA
So far, we've discussed CO-PA a lot. However, in SAP
S/4HANA, it's not the only change at the CO side. There are
several other changes done in the CO module to simplify
accounting and reporting. Let's walk through those changes one
by one.

Changes in transactions
With SAP S/4HANA, several areas have seen changes in
transaction codes, such as with Controlling. Multiple
transactions have been changed or replaced with new ones. The
following transactions are no longer available:
 Create/Change/Display Primary and Secondary Cost
Elements–KA01, KA02, KA03, and KA06
 Cost Object Planning by Cost Element/Activity/Statistical
Key Figure–KK16, KK17, KK46, and KK47
 Assign Currency Types to Material Ledger Type–OMX2
 Assign Material Ledger Types to Valuation Area–OMX3
The following transactions are changed/HANA-optimized:
 Result Analysis: KKAK replaced by KKAKH
 WIP Calculation: KKAO replaced by KKAOH
 Variance Calculation: KSS1 replaced by KSS1H
 Project Settlement: CJ8J replaced by CJ8GH

Changes in tables
In CO, the line items were stored in COEP and the header
was COBK. COEP is replaced by ACDOCA, which is the master
table. COSS and COSP are completely removed.

Changes in configuration
Apart from several technical changes in Controlling, there are
new configuration nodes added. We will now look at those
along with the relevance of each configuration area.
Configuration of the document type
for CO
In this node, the document type can be configured for CO
transactions. Since all documents flow to the same table, it is
important to segregate the accounting and controlling
transactions from a reporting perspective:

Click the highlighted section:


Standard SAP has provided CO as a reference transaction.

Maintaining document-type
mapping for CO transactions
This configuration node helps in controlling or restricting the
type of documents getting posted to CO:

Also, a default variant needs to be assigned:

The mapping looks as follows:

Checking and defining default


values for posting in Controlling
This setting is done for each operational company code. In this
activity, the default ledger and the document-type mapping are
linked:

Maintaining version for the ledgers


In SAP S/4HANA, you can specify the ledger from which CO
will read the actual data:

Once you enter the configuration node, the following settings


can be done:

With this, we have completed learning about the changes to


Controlling and to CO-PA in SAP S/4HANA.
Summary
I hope that you enjoyed reading about COPA. It was a pretty
detailed discussion, and we covered almost all the aspects of the
planned areas. Additionally, we discussed the key changes in the
controlling section, apart from COPA. COPA is one of the major
areas that underwent a change due to S/4HANA innovations,
and SAP is focused on account-based COPA.

Questions
1. What is COPA?
2. What are the key differences between account-based COPA
and cost-based COPA?
3. What are the table-level changes in COPA due to SAP
S/4HANA?
4. What are the key features of Material Ledger?
5. What is the meaning of the COGS split?
6. How COPA is different from Profit-Center Accounting?