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Compass for FAM End Users

Module 5: Compass Project Accounting May 2013

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Module topics
Compass Project Accounting overview Periodic Accounting Proportional Performance Accounting Completed Performance Accounting Amortization Accounting Final accounting considerations Labor expenses Project Accounting and conclusion

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Amortization
Amortization allows for the collecting of transition and startup costs onto the Balance Sheet Startup costs are then released over time (amortized) to the P&L as an expense The Accounting and Financial Manual (AFM) guideline on this subject can be found in topic 7015: http://ent121.sharepoint.hp.com/teams/AFM%20Topics/default.aspx

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Amortization process
Defer actual expenses to the Balance Sheet HP accounting rule Costs incurred during the Transition phase of a project are not recognized until Ongoing Delivery begins

Deferred expenses are posted to either long-term or short-term amortized expense account Amortized expenses are divided evenly over the life of the Ongoing Delivery once delivery begins

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Compass amortization
RA key
PS-DNA

Key features
Automates deferral of expenses to long-term/short-term deferred accounts (19140100, 15120100) Correctly defers and amortizes expenses incurred after amortization has started Uses the historical accounting rate

Exceptions and special features


Is not a standard SAP RA key (custom code) Separate batch job, and schedule, to standard RAdoes not run daily

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Batch job schedule


Batch job for PS-DNA is scheduled to run twice a month, on WD-4 and on last calendar day at 1700 hr system time For certain efforts, like migrations, additional PS-DNA jobs can be scheduled Each fiscal year, the dates for PS-DNA job, standard, and others are published on: FI Jobs Calendar If the PS-DNA job run fails to complete successfully, a ticket is raised by GSAO to SPS (Services Project & Support Team) to investigate If the PS-DNA job run is in Finished status, and if there are any PS-DNA errors, GSAO reports these errors to the country contacts (EngCOS/FAM) to get them cleared After the errors are fixed, they will not appear in the error logs when the scheduled program runs next time

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

When to use amortization


Apply PS-DNA to WBS elements in:
Transition, Transformation, Build, and Manage phases Consulting projects under the umbrella of an outsourcing arrangement Incremental projects and change orders that modify an existing outsourcing agreement with addition of significant new scope, new services, or new functionality beyond the base outsourcing agreement

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Impact of PS-DNA on WBS design (1 of 3)

PS-NRA
Post costs and perform amortization accounting at the lowest level

PS-DNA

PS-DNA

PS-DNA

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Impact of PS-DNA on WBS design (2 of 3)


This is a special rule that pertains to labor cost only You cannot post labor cost to a lower level than PS-DNA

PS-NRA
Labor costs must not be posted to a lower level element with PS-DNA as parent

PS-DNA

PS-DNA

PS-DNA

Labor costs
9 Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Impact of PS-DNA on WBS design (3 of 3)


Third-party products requiring CAN
PS-DNA must be at the lowest level in the hierarchy, EXCEPT in the case of third-party Product acquisitions using CANS User Status
Labor or other costs posted on CAN WBS element will not be considered for deferral Labor and other non-CAN costs must be posted directly on the parent DNA WBS element

PS-NRA

PS-NRA Labor and non-CAN costs posted here

PS-DNA

OPEN

Requires separate WBS element for CAN budget with CAN-specific user status settings Status codes CANS, CSSP, CCLS cannot be used on PSDNA element

PS-NRA CANS
NOTE: CAN process is covered in detail in the Acquisitions lesson to follow later in the course.

CAN Budget and CAN costs posted here

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GL accounts
One RA account: 33450000WIP Adjustments Labor and third-party Services Two B/S accounts: 19140100Long-term cost deferral 15120100Short-term cost deferral PS-DNA works with a significant number of expense accounts

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Accounts considered for deferral and amortization


SCS account 3304MP9999 3310MP9999 3327F*9999 3327MP9999 3363MP9999 336326xx99 3365MP9999 3370MP9999 AFM account 33040200 33100100 33270100 33270100 33630000 33630000 33650000 33701100 Third-party products Third-party services Project expenses (used in US only) Project expenses CATS IC labor transfer OMEGA IC billings OMEGA Domestic billings Equipment/Other Overheads Description

337126*
3372MP9999 337326* 3851MP9999 3852MP9999 3854MP9999 3326MP9999
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33712600
33720100 33732600 38510300 38520800 38540300 33260100

Response Center Charges


Cross charge from other BU Cross charge from MSGD Freight outbound expense Freight inbound expense Warehousing expense HP labortrade delivery (manual postings)

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

WIP account usage


The following accounts are used in conjunction with WIP adjustments on PS-DNA
Account 3345DA9999 (AFM: 33450000) 1914MP9999 (AFM: 19140100) 1512MP9999 (AFM: 15120100) Description Cost of Sales adjustment account for Labor and third-party Services (Work in Process Deferral, Contra Cost of Sales) Long-Term Deferred Direct Costs Short-Term Deferred Direct Costs Business area usage All Compass business areas

All Compass business areas All Compass business areas

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Reporting
Transition costs are captured in the ActDlvCost and DlvCostInc columns of CJE0 report The WIP column, which should capture the offset to the Balance Sheet, is always blank because CJE0 report has a value type restriction that allows RA postings only Review the Balance Sheet account details by using ZMPB or ZMPWBSLST in SAP or BW B/S reports

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Long-term and short-term cost deferrals


During deferral (status = OPEN)
The forecast start and end dates are used to calculate the amortization period (number of months) Any cost posting is divided by this number of months, then: A value equal to 12 months is posted to short-term deferral The remainder to long-term

During amortization (status = AMRT)


The remaining amortization period is calculated from the current date to the forecast end-date If this is > 12 months, amortization is from long-term deferral If < 12 months, from short-term deferral Amortization amount is the remaining deferred balance divided by remaining amortization months

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Cost planning
Plan expenses in Plan Version 0Plan expenses in either month incurred or month recognized PS-DNA uses WBS forecast start and end dates to determine number of periods for amortization No dedicated amortization plan is required

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Amortization principles
The WBS element User Status OPEN/AMRT and forecast start/end dates control the deferral or amortization of costs OPEN: Collect costs and defer AMRT: Recognize remaining deferred cost over remaining periods

Amortization begins when user status is changed to AMRT and not on forecast start date

Forecast end date controls the number of periods over which amortization takes place

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Amortization periods
Month Status 1 OPEN 2 OPEN 3 OPEN 4 OPEN 5 OPEN 6 OPEN 7 AMRT 8 AMRT AMRT 60 AMRT

Costs incurred in months 1-6 will be deferred and begin amortization in month 7 Costs incurred in months 7-12 will be amortized immediately Costs incurred after month 12 should be posted to a new WBSe and be recognized immediately and not amortized

Forecast Start Date

Amortization begins when user status is changed to AMRT and not on forecast start date

Forecast End Date

User status controls when amortization begins Forecast End Date controls the number of periods for amortization Forecast Start Date is not used, but is required by SAP

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Amortization example

Costs Posted in Mo. 1 Mo. 2 Mo. 3 Mo. 4 Mo. 5 Mo. 6

Amount $1,000.00 $1,200.00 $1,500.00 $1,000.00 $1,200.00 $0.00

Deferred $1,000.00 $1,200.00 $1,500.00 $1,000.00 $1,200.00 $0.00

Deferred Balance $1,000.00 $2,200.00 $3,700.00 $4,700.00 $5,900.00 $5,900.00

Remaining periods 60 59 58 57 56 55

Recognized $0.00 $0.00 $0.00 $0.00 $0.00 $107.27

Remaining Deferred $1,000.00

Costs posted before Mo. 6 will be amortized over 55 periods Costs posted in Mo. 7 will be $2,200.00 amortized over 54 periods Costs posted in Mo. 8 will be $3,700.00 amortized over 53 periods
$4,700.00 $5,900.00 $5,792.73

Mo. 7
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$3,000.00

Amortization begins

$3,000.00

$8,792.73

54

$162.83

$8,629.90

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Amortization calculation
Amortization amount this period

Total Incurred Cost Total Amortized To-Date Remaining Amortization Periods


=

periods from current period to forecast end date

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

PS-DNA user statuses


User status OPEN or NOLA Impact with PS-DNA Capitalization occursExpenses posted will be deferred Notes PS-DNA will determine the portions of expenses posted to long-term or short-term deferred accounts

AMRT
Must be applied in sequence

Amortization occursExpense Recognition takes place


Work Accepted: Any remaining deferrals on the Balance Sheet will be reversed to the P&L

PS-DNA uses the WBS forecast start and end dates to determine amortization period/amounts.
This user status must be used before setting user status to CLSD

WKAC

CLSD

Closed: No postings allowed

Must use WKAC before CLSD

IMPORTANT: PS-DNA job must be allowed to run between making any status changes.

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

PS-DNA golden rules


Always update User Status sequentially
OPEN AMRT WKAC CLSD Do not skip the WKAC step Do not go backward (such as AMRT OPEN) Wait for PS-DNA to run between changes Do not post manual JVs for expenses against 33450000 (WIP Adjustments Labor and third-party services) without seeking support

Do not use PS-DNA for amortization of vendor prepayment


Separate Process Guide

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Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

Thank you

Copyright 2013 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP Restricted.

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