You execute the revenue recognition run and notice a deferred Cost of Goods sold amount for Sales Order item ABC-AA (ABC-AA represents the Sales Order item ID).
- The Sales Order item is of type Product -delivery based.
- The Sales Order item uses an Event-based accrual method, such as 2-Recognize at Point of Delivery or 1-Recognize at Point of Invoice.
- The ordered material, XYZ, is valuated with the moving average perpetual cost method (XYZ represents the material ID).
- For the Sales Order item you created Goods Issues to Customer as well as Reversal Goods Issues to Customer.
- The inventory cost of material XYZ changed during the different goods issue business transactions.
You expect the Revenue Recognition run to recognize the actual, delivered cost. Instead, you notice that even though the run recognizes the correct Delivery Amount, it still defers a value on the Deferred Cost of Goods sold account.
SAP Business ByDesign
Reproducing the Issue
- In the Cost and Revenue work center go to the Revenue Recognition view.
- Find run XXX and open the Application log.
- Go to the Processed Successfully tab and here to Advanced Information.
- Access the Event Based tab and find sales order item ABC-XX.
- In the Total Delivery Amount collumn the correct cost amount appears.
- But in the Deferred CoGs Amount collumn a value appears which you cannot explain.
The system is designed to calculate an average material price for all the use cases of event-based scenarios. The functionality is designed to derive the cost as accurately as possible and therefore applies an Absolute Cost formula to calculate the Cost to be recognized, considering
- the Total Absolute Cost: all delivery amounts [without considering delivery (positive) or delivery reversals (negative)],
- the Total Absolute Quantity: all delivery quantities [without considering delivery (positive)or delivery reversals (negative)],
- the Total Planned Quantity: Sales Order Item ordered quantity,
- the Percentage of Completion (POC): actual delivery quantity ÷ planned quantity
The formula is as follows:
Cost to be Recognized: (Total Absolute Cost x Total Planned Quantity÷Total Absolute Quantity) x POC.
If there is a difference between the Delivered Amount and the calculated cost to be recognized (due to reversal postings), then this difference will be posted to the Deferred CoGs account.
Sales Order item XYZ-XX
Ordered Quantity: 10 ea
- Goods issue AAA: 5 ea with an inventory cost of 2,00 ea - Delivery Amount: 10,00 LC (AAA represents the goods issue ID: LC stands for Local Currency).
- Reversal Goods Issue BBB: -5 ea, Delivery Amount: -10,00 LC (BBB represents the reversal goods issue ID).
- New Goods Issue CCC: 5 ea, with a new Inventory Cost of 2,50 ea - Delivery Amount: 12,50 LC (CCC represents the new goods issue ID).
This translates into
- Absolute Delivery Amount: 32,50 LC [10,00 LC + 10,00 LC (not considering the negative sign) + 12,50 LC]
- Absolute Delivery Quantity: 15 ea [5 ea+5 ea(not considering the negative sign)+5ea]
- Actual Delivery Amount: 12,50 LC
- Actual Delivery Quantity: 5
- Planned/Ordered Quantity: 10 ea
- POC: 0,5 (5/10)
Cost to be Recognized: (Total Absolute Cost x Total Planned Quantity / Total Absolute Quantity) x POC:
Cost to be Recognized: (32,50 LC x 10 ea ÷15 ea) x 0,5= 10,83 LC
Actual Delivery Amount: 12,50 LC
Difference: 1,66 LC
The revenue recognition run posts the difference of 1,66 LC to the Deferred Cost of Goods sold account.
The system works as designed here and calculates an average material price for all event-based scenario use cases.
The only two options to clear the deferred costs resulting from material unit cost variances during the course of a sales orders goods issues and their reversals is to either
- change the accrual method of the affected sales order item to 4-Reverse Deferrals and Accruals or
- create a Manual Journal Entry Voucher of type 00088 - Manual Entry for Sales Documents with screen variant 633 - Man. Adjusting Entry for Sales Documents.
deferred CoGs, sales order item, event-based, material, inventory cost change , KBA , deferred cogs material inventory cost , moving average inventory cost change , event-based revenue recognition , SRD-FIN-COR , Cost & Revenue , Problem