9/24/2019 Material Ledger and Actual Costing | SAP Blogs

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Sarvottam Darshan
February 1, 2018 5 minute read

Material Ledger and Actual Costing

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Executive Summary:

From the time of Luca Pacioli, the father of accounting, till today, inventory valuation has been a point of debate.
In countries with stable in ation rate it is considered ne to have inventory valuated at standard cost. In such
countries material inventory values are normally carried by the SAP system in one currency with raw materials
valuated at moving average price and semi- nished and nished goods valuated at standard price. In countries
where currency is not stable and in ation rates are high it is pertinent to have inventory valuated at actual
costs. In such countries it might also be required to record inventory valuation in more than one currency,
usually a local currency and another more stable reporting currency like the USD to indicate the in ationary
impact on the inventory values. SAP supports this requirement of showing inventory valuation in multiple
currencies at actual cost using the functionality of material ledger and actual costing. This whitepaper provides
an overview of material ledger, actual costing, its setup in SAP and some known issues based on real life project
experiences.

Introduction: Material Ledger and actual Costing in SAP

Material Ledger in SAP essentially is a line item wise record showing changes in stock and prices with each
material movement in up to three currencies. Material records pertaining to opening stock, goods receipt,
invoice receipt, debits, credits etc get logged in the ledger along with the price and exchange rate di erences
throughout the month. The currency translations for the three currencies happen at historical exchange rates
available at the time of posting. This ledger with a complete record of each single transaction of the material
forms the basis to calculate actual cost for the material at period end. The actual price thus calculated in SAP is
called the periodic unit price and can be used to revaluate inventory. This actual price can then also be treated
as standard cost for the next month. A typical material ledger and actual costing ow in SAP is as shown below:
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The material ledger also becomes useful in cases where transfer prices are active between organizational units
of the same enterprise i.e. transfer prices between two legal entities, two groups or two pro t centers. In this
case material ledger provides the base value for transfer price calculation for the sending material and records
the transfer price for the receiving material.

Interface with the User

With material ledger active a SAP user gets exposed to some additional information and operational steps.
Following additional information is available at his/her disposal:

Line item display of all transitions that have happened on the material
Ability to see the inventory value in more than one currency

Users can conduct a detailed material price analysis at any time as shown below:

Material Price Analysis-Price History View: CKM3

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Note: The transaction CKM3/CKM3N was refactored and now provides a simpli ed and improved view of
materials in plants with active Actual Costing in S/4 HANA. It replaces the former CKM3 view Price
Determination Structure. The former CKM3 Price History view is still available via transaction CKM3PH for all
materials (independent of price determination control and active Actual Costing). All other views formerly
o ered by CKM3/CKM3N are no longer available.

Note reference: wiki.scn.sap.Com

At period end the user can perform actual cost update based on the transactional gures captured in material
ledger as follows:

Actual Costing-Costing Cockpit: CKMLCP

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Note: As of S/4HANA 1610, there is a new Actual Costing with simpli ed data model and calculation logic. You
may nd detailed explanations on this page.

Note reference: https://wiki.scn.sap.com/wiki/pages/viewpage.action?pageId=477832259

SAP also provides a plethora of reports for business users in Actual Costing / Material Ledger Information
System.

Settings and Con guration

The settings and con guration steps involved are as listed below:

Activate Valuation areas for Material Ledger (T.Code: OMX1)

Assign Currency Types to Material Ledger Type (T.Code: OMX2):
Assign Material Ledger Types to Valuation Area (T.Code: OMX3):
OBYC Settings (Regular setup+ material ledger cost price di erence setup etc)
De ne Movement Type Groups of Material Ledger (T.Code: OMX7)
Material update structure (T. Code : OMX9)
Assign Movement Type Groups of Material Ledger (T.Code: OMX0)
Assign Material Update Structure to a Valuation Area (T.Code:OMX8):
Activate actual costing
Activate Actual Cost Component Split
Check Material Ledger Settings (T.Code:CKM9)
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Production Startup (CKMSTART): do a test run initially

Production Startup (CKMSTART): The expected results of a good material ledger production startup is as
shown below

Note: During material ledger and actual costing setup transaction code CKM9 is used as a key tool to ensure
the setup is technically ne at each step. Each element in this report should show  (ok) as a con rmation for the
setup to be ne. All the checks except one are set ok once the above setups are correctly maintained. The one
check which does not come through the above setup is the “Involved in cost obj. Controlling” setup for material
ledger setup. This check automatically becomes active the moment the rst cost object (Production Order,
process Order, cost collector) for the production process is created in SAP. A section of CKM9 result is as
shown below:

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Some additional information for material ledger implementations:

Material masters do not get created after material ledger is made active but not productive. So either create
it before material ledger is made active or after it is productive.
All previous material ledger periods need to be closed in production before going live. In number of cases
chances are that material ledger gets productive in one month (say 04,2012) and then business tries to
execute closing after the completion of the next month ( say 05, 2012). In such cases system generates error
message. Forced closing as per OSS note number 361236.
Detailed information on posting Logic in material ledger: OSS note 908737
Setting Material Ledger Unproductive in Development and Quality servers OSS note 108374

Conclusion:

SAP’s material ledger functionality provides the ability to record inventory values in more than one currency
and indicates the inventory in ationary trends. Line item wise material transactions provide a meticulous
approach to conduct actual costing at period ends. It provides detailed information to users on the ow of
actual costs and the impact due to it. The functionality needs to be activated with caution as once activated in
production environment it cannot be deactivated.
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References

http://help.sap.com

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Assigned tags

FIN Material Ledger | actual costing | controlling |

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