Inter-segment Sale and Purchase ? Revenue and Cost

[Former Member]

Dear All

I have this scenario, One company code and 4 Segments.

Company Code : 1000

Segment 1       : Cycle as "S1"

Segment 2       : Motorcycle as "S2"

Segment 3       : Food as "S3"

Segment 4       : Hotel as "S4"

Plants

Segment 1      : Plant 1 as "P1"

Segment 2      : Plant 2 as "P2"

Segment 3      : Plant 3 as "P3"

Segment 4      : Plant 4 as "P4"

Detailed scenario :

S4 is the main Segment where Sales are generated i.e.

Sales Order -> Delivery -> Invoicing -> Incoming Payments

S3 segment provides food to S4, i.e. they procure vegetables, fish, chicken, meat. S3 sells these things to other customers at cost + profit, and sells these things to S4 at cost + profit.

We are thinking to use ME21N - STO, supplying plant P3 and delivery plant P4 with an extra cost handled in Condition Type, to record profit of Segment 3.

I am confused what is the standard procedure of Sale and Purchase between Segments, Financial Statements on Segment Level, when consolidated, removal of Inter-segment profit.

Waiting for your reply.

[Former Member]

Hi,

what did you describe it's very likely to Transfer prices.

'We are thinking to use ME21N - STO, supplying plant P3 and delivery plant P4 with an extra cost handled in Condition Type, to record profit of Segment 3' - in this case you'll not get Legal reporting, that's why you need to use parallel valuation.

[Former Member]

Hello Aleksey

We are looking for some solution or workaround, outside Transfer Pricing or Material Ledger. There is no such legal reporting requirement, but how parallel valuation would help ? Please explain further

Regards

Omar Sajjad

[Former Member]

Hi,

basically you need to reporting. 1 - Legal, without this additional cost and internal revenue, 2 - Internal reporting, with additional costs and revenue.

And 1 will be Legal valuation, 2 - Transfer prices valuation... So it's parallel valuations

If you don't want Material Ledger, then the only option is to do it on 'Parallel accounts'. I mean that you need to reflect this additional values on these accounts, which are 'Off balance' accounts for Legal reporting.

Also you could try to use note 937872 for additional revenue for cross Profit center posting, but any way you need to develop something for additional costs.

By the way, do you need to 'use' this costs after? I mean to settle?

[Former Member]

Hi

If we opt the option to do it in 'Parallel Accounts', what basic setup needs to be defined ? Will it be covered in FI or CO ?

I have come up with the following entry using ME21N - STO

Dr. Stock Account     120     Segment 4

Cr. Stock Account     100     Segment 3

Cr. Revenue A/C         20      Segment 3

When we open P/L on Segment 3 it shows accurate figures but when Company Code P/L is executed, this revenue is still shown.

I believe at Company Code level this inter-segment profit should not be seen.

Coming back to your point, if we need to settle this cost, how can we achieve that ?

[Former Member]

Hi,

I don't think there is an easy answer, because it's not a standard solution... Also there is a need to understand all details-processes, reports and so on.

'When we open P/L on Segment 3 it shows accurate figures but when Company Code P/L is executed, this revenue is still shown.' - that's why I told about parallel valuation. If you need also to manage materials with different prices then it will be very combersome solution. I did something similar to it in FI-SL, but this project took about 10 months.