1. Create Result Analysis Key Y00001 configuration
2. Define Result Analysis Version
3. Define Valuation method for Result Analysis key
4. Define Line ID’s
1. Introduction
This blog starts with explaining a reporting issue faced in some given scenarios. And then in general
will explain the possible solution. In the later part will see how SAP Result Analysis addresses these
issues and provide some basic configuration details relating to Result Analysis.
2. Scenario
Let’s start with a scenario where in REV Ltd., a construction company gets into a customer project to
build a plant. Terms of the contract are as below;
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The contract is of 10 million. Which means REV Ltd. gets revenue of 10 million from the
contract.
Invoice of 5 million will be raised at the beginning of the contract and the remaining 5
million will be raised upon completion of the contract which is after 4 months.
REV Ltd. has estimated that it would cost 8 million to complete this project. It means a profit of 2
million (i.e., 25% profit on the cost).
Below is the impact of this contract over the period (of contract) on Profit and Loss of REV Ltd.,
An investor looking at the above financials at the end of period 1 with no other details, finds the
business to be highly profitable and may take a wrong investment decision.
Even when we look at the financials throughout the contract period, anyone will certainly interpret
the business to be highly volatile and risky, though it is not as it looks by numbers.
To overcome the scope for interpretation and to keep a more stable and appropriate profit and loss
statement, it requires adjustment in the reporting revenue or corresponding costs (as the case may
be) in each period. In most cases, this exercise is also required to get complied with accounting
regulators/standards.
So, how do we do this?
Indeed, there are multiple approaches. An appropriate one can be picked based on the nature or the
business, internal policies, available information, regulations or any other influential aspects.
Nevertheless, for our discussion and understanding we will limit our self to below two approaches;
1. Percentage of Completion Method (POC) – Cost Based
Under this method;
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Calculate POC of a project based on how much has been already spent on the project in
comparison with the planned cost, i.e., POC = (Actual Cost/Planned Cost) * 100
Recognize revenue only to the extent of POC, i.e., Calculated Revenue = Planned Revenue *
POC
If there is difference between Actual Revenue and Calculated Revenue, it must be adjusted.
When Actual Revenue > Calculated Revenue (Revenue Surplus), then reduce the revenue.
When Actual Revenue < Calculated Revenue (Revenue in Excess of Invoiced), then increase
the revenue.
There will be no change in reported cost.
2. Revenue Based Method
Under this method;
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We keep revenue as it is; but do adjust the expenditure/cost to bring it in proportion to
revenue.
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Calculated Cost = (Actual Revenue/Planned Revenue) * Planned Cost
If there is difference between Actual Cost and Calculated Cost, it must be adjusted.
When Actual Cost > Calculated Cost (Work in Process), then reduce the cost.
When Actual Cost < Calculated Cost (Reserves for Unrealized Costs), then increase the cost.
There will be no change in reported revenue.
Now with adjusted financials as above under both approaches, profit is evenly distributed over the
period and business doesn’t look volatile and risky. This is also called as principle of matching cost
and revenue or ‘matching principle’.
In SAP, the ‘Result Analysis’ feature helps in automatically calculating and adjusting the financials as
above.
3. SAP Result Analysis
3.1 Process
In SAP, a project is created with required Work Breakdown Structure (WBS) for each customer
project. Planned cost and revenue of the project is also maintained. All expenses relating to the
project are posted on WBS (cost object). Revenue relating to the project is also posted from SD
(billing) on the WBS. (It is to be noted that when revenue is posted on WBS, COPA documents are not
generated.)
During period end, Result Analysis (Transaction KKA2) is performed on the project to match cost
and revenue. It is performed at WBS level while it considers all the sub level WBS and Network
Activities under it. To calculate and propose accounting adjustment entries as per matching
principle, Result Analysis considers various data like planned cost, planned revenue, actual cost,
actual revenue, method to be used to match cost and revenue, and GL accounts to be posted. Result
Analysis does not post any accounting entries. The calculated results should be saved to get
considered for settlement run.
Result Analysis screen shows summary of inputs considered for calculation along with adjustment
calculation;
The next step is Settlement (Transaction CJ88) of the project. Settlement of the project happens
based on the settlement rule assigned. Normally in case of customer projects, settlement happens on
COPA. Settlement will post settlement accounting entries as well as result analysis entries.
Image below depicts overview of Result Analysis;
3.2 Configuration
Let’s try to understand some of the important configuration which help Result Analysis work.
Maintain Result Analysis Keys (Transaction OKG1)
Result Analysis Key (RA Key) is a control parameter for Result Analysis. It is assigned to a WBS.
When a RA Key is present in WBS it becomes Result Analysis relevant. The method assigned to RA
Key will be considered when Result Analysis is executed.
Define Valuation Methods for Results Analysis (Transaction OKG3)
Valuation Method specify the method by which results analysis is carried out. Whether it is CostBased POC Method or Revenue-Based Method or so on. It is assigned to RA Key in combination to
controlling area and RA Version.
Valuation Method can be assigned in Simplified Customizing or in Expert Mode. With Expert Mode
lot of settings can be made in the valuation method. It is recommended to user Expert Mode only
when necessary.
Below is the list of Result Analysis Methods available in SAP; (More details on Results Analysis
Methods can be found in SAP Help)
Define assignment of Cost Elements (GL Account) for Results Analysis (Transaction OKG5)
Cost Elements are assigned to Line IDs defined. Line IDs structure the results analysis data according
to the requirements of Financial Accounting. Postings to these cost elements (GLs) will be
considered for actual data (cost and revenue) while calculating result analysis.
Define Posting Rules for Settlement to Accounting (Transaction OKG8)
This configuration helps us to define the GL accounts which needs to be posted as part of result
analysis adjustments upon settlement. For example, GLs for Revenue in Excess of Invoiced or
Reserves for Unrealized Costs. Result Analysis Category is the key for account determination. It is
defined with origin of Result Analysis data. For Ex. RA Category POCI (Revenue in Excess of Billings)
is referred for posting when calculated Revenue in Excess of Billings.
This configuration is maintained mainly in combination of CO Area, Company Code, RA Version and
RA Category.
4. Conclusion
Hope you find the blog helpful. The intention of this blog is to give an overview of the Result Analysis
concept. Result Analysis has lot of methods and options and please do further reading to know and
utilize the full potential of Result Analysis.