PURCHASE ORDER

ACCRUALS IN SAP
S/4HANA 1909
1. INTRODUCTION

Organizations procure a wide variety of consumables, goods and services to run their day-to-day operations. On delivery, invoicing and payment for
the products or services rendered can pose quite a challenge. Some of the challenges arise from invoices being delayed or if advances had been paid –
for example, insurance payments and subscriptions. Finance has the legal obligation to accrue or defer these service and consumable costs as well as
advance payments at month-end or quarter-end.

Before SAP® S/4HANA® Accruals Management, automating the management of the entire accrual/deferment process was a near impossibility. The
S/4HANA Accruals Management tool helps calculate, validate and post transactions automatically along with workflow setup for approvals.

Accrual: In some cases, financial expenses belonging to the current month will be invoiced in future periods. For example, a supplier may have delivered
consumables, but has not yet submitted an invoice.

Deferral: Defer or delay recognizing certain revenues or expenses on the income statement until a later, more appropriate time. Revenues are deferred
to a balance sheet liability account until they are earned in a later period. When the revenues are earned, they will be moved from the balance sheet
account to revenues on the income statement.

Manual Accruals – ACAC SAP S/4HANA 1909 includes the following features:
• In this process, one must create an accrual object, then define and • Accrual engine posting line items are stored only in ACDOCA
assign posting accrual items via manual Excel upload. • All currencies of general ledger accounting are supported
• Standard finance reversal process transactions FB08 and F.80 are
Purchase Orders Accruals – POAC supported
• Data transfer from Procure to Pay to accrual management via • No redundant storage of accrual documents
accrual objects. • Enables complex postings, such as more than two lines items
• Note: In this white paper, we will focus on the purchase order • No separate balance carryforward required
accrual process. • Transaction ACACCARRYFORWARD is obsolete

Accrual Methods
• Accrual method will be based on the delivery schedule of the
purchase order.
• Linear distribution of purchase order value.

2. PURCHASE ORDER ACCRUALS PROCESS

The chart below shows the various scenarios for the purchase order process.

Purchase Order Consumables and Services S/4HANA Accruals Management

• Purchase Order without Goods Receipts

• Purchase Order with Non-Valuated Goods Receipts

• Purchase Order with Valuated Goods Receipts (physical Accrual Objects

goods receipts not accounted in the books)

• Purchase Order with Service Entry Sheet

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Purchase Order without Goods Receipts
This consists of mostly consumables, with liability booked upon invoice receipt. Since there have been no goods receipts, accrual is calculated based on
the following methods.

Purchase Order with Non-Valuated Goods Receipts

Quantity received without value postings (no value update). In this case, we need to accrue for the non-valuated goods receipts.

Purchase Order with Valuated Goods Receipts

Inventory received but not accounted for with goods receipts. For example, inventory sitting in quality inspection, supplier sends inventory prior to due
date, etc.

Purchase Order with Service Entry Sheet

A service entry sheet posts the costs like a valuated goods receipt. Usually, there is no delivery schedule available in the purchase order. For example, a
supplier payment is based on hours spent on the job.

The following chart depicts the overall purchase order accruals process.

Purchase Order Accruals Process

Create Purchase Order **Transfer Purchase Calculate *Approve – GL Post Accruals

Order to Accruals Accountant

Generate Proposal *Review – PO Owner ***Reversal of Accrual

and Controller Postings

* Optional
** Automatically
*** After Supplier Invoice Receipt

1. Create Purchase Order via SAP Fiori® Manage Purchase Orders app.

2. Transfer Purchase Order to Purchase Order Accrual Object. Each Purchase Order automatically transfers into an accrual object. Display of
accrual objects by transaction code - POACTREE03.

3. The system calculates accrual object based on rules defined in the configuration.

4. Review and approve accrual object. At the end of the period, reviewer can adjust accrual amount, or approve to post.

à As a prerequisite, the proposal step must be executed using transaction ACEPROPOSALRUN, prior to reviewing and approving
transactions.

5. Reviewing can be performed using transactions FACRARVWBU selecting purchase order owners or cost object accruals FACRARVWCO for
the controller.

6. In addition to the above, activation of the approval process using transaction code - FACRAAPPRVGL.

7. The difference between review and approval: If it is the only active review, then the system will post the proposed accrual amounts even if no
review was done, but if the approval is active, then only those accrual amounts that have been approved will be posted.

8. Post accruals at the period end. The accrual amounts are posted, for example, with the transaction ACEPOSTINGRUN (Periodic Posting Run).

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3. DETAILED TRANSACTIONAL FLOW IN SAP S/4HANA

3.1. Create Purchase Order

Usage: Purchase Order is an agreement between the ordering party and the supplier.

Logistics à Materials Management à Purchase Order à Create à ME21N - Vendor/

Transaction Path:
Supplying Plant Known

In this example, ABC Management Consulting LLC rendered services on 08/02/2020. This must be updated in the Delivery Schedule tab to
calculate accruals.

Since this is a service-related Purchase Order, no goods receipt is expected.

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 Purchase Order Accruals – Transfer
Using the SAP Fiori Manage Purchase Orders app, a purchase order with multiple or single line items can be created. The system
determines whether accruals are potentially relevant or not. This is done by evaluating the settings of the Purchase Order Transfer Variant
in the configuration.

3.2. Display Accrual Objects

Accrual objects are created automatically in the background when a purchase order is
Usage:
generated in the system.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management

Transaction Path:
à Purchase Order Accruals à POACTREE03 - Display Accrual Objects

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 Start and End of Life periods are defined by the characteristics Start and End of Life for the given accrual object.

After approving the accrual object, the Reviewed and Approved Amount field will appear in transaction currency; initially, it will have a
zero value.

Interpretation of Accrual Item Types

The following accrual item types are relevant for accrual postings:
• ACCRL – Accrual Amount
• ACTCST – Actual Costs
• PLNCST – Planned Costs

In the case of a partial invoice receipt scenario, ACTCST (actual costs) will be subtracted from PLNCST (planned cost) to ACCRL (derive
accrual amount).

3.3. Edit Time Intervals for Accruals Reviews and Approvals

This transaction will generate time intervals for a selected interval variant. The intervals
Usage:
are to be used for review and approval of periodic accruals.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path: Purchase Order Accruals à Review & Approve Accruals à FACRATIVL - Edit Time Intervals for
Accruals Reviews and Approvals

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 Before generating the intervals, the following required data is entered:
• Start Date – Specify a start date of the range for which intervals are to be generated.
• End Date – Specify an end date of the range for which intervals are to be generated.
• Generation Frequency – Specify how frequently to generate intervals.

3.4. Propose Periodic Amounts

Usage: Use this transaction to propose accrual amounts for each period.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path: Purchase Order Accruals à Review and Approve Accruals à ACEPROPOSALRUN - Propose
Periodic Amounts

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 Calculate the accrual amount in a specific Ledger Group level. If the Ledger Group is left blank, it will post into all ledgers.

• Application Component POAC means Purchase Order Accruals

• Accrual Object ID is the same as purchase order number
• Accrual Subobject ID equals purchase order line item

3.5. Review Purchase Order Accruals – Purchase Order Owners

Usage: Use this transaction to approve the accrual amount by purchase order owners.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path: Purchase Order Accruals à Review and Approve Accruals à FACRARVWBU - Review Purchase
Order Accruals – FACRARVWBU - Review Purchase Order Accruals – Purchase Order Owners

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 The following are the lifecycle statuses of an accrual subobject: The following approval types can be selected:
• P – In Process • E – Explicit review is required
• U – Paused • A – Automatically reviewed; the amount is within the
• S – Suspended threshold range
• F – Prematurely Finished • B – No review is required; the amount is below the lower
• D – Marked as Deleted limit of the threshold
• A – Finished • N – No review is required; the review process hasn’t been
activated

Review Status indicates the status of an accrual item in the review process.

Select Set as Reviewed and save.

3.6. Review Periodic Accruals – Controllers

Use this transaction to approve the accrual amount by controllers, who are responsible
Usage:
for FP & A division.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path: Purchase Order Accruals à Review and Approve Accruals à FACRARVWBU - Review Purchase
Order Accruals – FACRARVWCO - Review Periodic Accruals – Controllers

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 Once the transaction is executed, the system will allow a comment to be entered if desired.

Once data is verified and found correct one can save the document for posting.

3.7. Periodic Posting Run

Usage: Use this program to calculate and post accruals through the S/4HANA Accrual Engine.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path:
ACEPOSTINGRUN - Periodic Posting Run

Process the transaction once all the required data has been entered.

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 Upon saving the data set, the financial document will be created.

Details of the financial document can be viewed as shown below:

• Document type YP was used for accrual postings

• Observe reference transaction ACES4 to identify accrual postings in the documents and ACDOCA table

3.8. Display Accrual Objects

Accrual objects are created when a purchase order is generated and displayed in the
Usage:
accrual object transaction.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path:
Purchase Order Accruals à POACTREE03 - Display Accrual Objects

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 The above figure shows the approved accrual amount.

3.9. Supplier Invoice

The Accounts Payable team receives an actual invoice from a supplier, which will need to
Usage:
be keyed into the system.

Logistics à Materials Management à Logistics Invoice Verification à Document Entry à MIRO

Transaction Path:
- Enter Invoice

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 Execute Periodic Posting Run to Reverse Accrual Amount

Accruals are projected values, which are to be accounted as part of the month end process. These will be reversed on the first day of the
following month, or when an invoice is received from the supplier.

In S/4HANA, reversal of accrual postings can be done in several ways. All accrual postings can be reversed using reversal transaction F.08
and F.80 mass reversal.

Note: Performing a manual reversal of accrual postings is not required if setup customization is done for enabling automatic inverse postings. The
need to perform manual reversals should be exception-based.

In this example, we are doing manual accrual reversal.

3.10. Display Accrual Objects

Accrual objects are created when a purchase order is generated and displayed in the
Usage:
accrual object transaction.

Financial Accounting à General Ledger à Periodic Processing à Accruals Management à

Transaction Path:
Purchase Order Accruals à POACTREE03 - Display Accrual Objects

Enter purchase order number, or if left blank, all purchase orders will be selected.

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 Select the Postings tab to display the document and then select Reverse.

Multiple documents can be reversed using the Select All indicator.

4. KEY TAKEAWAYS

• SAP S/4HANA 1909 provides the best solution for accruals management.
• It can be implemented independently after migrating to S/4HANA 1909 from any legacy system.
• The purchase order accruals will be calculated automatically.
• Optionally, a review and approval process for accrual postings can be implemented.

14 | Purchase Order Accruals in SAP S/4HANA 1909 Contact Bristlecone at [email protected]

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