I am working on intercompany profit elimination and trying to understand how it works.
We have implemented intercompany profit elimiation for US and trying to work for other countries. My client is using Dual costing for materials to record profit made in intercompany and later to eliminate (I/C profit elimination) at month end.
Can any one explain how does this work ?
Hello Deepa! I too am just beginning to work on our intercompany profit elimination techniques using 4.7 in SAP and Material Ledger actual costing. We previously set up 3 currencies. The currencies are as follows:
10 - Called Local currency. this currency will include the profit in the cost estimate and std of the transferred parts.
30 - Called Group currency. This one is a straight conversion to the group currency (if different) at the exchange rates provided in the rate table.
31 - Called Group at Group. This currency is expected to provide the cost estimate standard cost of all inventory without the extra profit layer.
So, we have a couple of things that must happen. We need a layer within the cost estimate that gets picked up in currencies 10 and 30, but not in 31. I believe this behavior is handled by the way the layer is created. If we use Additive Costs, the Accounting department would add the profit layer to the cost estimate for the normal costing variant. We would not apply an additive cost layer for the other costing variant that applies to the 31 currency. The other thing is that we then need to find a report that shows the currencies with (30) and without (31) intercompany profit layer. This report will show us the remaining intercompany profit layer in inventory which should be eliminated.
That is the basic strategy we are going to test with. Another way we plan on adding the layer is to use Purchasing Information Records (PIR) - Pricing Conditions. If we can get the PIR pricing conditions to work as described above using Additive Costs, we can hand off the daily maintenance to the purchasing side of the organization. This is just another option to explore.
If you have arrived at any additional epiphanies, please let me know.