Account Based COPA - S/4 HANA Finance

As a reporting tool, profitability analysis (CO-PA) is very effective for evaluating the profitability of your market segments according to various dimensions such as geography, customer, or product type.

Two types of CO-PA

There are two types of CO-PA: costing based and account based. However, most businesses that use CO-PA implement the costing-based version. In fact, when CO-PA is mentioned, that person is usually referring to costing-based CO-PA. This may be because costing-based CO-PA was the first to be introduced by SAP, mainly for sales and contribution margin reporting, whereas account-based CO-PA was subsequently introduced to deal with reconciliation with the general ledger.

Account-based CO-PA is simply the version of CO-PA that is structured by accounts rather than value fields (as is the case with costing-based CO-PA). The immediate advantage is that it is easier to reconcile to the general ledger, as there is no mapping involved and you are simply comparing the account in one module with another. Postings to account-based CO-PA are updated in the tables for controlling objects (COBK, COEP, COSP, and COEJ), and also the profitability segment tables CE4XXXX (where XXXX designates the operating concern) and CE4XXXX_ACCT (for additional segment-level characteristics. Because of the limited information that is available about account-based CO-PA (as a relatively small percentage of companies actively use it), there seem to be misconceptions about what it does. Some people with whom I have spoken think that you cannot use both account- and costing-based CO-PA at the same time. Others believe that if you activate account-based CO-PA, then your whole income statement becomes visible in CO-PA.

Advantages of Account-Based CO-PA

• It is easier to set up than setting-up costing-based CO-PA. It takes much less time than if you are configuring costing-based CO-PA (which involves the mapping of condition types, cost elements, variance categories, and so on to value fields).
   
• It is more dynamic than a typical profit-and-loss (P&L) report because you can slice and dice your accounting results according to dimensions such as customer, product, or salesperson.
   
• It facilitates easier reconciliation with the general ledger because you can look at the values in both modules using the same reconciling object (i.e., general ledger account).
   
• It can be used in conjunction with costing-based CO-PA. You can activate both costing- and account-based CO-PA at the same time by checking the relevant boxes in the Create Operating Concern definition screen.
   
• The timing of a cost-of-sales posting to the general ledger (in cases where the sales order is not a cost object) is aligned with the update in CO-PA. Therefore, if a product was shipped in one month and billed in another, this does not create an imbalance between account-based CO-PA.
   

Disadvantages of Account-Based CO-PA

• No contribution-margin reporting or variance categories (see the note that follows). For companies that want contribution-margin reporting, account-based CO-PA is not suitable because it does not break down cost-of-sales into its cost components and hence you can’t distinguish fixed costs from variable costs. Also, you do not get the granularity that is needed to analyze the individual cost buckets beyond the total value that was posted to the general ledger. A similar limitation applies to the production-variance categories, such as input price, input quantity, and resource use. With account-based CO-PA you only get the total production variance that was posted to the relevant account when the production order was settled.
   
• Contrary to conventional belief, you cannot bring every P&L account into account-based CO-PA. For example, if an account is normally posted with another cost object such as a cost center or a production order, it does not also go to account-based CO-PA (as the SAP system takes only one true account assignment with a posting). You, therefore, need to use an assessment or settlement to move the values to account-based CO-PA. In that case, the cost element in CO-PA is not exactly the same as what was originally posted in the general ledger.
   
• You cannot make manual postings into account-based CO-PA the way you can in costing-based CO-PA (using transaction code KE21N). The system restricts this function because it could affect the reconciliation with financial accounting. Therefore, you have fewer options for “trueing up” account-based CO-PA if something goes wrong. In addition, you cannot create line-item reports (transaction code KE91) with account-based CO-PA.
   
• You cannot map statistical conditions from the sales and distribution module into account-based CO-PA. In costing-based CO-PA you can map conditions that do not have an accounting equivalent into a CO-PA value field (for example, to build in a what-if scenario in your profitability reporting). However, because account-based CO-PA pulls its values only from accounts, these statistical conditions are not shown in the reports.
   
• Account-based CO-PA increases the postings in database tables. Account-based CO-PA postings are updated to CO object tables, such as COBK and COEP. Table COEP is normally a huge table because it collects all the line items of CO postings, and a build-up of records in this table could ultimately affect performance. Additionally, if you activate both account-based and costing-based CO-PA, then you will be updating two potentially huge line-item tables: COEP (for account-based) and CE1XXXX (for costing-based) with essentially the same CO-PA data.