blueprint document

6/13/2014 Blueprint Document

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GLENMARK SAP ECC 6.0EVEREST PROJECT

Business Blueprint Document

COCost Center Accounting

Process Number: CO 1.1

TITLE: Cost Center Accounting.Prepared By: Jos Eduardo Nascimento

INDEX

I Business Process Overview 2

II Customer Expectation 3

III SAP System Functions (Process Flow) 4

Cost Elements 5

Cost Center 7

Processes 12

Internal Processes Controlling 12

Cost Center Accounting 12

IV Transactions / Programs / Reports / User Exits 14

V Description of Functional Deficits 15

VI Approaches to address Functional Deficits 16

II Interfaces 16

VIII Authorisations 16

IX SAP Configuration 16

Reporting Requirements 16

XI Supplementary Information 16

XII Annexure: 16



I Business Process Overview

AS-IS Process:

AS IS COST CENTRE ACCOUNTING

I Current method Cost Centre Accounting

Microsega follows the method of booking of expenses as per cost centers. Following is the informationpertaining to the cost centre accounting in current system :

Overheads are booked cost centre on daily basis.

Provision of overhead done as per cost centre.

In case of common expenses booked to the cost centre, an allocation is done to the receiver

cost centre. This is a period end activity. Some instances of distribution cycles are: Buildingrent, Condomini, Cleaning services, Telecommunications (Telecom), Coffe break services,Printing and stationery, Moto boy services, Equipments Insurance.

Sales and material consumption is not booked to cost center.

In Microsega cost centre is mandatory only for the those accounts for which it is configured. A

list of GL codes for which cost centre is mandatory is attached as per Annexure A.

II Cost Center Budgets

Cost centre budget are maintained in the system by cost centre and GL codes.

There is no mechanism in microsega restricting the spend of actual expenditure within budget.

III Cost Center Reports (Actual x Budget)

Budgets are updated in current Microsega by Cost centre.

Cost centre report Budget vs Actual is available in the system. This report is available for a single

period as well as accumulated. All the department heads have access to this report.

Analysis of the budget vs actual is done by a Finance team member and reasons for variances

asked for.



IV Allocation of one CC cost to other CC

Expenses which are common in nature are booked to a cost centre which is specially created for

common expenses.

At the end of the period these expenses are allocated to the receiver cost centre by distribution

cycle. The basis of distribution cycle is by head count.

This is period end activity.

V Current hierarchy structure

Cost centre are maintained in the current system by hierarchy.

A list of the same is attached as per Annexure B.

II Customer Expectation

Cost Center Controlling

TO BE COST CENTRE ACCOUNTING

Going forward the SAP system to have all the functions as detailed in the AS IS process. Tohave more clarity, our forward looking requirements are listed below.

Cost Center Budgets

Cost centre budgets to be maintained in the system using version control.

There budget to be available in the system by cost centre, GL codes, by period and by versions.

Budgets to be updated by the Finance team member.

Upload program to be made available to the core team members for upload of budgets by cost

centre, GL code, by period and version.

Allocation of one CC cost to other CC



A separate cost centre to be created for loading of the common cost.

This cost centre will be used for allocation of expenses to the receiver cost centre.

The allocation of the cost will be by distribution cycle. The allocation logic to be provided by

Finance team based on the head count data.

The allocation logic to be revised on a monthly basis by Finance, based on the head count datareceived from HR

Cost centre code and hierarchy structure :

Cost centre codes to be created based on the logic followed in India.

Cost centre hierarchy to be created based on the India cost centre hierarchy structure.

List of cost centre and their hierarchy attached as per the annexure C

Cost Center Reports (Actual x Budget)

Cost centre report to be made available as follows :

By cost centre and gl code For a period and YTD.

By hierarchy / cost centre / gl code For a period and YTD

Downloadable reports in the excel format for analysis.

Cost Centre Budget Control

System to provide mechanism by which the actual expenditure are restricted within thebudgeted expenditure for a period.

Cost Centre Actual Cost:

System to make cost centre mandatory for the list of GL codes provided as per Annexure D.

III SAP System Functions (Process Flow)

Cost Center Controlling

Cost center accounting (CO-CCA) is used to collect department overhead costs suchas operations, finance or sales departments. Cost centers are attached to a company



code and to the controlling area. In addition they are always attached to a profitcenter (see below).

Postings to cost centers take place using cost elements, either primary orsecondary. Primary cost elements have a one to one correspondence with general ledgeraccounts (a posting to a P&L account, for example Salaries, immediately updates theprimary cost element Salaries also). Secondary cost elements exist only in Controlling andare used for re-postings or allocations between cost objects such as a settlement of aninternal order at month end or assessments of cost centers .

As with all Controlling master data, cost centers may be easily organized into groups forreporting or allocation purposes. However, a default or standard hierarchy of cost centersis required by SAP R/3 in order that no cost center may be omitted from the structureaccidentally.

Actual postings to cost center accounting can be allocated from one cost center toanother with different techniques as periodic reposting, distributions, activity basedallocations and assessments.

With the use of the planning function, budgets or plans may be created for cost centers,manually or automatically.

Cost center accounting provides a lot of delivered SAP R/3 standard reports to analyzethe cost center costs.

To creation of a cost center structure that represents theorganizational structure

Of the company for responsibility area. The assessment cycles or distribution cycles willbe appropriate the indirect costs to the productive cost centers, in way that all the costswill be absorbed by the productive activities in according to the Brazilian legal requirements.

The Postings expenses will be classified by account and for cost object.

Master Data Cost Center Controlling



Controlling Master data

Validity Periods

All master data in cost center accounting are created with a validity period. The initialcreation of a cost center master record will be for Glenmark with the validity period:

From 01.01.2008 UNTIL 31.12.9999

Cost Elements

SAP R/3 distinguishes between primary cost / revenue elements and secondary costelements. The cost elements must be meet the Glenmark Chart of accounts.

Primary Cost Elements

Primary cost elements correspond to the P/L accounts used in the chart of accounts. Onecan only create a primary cost / revenue element if there is first a P/L account created inthe general ledger.

In the Glenmark Controlling Area all P/L accounts must be created as cost elements inorder to guarantee a 100% comparison of FI and CO. The exception is the cost of goodssold account and material consumption and revenue accounts related to sales, which is aP&L account but must not be created as a cost element. The financial expense accountsmust not be created as cost element.

The Cost Element Category for primary cost elements posted to cost centers or internalorders must always be 1. Revenue Elements posted via Sales & Distributions (SD) musthave the cost element category 11 or for sales deductions 12. Cost elements with thecategory 1 cannot be posted from SD.

The Glenmark will not create the Revenue accounts as cost element.

Note: The cost of goods sold accounts posted from SD with MM-account assignment(VAX) must not be created as cost element!

Note: Cost of good sold will be directly posted through the sales process to CO-PCA(profit center) and COGS is only a account not a cost element.

Default account assignment object recommended method is to use



transaction OKB9 where cost assignment to cost elements can be madedependent on company code.

Secondary Cost Elements

Secondary Cost Elements do not correspond to P/L accounts. One cannot directly post toa secondary cost element, but rather they are used for Controlling internal allocationpurposes.

At Glenmark the following secondary cost elements will be used:

Secondary cost elements for activity type, to allocate the production costs from

production cost center to production order

Assessment cost elements for the assessment from indirect cost center to direct

cost center . (type 42).

Secondary cost element for Internal Order settlement, to transfer the internal order

expenses to the cost centers. (type 21).

The field description is the same as for the primary cost elements.

The source of the secondary cost element naming conventions is not the P/Laccount, because the secondary cost elements does not have a correspondence to a P/Laccount it exists only in Controlling. The name of the secondary cost elements can befreely defined.

The following secondary cost element categories will be used:

Category 43: Activity Types

Category 42: Assessments

Category 21: Internal Order settlement

Cost Element Groups

Primary and secondary cost elements can be grouped into cost element groups. Costelement groups shall be used for planning and reporting. The cost element groups can beused to define the row structure in the cost center and internal order reports.



Cost Center

The cost center structure is created to meet the management requirements (Glenmark).

Cost Center Description / Naming Conventions

Cost Center naming conventions:

Pnn: Production Costs

Tnn: Indirect Costs

Ann: Sales and Administration

Cost Center categories will be:

C Name

V Sales/Adm

H Indirect cost centers

M Overheads

F Production

To decide about the Controlling structure for Brazil we have scenario into consideration:EXAMPLE

Scenario :

10000 PRESIDENCY

11000 FINANCE

12000 HR

12100 ADMINISTRATION

13000 IT

13100 SAP PROJECT

20000 INDUSTRIAL DIRECTOR

21000 PRODUCTION

21010 WEIGHTAGE



21020 SOLIDS

21030 SEMI SOLIDS / LIQUIDS

21040 PACKAGE

21050 FILLING

22000 SUPPLY CHAIN

22010 LOGISTICS

22020 PP

22030 INTL. PURCHASE

23000 QUALITY

23010 QUALITY CONTROL

23020 QUALITY ASSURANCE

23030 VALIDATION

23040 RESEARCH AND DEVELOPMENT

23050 QC/QA PROJECT

24000 ENGEENIRING

25000 MAINTENANCE

30000 COMMERCIAL DIRECTOR

30100 SALES ADMINISTRATION

30200 MARKETING INTELLIGENCY

30300 SALES TRAINING

30400 MEDICAL MANAGER

31000 PHARMA NSM

31010 REGIONAL MANAGER 1

31020 REGIONAL MANAGER 2

31030 KEY ACCOUNT

31200 MARKETING PHARMA

31210 DERMATOLOGY MARKETING

31220 ENDOCRINOLOGY MARKETING



31230 RESPIRATORY MARKETING

31240 GYNECOLOGY MARKETING

31250 OTHERS MARKETING

31300 SALES TRAINING PHARMA

32000 ONCOLOGY MANAGER

32010 SALES FORCE ONCOLOGY

32200 MARKETING ONCOLOGY

32300 SALES TRAINING ONCOLOGY

33000 HOSPITALAR MANAGER

33010 PUBLIC HOSPITALS

33020 PRIVATE HOSPITALS

33200 MARKETING HOSPITALS

33300 SALES TRAINING HOSPITALS

34000 REGULATORY

34100 SAC

39000 NEW BUSINESS

70000 LATAM PRESIDENCY

71000 LATAM FINANCE

71100 LEGAL LATAM

72000 LATAM HR

73000 IT LATAM

74000 LATAM IP

79000 LATAM API

80000 UPPER LATAM

80010 JAMAICA

80020 DOMINICAN REPUBLIC

80030 TRINIDAD & TOBAGO

80040 HAITI



80050 GUYANA

80060 ECUADOR

80070 PERU

80080 VENEZUELA

80090 CHILE

80100 MEXICO

80110 COLOMBIA

80120 ARGENTINA

81000 BRAZIL

81100 UPPER LATAM FINANCE

81200 UPPER LATAN HR

81300 UPPER LATAM IT

The cost center hierarchy: Example



Processes

Internal Processes Controlling



Cost Center Accounting

Planning within Cost Center Accounting

Glenmark will do planning by cost centers/primary cost element in auxiliary cost centers.The planned data in the R/3 system must be used to control the costs, through thevariances (Plan vs. Actual).

After the input of the planning data, the cost center assessments will be executed. Forthe assessments will be used the percentage criteria.

It will be created 03 planning versions, besides version 0 (Annual Plan):

Version Update 1

Version Update 2

Version Update 3

These versions will be selected at the moment of the reports execution foractual/planned comparison.

The postings can be done manually in each version, automatically or both. The planversion can be copied to another version or it can be revaluated.

The currency type used for planning will be P (planning).

The assessments for planning must be the same for actual data.

Actual Posting within Cost Center Accounting

The cost center postings can be generated by FI/GL. All the P&L accounts are preparedto demand a cost object controlling that can be a cost center.

The postings can be visualized in cost center in real time, through of the reports afterthe documents be saved.

Itll be used the Standard reports.

There is a transaction in SAP system called automatic assignment of



controlling objects (transaction code: OKB9) where one can providedefault settings for controlling objects depending on the company code/ account combination.

1Assessments within Cost Center Accounting

The SAP technique to do these assessments is to create assessment cycles. Anassessment cycle is a series of rules determining which sender allocates costs to whichreceiver and on what basis this is done. One creates these cycles only once, but one hasto process the cycles every month during the month end closing procedure

The assessment will occur between indirect cost centers to production cost centerswhere the activity types occur:

The indirect cost centers must have balance 0 but if we add the secondary cost elementin specific reports. sin the end of the month. All the indirect cost must be in theproduction cost center (Pnn), consequently in the stocks.

Internal orders (CO-OPA) are used to collect costs for special / event based reportingpurposes or reposting to other receivers. In most cases, an internal order will be used toreceive cost bookings which will be settled at month end to a different cost object.These internal orders are called real internal orders and this type of order will be used onlyfor CAPEX control. Valid receivers for settlement include cost centers, other internalorders, GL accounts, materials, assets and production orders. Settlement is controlled inthe order master record and may be on a percentage or fixed amount basis to multiplereceivers. Order settlement may be made with the original cost elements used to post tothe order or, as in most cases, using asecondary cost element to amalgamate the variouscost elements posted to the order to a single value. In certain cases the order may notbe settled and this is known as a statistical internal order. When posting to a statisticalorder another cost object will be used, such as a cost center, to take the real posting.The collection of car expenses or travel costs might be an example of this sort of order.

Orders may be grouped for reporting or settlement purposes and a single order may beplaced in many hierarchies. Plans can be built for orders at the individual order level orthe order group level. Through SAP R/3 integration, plans built at the order level can berolled up through cost centers, profit centers and company codes.

Internal orders (CO-OPA) are used to collect costs for special / event based reportingpurposes or reposting to other receivers. In most cases, an internal order will be used toreceive cost bookings which will be settled at month end to a different cost object.These internal orders are called real internal orders. Valid receivers for settlement includecost centers, profitability analysis, other internal orders, GL accounts, materials, assetsand production orders. Settlement is controlled in the order master record and may be ona percentage or fixed amount basis to multiple receivers. Order settlement may be madewith the original cost elements used to post to the order or, as in most cases, usinga secondary cost element toamalgamate the various cost elements posted to the order to asingle value. In certain cases the order may not be settled and this is known as a statisticalinternal order. When posting to a statistical order another cost object will be used, suchas a cost center, to take the real posting. The collection of car expenses or travel costsmight be an example of this sort of order.



Orders may be grouped for reporting or settlement purposes and a single order may beplaced in many hierarchies. Plans can be built for orders at the individual order level orthe order group level. Through SAP R/3 integration, plans built at the order level can berolled up through cost centers, profit centers and company codes.

The Glenmark will use the statistical internal orders with a separate order type to control marketingexpenses. Internal orders will be created in combination of brand and marketing expense. Theactual expenses will be collected in the internal order in such a way that the expenses directly

incurred to the products will be reflect automatically in the corresponding statistical internal ordersby an internal order report.

The plan can be updated in the statistical internal order. This will facilitate the comparison of actualvs plan marketing expenses.

IV Transactions / Programs / Reports / User Exits

NA

Transactions Program ReportsUser

ExitsDescription \ Comments

KA01 Create Primary Cost Element

KA06 Create Secondary Cost Element

KA02 Change Cost Element

KA03 Display Cost Element

KA04 Delete cost element

KA05 Cost element: display changes

KAH1 Create Cost Element Group

KAH2 Change cost element group

KAH3 Display cost element group

KS01 Create cost center



KS02 Change cost center

KS03 Display cost center

KS04 Delete cost center

KS05 Cost center: Display changes

OKEON Change Standard Hierarchy

OKENN Display Standard Hierarchy

KSH1 Create Cost Center Group

KSH2 Change Cost Center Group

KSH3 Display Cost Center Group

KK01 Create Statistical Figure

KK02 Change Statistical Figure

KK03 Display Statistical Figure

KO01 Create Internal Order

KO01 Change Internal Order

KO01 Display Internal Order

V Description of Functional Deficits

The Glenmark desires that the values planned for cost center, have the function of stoppurchases requisition. This function of Budget exists only by cost object level not byobject level and account. In this case , The SAP Standard system takes care onlyplanning necessities .



VI Approaches to address Functional Deficits

The Control of budget with the implementation of the FM module , only for accounts

manageable.

II Interfaces

VIII Authorisations

IX SAP Configuration

Reporting Requirements

XI Supplementary Information

XII Annexure:

Attachments:

As IS XLS document:

*****END OF DOCUMENT*****

CO Module Page 16 of 16

Process Number: CO 1.1

blueprint document

Documents

microsega cost centre

cost centre accountinggoing

receiver cost centre

cost elements

cc cost

cost centers

current system

current microsega