SAP Solution Brief SAP Services

SYSTEM LANDSCAPE OPTIMIZATION: VALUATION CLASS CONVERSION

Organizational structure changes resulting from mergers, divestitures, or data cleansing activities call for the harmonization of your business data. The System Landscape Optimization group of experts from the SAP Consulting and SAP Custom Development organizations supports customers facing this task with a variety of harmonization services. One of these is the valuation class conversion, which allows you to redefine the financial account determination for your materials without affecting the material master data.

Complex business transactions mergers, acquisitions, divestitures, and reorganizations are likely to involve several issues a company has rarely faced before. Not surprisingly, the ability to successfully align business data to reflect company reorganization is widely seen as one of the most critical issues in the success of both company expansions and company divestitures. IT plays a critical role in this, as business and IT are becoming increasingly intertwined. Many companies have seen how their enterprise resource planning (ERP) software supports and facilitates major business initiatives. Yet they know it can constrain and impede these initiatives if the data the ERP software uses does not mirror the actual situation within an organization. Consequences of this discrepancy can be severe: operational costs may increase and controlling and reporting activities can be encumbered. This in turn may induce companies to make wrong decisions or to act against international business guidelines, such as those of the Basel II Capital Accord. It is, therefore, essential for a company to ensure that the business data its ERP software uses is consistent and relevant. Perhaps you just went through a major business transformation, necessitating core business information for example, your material data to be reallocated. Or you are planning a changeover from in-house to external production for some of your materials. Or maybe you want to correct erroneous assignments between your materials and your valuation classes. In each of these cases you may need to redefine the valuation classes to which your materials are assigned.

However, as changes in the master data of such vital and widely connected business objects as your materials have far reaching consequences, there are restrictions, posed both by legal requirements and system limitations: To prevent data inconsistency, it is by default impossible to change a materials valuation class assignment in the software once transaction data for the material has been created. Materials for which no postings have as yet been made can still be changed. Where more than a few material numbers are concerned, though, manual changes are neither efficient nor reliable. Hence when the valuation class assignment is to be revised, a specific solution is needed.
Your Partner: The System Landscape Optimization Group

Data Consistency Ensured

With the valuation class conversion service, you are offered a secure data harmonization method that guarantees the integrity of your material data. Its comprehensive approach includes all facets of the logistic process chain and thus provides consistent business data throughout the entire range of your logistic applications. From a technical point of view, the valuation class conversion service covers all conversion-relevant data occurrences in your system. Master as well as transaction data not only of SAP standard tables, but of user-defined and modified tables as well are processed.
Minimal Interruption of Your Daily Processes

The System Landscape Optimization group of experts from the SAP Consulting and SAP Custom Development organizations now offers a standardized procedure for restructuring valuation classes: the valuation class conversion service. This service offers a fast and safe way to: Change the valuation classes of materials individually or as specified by a predefined rule Rename individual valuation classes as defined in a mapping table (a 1:1 list that assigns a new entry to each value that is to be changed)
Aligned Data Structures for Efficient Reporting

The valuation class conversion service changes your material data directly at database level. As a consequence, the old values no longer exist after the conversion, nor will there be any traces of the change other than the adjustment postings in financial accounting described below. Making the changes at database level enables a smooth conversion that prevents data redundancy and hardly interrupts your daily processes. The optimized processes used require minimal system downtime; depending on the size of the tables involved this can be as little as a few hours.
Audit Stipulations

As a stand-alone service or in combination with other services of the System Landscape Optimization group (for example, the system merge service, the company code merge and split services, or the cost area conversion service), the valuation class conversion service enables you to align your material data with your current or future business situation. This allows for efficient and correct controlling and reporting, both internally and externally, that meets the information needs of all of your company stakeholders.

Changing your material data has such far-reaching implications that the valuation class conversion cannot be executed at any time or without thorough preparation. All facets of the conversion including the follow-up activities listed below must be discussed in detail with your auditor, whose approval of the intended changes to your material data is essential. Moreover, you need to consult the auditor about the best time to perform the valuation class conversion, especially if it will be run in combination with or subsequent to another conversion or migration service, like a company code split service.

Follow-Up Activities

The Service Offering

When the conversion of valuation classes leads to changed account determinations, the stock values in the general ledger change to reflect this. The valuation class conversion service from the System Landscape Optimization group converts the valuation class both in the material master and in the logistical transaction data, but for accounting reasons does not automatically update the corresponding stock account values in financial accounting. There are two options to ensure data consistency between the stock account in financial accounting and the summarized stock values in materials management: In financial accounting, you can transfer the related stock account values using manual correction postings. When choosing this option, there is no need to make any changes in materials management. In materials management, you can post the stock of the materials affected to zero just before the conversion takes place. Directly after the conversion you reverse this posting with the new valuation class assignment using customer-defined movement types (for each material movement, the movement types determine the rules for updating the stock quantities and the stock values in the relevant general ledger accounts). As the changes made in materials management are automatically reflected in the general ledger, additional changes in financial accounting will not be needed when you choose this option. Either way, you are provided with accounting records that document the changes to the stock values in your general ledger. Furthermore, special attention should be given to clearing your goods received/invoices received (GR/IR) accounts in case the postings for these accounts depend on the valuation class. Avoiding open balances prior to conversion will enable you to continue clearing these accounts without problems after the conversion. If this option is not feasible in your situation, you can choose instead to perform the first postconversion clearing of the GR/IR accounts manually.

The valuation class conversion service available through the System Landscape Optimization group covers all stages of the conversion project, ranging from the initial design phase of the strategy to planning and conducting the final conversion. The system landscape optimization service includes the following activities: Back-office support Provision of the conversion tool Extension or tailoring of the conversion tool Execution of the conversion Evaluation and presentation of the results Like all services offered by the System Landscape Optimization group, the valuation class conversion service is based on technology that is tested and standardized to ensure that the data migration and conversion is performed transparently and efficiently.
Standardized Project Flow for Optimum Results

At the start of the project, a project team from the System Landscape Optimization group holds a kick-off workshop or a telephone conference to define the project scope in accordance with your specific objectives. In the technical analysis that follows, the consultants analyze all relevant areas and clarify whether all prerequisites for the planned conversion are met. Specific issues, such as archiving and workflows or objects that cannot be converted by purely technical means, are considered. Based on the results of this analysis, the project team provides you with a recommendation for the reorganization of your material data, as well as a detailed list of the items that require special attention. After you have agreed on the optimal solution, the project team draws up a project plan as well as a quotation for the complete project. Subsequently, the conversion package is tailored to your special requirements and can be transported to the systems in which the valuation class conversion is to be tested and executed.

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Depending on project complexity, one or two conversions are performed with test data. For these test conversions, you provide a test system that is an up-to-date copy of your production system and is reserved exclusively for the conversion project during the course of the tests. The test conversions start four to six weeks before the planned date of the production conversion and take one to two weeks each to complete. After each test changeover, the customer and the project team members check whether the following conditions have been met: Data structures have been completely and correctly generated Postconversion accounting postings are consistent Data can be accessed as usual Before the update run can take place, the test results must be verified in detail, all changeover prerequisites must be met, and an audit opinion must be secured. As soon as you have confirmed that the results of the tests are satisfactory, the production data can be converted. As the conversion requires the production environment to be locked for all other activities, this part of the project usually takes place on a weekend so as to affect daily business as little as possible. For the duration of the project, you are asked to provide a contact person from your basis team able to deal with the projects technical requirements. Contact persons from the user departments affected should be available as well to support the project team with application-specific issues.

Main Benefits at a Glance

The major advantages of the valuation class conversion service can be succinctly highlighted in the following points: Ensured consistency and integrity of your business data Correct and up-to-date classification of your materials Correct and efficient reporting in financial accounting and controlling Continuity of your business processes: no major redirections or interruptions Proven, standardized conversion technology
Find Out More

Are you planning to restructure your material data? Then visit us at the SAP Service Marketplace extranet at http://service.sap.com/slo, fill in our questionnaire, and send it to the System Landscape Optimization group (slo.consulting@sap.com) or to your SAP contact person.

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