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Version 2

created by Srinivasan Desingh on Feb 22, 2015 6:26 AM, last modified by Srinivasan Desingh on Feb 23, 2015 12:33 AM
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SAP Results Analysis for Beginners:

When I was picking up Project systems skills, Results Analysis was one of my challenging areas to understand. In this
document, I tried to explain RA in a simpler manner with Professional services scenario.
Why Results Analysis?
In any customer projects with more lead time (at least 3 months), RA plays an important role. Results Analysis is to
valuate ongoing unfinished activities, in projects during period-end.
If you look at profit and loss of such ongoing unfinished activities, you will see costs only and therefore your P&L shows
loss. If you look at this in the period-end, the projects ongoing activities will have an unfavorable effect on the companys
results. Accurate, timely recognition of project profitability, for each project, for every period end, is very important in any
company.

SAP Results Analysis is used to show a more realistic view of your ongoing activities by
capitalizing the value added so far in the balance sheet.
How to capitalize?
SAP has supplied fifteen RA methods as standard. Results analysis methods contain the rule for
calculating the results analysis data. These methods will help you to capitalize the
costs/revenue.
Professional Services Scenario:
Consulting, audit & tax, legal, and IT services businesses use professional services scenario in SAP. This would
efficiently manage people, client relationships, maximize resource utilization, improve project and operational efficiency,
drive profitability and adhere to government regulatory requirements.

Method 3 - Cost based Percentage of Completion (POC) method:

In this document we will look into Method 3 - Cost based Percentage of Completion (POC)
method. This method is primarily used in large customer projects and is used to capitalize
revenue instead of costs. With this method, you assume that the costs incurred to a project will
lead to an amount of revenue equal to the costs. For example, if you realize 15% of your
percentage of completion, you will capitalize 15% of your planned revenue. This enables you to
report a profit before any revenue has actually been received. Some countries will not allow
unrealized profits to be reported. Legal requirements in different countries stipulate that
unrealized profits can be capitalized or that they cannot be capitalized.
How RA Method - 03 works?
The following are the parameters used to calculate:
1.

Planned Revenue

2.

Actual Revenue

3.

Planned Costs

4.

Actual Costs

Output parameters:
1.

Calculated Costs (Cost of Sales)

2.

Calculated Revenue

3.

Revenue Surplus (Reserves for unrealized costs). ( In SD Revenue Recognition term this is
called Deferred Revenue)

4.

Revenue in Excess Billing (Capitalized costs (WIP)). (In SD Revenue Recognition term this
is called Unbilled receivables)

http://scn.sap.com/docs/DOC-62120

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SAP Results Analysis for Beginners | SCN

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In this method, system has to calculate Percentage of Completion (POC) based on planned
costs and Actual costs.
Percentage of Completion (POC) = Actual Costs / Planned Costs
1. Calculated Costs = POC X Planned costs
= (Actual costs / Planned Costs) X Planned Costs
= Actual costs
Therefore, in this method, Calculated Costs (Cost of sales) will be always Actual Costs.
2. Calculated Revenue = POC X Planned Revenue
= (Actual Costs / Planned Costs) X Planned Revenue
If Actual Revenue > Calculated Revenue
System creates Revenue Surplus
3. Revenue Surplus = Actual Revenue Calculated Revenue
If Actual Revenue < Calculated Revenue
System creates Revenue in Excess Billing
4. Revenue in Excess Billing = Calculated Revenue Actual Revenue
-----------------------------------------------------------------------------------------------------------------------------------

Now let us take an Example. I have taken a happy path where there is no loss in the project.
A project with sales contract is created with planned revenue $ 100. You plan labor and service
costs in the project for $80. Assume, the project will have lead time of 4 months (periods).
In the first period, few services were performed in the project and therefore the actual costs $20
incurred in the project. No invoice was raised to the customer.

Although NO revenue is received, Profit has already been capitalized. This is the specialty of
this method.
----------------------------------------------------------------------------------------------------------------------------------------------------------------

In the period 2, you send an invoice of $40 to your customer and also your actual costs in the
project increased to $40.

http://scn.sap.com/docs/DOC-62120

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Profit is capitalized during this period.

----------------------------------------------------------------------------------------------------------------------------------------------------

In the period 3, you send another invoice of $40 to your customer and actual costs increased to
$60.

---------------------------------------------------------------------------------------------------------------------------------------------------In period 4, you complete the project technically and send the final invoice to your customer.
Total actual costs incurred is $80 and total invoiced amount is $100.

http://scn.sap.com/docs/DOC-62120

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SAP Results Analysis for Beginners | SCN

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Based on this method, you can learn other methods easily. Hope, I have explained you simply.
Enjoy SAP..

2390 Views
Products: sap_for_professional_services Topics: enterprise_resource_planning Tags: sap, project, settlement, network, cj20n,
project_systems, wbs, sap_ps, results_analysis_reserve, project_system, kka2, kka1, result_analysis, kkaj

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23 Comments
Saurabh Tiwari Feb 22, 2015 3:02 PM

Dear Srinivasan,
I really enjoyed reading this document of yours. Earlier it used to be my dry area in PS but now it has
cleared my many doubts on RA.
The only few doubts here is,how down-payments are handled with this method? And if there is a return
on delivery then how it will impact on RA calculation?
And what if the project goes on Loss side?
It would add great value to this learning if you can support it by providing/creating a new document on
its mapping(configuration setting) in SAP.
Also, please let us know which are the mostly used RA methods across industries and which is the
most recommended method.
Many thanks for such a wonderful document. Really enjoyed seeing those handwritten practice of
concepts on paper. Reminds us of those academic days where we use to prove every algorithm while
learning a new concept.
Thanks & Regards
Saurabh
Like (0)

Srinivasan Desingh Feb 23, 2015 1:07 AM (in response to Saurabh Tiwari)

Hi Saurabh,
Thanks for your comment.
I don't want to include many concepts and complicate this document. That is the reason I
have mentioned 'Happy Path'.
If loss is incurred in the project, then another parameter called 'Reserves for Imminent loss'
will come into this concept of Results Analysis.

http://scn.sap.com/docs/DOC-62120

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I will try to write another document with config and transaction to support this document.
It is very difficult to pinpoint a method used across industries. But most commonly used
methods (according to my knowledge) are Revenue based RA with/without profit realization,
Cost based POC method, Completed contract method.
Regards
Srinivasan Desingh
Like (1)

Saurabh Tiwari Feb 23, 2015 8:37 AM (in response to Srinivasan Desingh)

Hi Srini,
Waiting for yet another document from you on the said topics .
I was thinking of Configuration because the doubt came to my mind was that How
the posted GL / Group of GL are recorded in RA, How the system record individual
values per area like Cost, Revenue , Deferred revenues and so on.
Would be interesting to know about it.
Regards
Saurabh
Like (0)

Paulo Vitoriano Feb 22, 2015 11:59 PM

Dear Srinivasan,
Is it possible to use POC method without plan data?
Thank you,
Paulo
Like (0)

Srinivasan Desingh Feb 23, 2015 1:09 AM (in response to Paulo Vitoriano)

Dear Paulo,
Cost based POC method is based on planned data. Without that system cannot calculate the
values.
Regards
Srinivasan Desingh
Like (0)

Sunil Yadav Feb 27, 2015 7:55 AM

Hi Srini,
Thanks for such nice explanation of RA and its Method (Cost Based POC Method).
This Document will help all members to understand simple calculation of Values and related posting in
Finance.
Regards
Sunil
Like (0)

Srinivasan Desingh Feb 27, 2015 7:16 PM (in response to Sunil Yadav)

Thanks Sunil.
Like (0)

Sunil Yadav Feb 27, 2015 7:59 AM

Exceptionally good !!
Like (0)

D SINGH Feb 27, 2015 8:58 AM (in response to Sunil Yadav)

Hi Srini,
Thanks a lot for share the knowledge on RA and it's very well explained.
Regards,
DSP
Like (0)

Gokulkrishnan Pillai Mar 5, 2015 11:35 PM

http://scn.sap.com/docs/DOC-62120

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Hi Srini,
In a nutshell..."Beautiful Document".
Will definitely be of great help to beginners
Best Regards,
Gokul
Like (0)

Srinivasan Desingh Mar 6, 2015 6:10 AM (in response to Gokulkrishnan Pillai)

Thanks Gokul..
Like (0)

Gerry Hodgins Mar 6, 2015 11:40 AM

Hi Srini,
I Really Really enjoyed this
Its simplified and educational ..
I would like to see more in other areas
Ger
Like (0)

Srinivasan Desingh Mar 6, 2015 6:20 PM (in response to Gerry Hodgins)

Thanks Ger.
Like (0)

Prasath Nagarajan Mar 10, 2015 5:40 AM

Hi,
Thanks, i learned POC method
Thanks
prasathn
Like (0)

Vctor Manuel Vargas Yamauchi Mar 13, 2015 7:50 PM

First, thanks for the explanation, it is very easy to understand as the method POC works. I have a
problem and I would like to help me. The problem is when the user enter a reclassification of costs, or
a provision or just manually enter a value of IRIR in t code KKA2 and in subsequent periods the system
no longer calculated properly. Any idea why and possible solution?
Thanks in advance.
Vctor
Like (0)

D SINGH Mar 14, 2015 8:29 PM

Hi Srinivasan,
Thanks a lot.Just got very good idea from your RA document and exploring it further.
Thanks,
DSP
Like (0)

VR Kumar Oct 3, 2015 6:03 AM

Dear Srinivasan,
Thank You for taking the initiative for making ,the RA process in a simpler way.
Regards,
vrkumar
Like (0)

Methee P Nov 5, 2015 4:18 PM

Thanks for such a great content. One quick question. Can I get actual cost settlement as well? I just
want to transfer all expense into a single G/L for P&L report
Like (0)

http://scn.sap.com/docs/DOC-62120

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Ken Melching Nov 5, 2015 7:51 PM (in response to Methee P)

Hello Methee,
You can configure all costs in RA to be on one Line ID (LID) and settle on a single cost
element.
You need to understand the difference between FI (G/L) and CO (cost elements). Settlement
is a purely CO function which posts on secondary cost elements. Are you settling to COPA?
With a single LID you would settle to COPA on a single value field.
Ken
Like (0)

Methee P Nov 6, 2015 3:40 AM (in response to Ken Melching)

Hi Ken,
Thank you for your reply. I did configure RA in my system(regarding SAP Revenue

Recognition for Projects (446)). Unrealized cost and profit is calculated and
posted correctly. The actual cost is not transferred from WBS to cost center
as I wonder if the actual cost can be transferred out of WBS. If yes, what will
happen to the next period run in case of WBS is not completed yet.
Methee
Like (0)

Ken Melching Nov 6, 2015 4:07 PM (in response to Methee P)

When you implement RA, how values are settled is controlled through the
RA Cost Elements not through the original postings.
So you have to configure the settlement Allocation structure source to
include the RA Cost elements.
Like (0)

mohan desai Nov 9, 2015 8:36 AM

Hi Srinivasan,
Good Effort...
Mohan
Like (0)

Angelique Smith Nov 20, 2015 9:33 AM

Hi Srinivasan
Excellent work.
I have a one question that have been puzzling me for a while. Why would results analysis revalue
postings according to the exchange rate changes? We use R\A type B (dynamic line items) and R\A
category POCI. How does the exchange rate revaluation work ? Should costs/ revenues be revalued
every time the exchange rate change? Is there any way that I can switch of the automatic revaluation
of the WIP during the R/A runs? My client is a service organisation that use RA type B (dynamic line
items) and R\A category POCI. They do not want the costs revalued based on the daily exchange rate
your assistance is appreciated
Regards
Angel
Like (0)

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