Completed Contract Method

(09) Completed Contract MethodPDF download from SAP Help Portal:http://help.sap.com/saphelp_470/helpdata/en/90/ba6f9f446711d189420000e829fbbd/content.htm

Created on April 07, 2015

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Table of content

PUBLIC 2014 SAP SE or an SAP affiliate company. All rights reserved.

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Table of content1 (09) Completed Contract Method 1 (09) Completed Contract Method


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1 (09) Completed Contract Method

UseYou can use the Completed Contract Method for:

Sales ordersProjects

The Completed Contract Method enables the use of conservative accounting practices because revenues and profits are only realized when the order iscompleted.

PrerequisitesChoose a results analysis method in simplified Customizing for Product Cost by Sales Order under Period-End Closing Results Analysis Valuation Method.

FeaturesUntil this sales order item has the status that causes the reserves and inventories to be canceled, the system updates all revenues as revenue surplus and allcosts as capitalized costs.Situation when the order is released:

R(PA) = 0C(PA) = 0C(z) = C(a)R(r) = R(a)

The revenue affecting net income and the costs affecting net income are zero.The capitalized costs are equal to the actual costs.The revenue surplus equals the actual revenue. The revenue surplus is basically a reserve.The capitalized costs and the revenue surplus can be transferred to FI and EC-PCA when you settle.Situation when the order is closed:

R(PA) = R(a)C(PA) = C(a)C(z) = 0R(r) = 0

ExampleYou have planned revenues of USD 200,000 and costs of USD 120,000 for your sales order.Period 01In period 01 you have actual costs of USD 20,000 but no revenues. In results analysis, the system calculates the following data:

Cost of sales affecting net income of USD 0Revenue affecting net income of USD 0Capitalized costs in the amount of the actual costs (USD 20,000)

You then settle the following:Capitalized costs to FI and EC-PCANo cost of sales and no revenues to CO-PA

The following values are reported in CO-PA:Profitability Analysis

Revenues affecting net income 0Cost of sales affecting net income 0Profit 0

The income statement shows the following values:Income Statement

Expense RevenueActual costs 20,000 Inventory increase

Capitalized costs 20,00020,000 20,000

Period 02In period 02 actual costs increase to USD 80,000. You deliver to your customer and send a milestone invoice for USD 100,000. The order is partially deliveredand partially billed. In results analysis, the system calculates the following data:

Cost of sales affecting net income of zero


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Revenue affecting net income of zeroCapitalized costs of USD 80,000Revenue surplus of USD 100,000

You then settle the following:Capitalized costs to FI and EC-PCARevenue surplus to FI and EC-PCA


Revenues affecting net income 0Cost of sales affecting net income 0Profit 0


Expense RevenueActual costs 80,000 Actual revenue 100,000Revenue surplus 100,000 Inventory increase

capitalized costs 80,000180,000 180,000

Period 03In period 03 actual costs increase to USD 90,000. You deliver a second amount to your customer and send a second milestone billing for USD 90,000. Totalrevenue is USD 190,000. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:

Cost of sales affecting net income of zeroRevenue affecting net income of zeroCapitalized costs of USD 90,000Revenue surplus of USD 190,000

You then settle the following:Capitalized costs to FI and EC-PCARevenue surplus to FI and EC-PCA


Actual Revenues 0Calculated cost of sales 0Profit 0


Expense RevenueActual costs 90,000 Actual revenue 190,000Revenue surplus 190,000 Capitalized costs 90,000280,000 280,000

Period 04In period 04 actual costs increase to USD 130,000. You deliver the remaining goods and send the customer the final invoice for USD 10,000. Total revenue isUSD 200,000. The order is now fully delivered and fully invoiced.In results analysis, the system calculates the following:

Cost of sales of USD 130,000Revenue affecting net income of USD 200,000Capitalized costs of zeroRevenue surplus of zero

You then settle the following:Cost of sales to CO-PARevenues to CO-PAThe cancellation of the capitalized costs and the revenue surplus to FI and EC-PCA


Actual revenues 200,000


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Calculated cost of sales 130,000Profit 70,000


Expense RevenueActual costs 130,000 Actual revenue 200,000Profit 70,000 200,000 200,000

The order has a total profit of USD 70,000.


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Completed Contract Method