The Tip Doctor, Insider Learning Network.
This tip is from the article “Cater to Arm’s Length Standards with Automated Intercompany Transfer Pricing Design” by Ashim Nanda, which was posted to the Financials Expert knowledgebase in October 2010.
Condition exclusion is a technique used to formul
ate rules to exclude one condition type (or a group of condition types) when the system finds a condition record for another condition type or group (Figure A). Typically, the technique is used to find the most favorable price or most suitable discount when multiple prices or discounts are applicable simultaneously.
I’ll use the condition technique to set up a rule to select a market-based price (e.g., the average sales price) for a value-added material transfer while the pricing procedure uses cost plus markup. Cost plus markup refers to the standard price of the material in the sending plant incremented by a certain percentage or dollar amount for a non-value-added material transfer.
Figure A Condition exclusion technique in transfer pricing design
You can maintain condition exclusion by following menu path Customizing > Sales and Distribution > Basic Functions > Pricing > Condition Exclusion. An exclusion group, as shown in Figure B, is a group of condition types that is compared with other groups during pricing. It results in the exclusion of an entire group.
Figure B Exclusion groups to club condition types
As shown in Figure C, condition exclusion procedure D (Exclusive) deactivates all the condition types in exclusion group ROH as the SAP system finds a condition record for condition type XTP1 in exclusion group FERT.
Figure C Configuration for condition exclusion
If condition records are maintained for all value-added materials in the system, they are transferred at the average sales price. Non-value-added items are transferred at cost plus markup.
To demonstrate, the condition record is maintained for condition type XTP1 at $12 per unit of material VITEM (Figure D). As you transfer a unit of non-value-added material ITEM and a unit of value-added material VITEM, the pricing procedure and the condition exclusion configuration proposes a cost plus markup price for ITEM and an average sales price for VITEM.
Figure D Internal billing for non-value-added and value-added material transfer
In Figure E, you can see how the exclusion technique deactivated condition types VPRS and PI02 as the SAP system found a condition record for condition type XTP1.
Figure E Demonstration of condition exclusion in transfer price calculation
More technical tips from Financials Expert, articles by Ashim Nanda, and other resources for Financials teams are available from the Financials Group on Insider Learning Network.