The Quantity-Based POC Method can be used for sales orders.

This method allows you to:

• Determine the revenue affecting net income on the basis of the actual quantity This enables you to report a profit before any revenue has actually been received.
• Determine the costs affecting net income
• Determine the revenue in excess of billings
• Determine the capitalized costs
• Determine the reserves for unrealized costs
• Determine the surplus revenue
• Show unrealized profits

The POC method is often used in Britain and North America. Because German law does not allow unrealized profits to be reported, the POC method is used in Germany only for internal information purposes.

You have planned costs, revenues, and quantities.

POC = Q(a) / Q(p)

C(PA) = POC * C(p) = Q(a) / Q(p) * C(p)

R(PA) = POC * R(p) = Q(a) / Q(p) * R(p)

If the actual costs are greater than or equal to the calculated costs, the system creates capitalized costs.

If the actual costs are less than the calculated costs, the system creates reserves for unrealized costs.

If the actual revenue is less than or equal to the calculated revenue, the system creates revenue in excess of billings.

If the actual revenue is greater than the calculated revenue, the system creates a revenue surplus. The revenue surplus is basically a reserve.

Both the calculated revenue and the calculated costs can be settled to CO-PA.

Capitalized costs, reserves for unrealized costs, revenue in excess of billings, and revenue surplus can be transferred to FI and EC-PCA when you settle.

The quantity-based POC method can also be applied to other objects if you make the appropriate setting in the Expert Mode of the valuation method in the Quantity base field.

You have planned a revenue of USD 200,000 and costs of USD 120,000 for a sales order. The planned order quantity is 100 units.

In period 01 you have actual costs of USD 20,000. You have not billed the customer. In results analysis, the system calculates the following data:

• No costs affecting net income
• No revenue affecting net income
• Capitalized costs using the formula Capitalized costs = Actual costs less cost of sales (= costs affecting net income)

You then settle the capitalized costs to FI and EC-PCA.

The following values are reported in CO-PA:

The income statement shows the following values:

In period 02 the actual costs increase to USD 80,000. You deliver to your customer and send him a milestone invoice for USD 100,000. The invoiced quantity is 40 units. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:

• Revenue affecting net income of USD 80,000
• Costs affecting net income in the amount of the actual costs of USD 48,000
• Capitalized costs of USD 32,000
• Revenue surplus of USD 20,000

You then settle the following:

• The calculated revenue to CO-PA together with the calculated costs
• The capitalized costs and the revenue surplus to FI and EC-PCA

The following values are reported in CO-PA:

Capitalized profit is shown in the balance sheet. The capitalized profit is the difference between the capitalized costs and the revenue in excess of billings. In this example it is USD 32,000. The capitalized profit enables you to capitalize profits that you have not yet realized.

The income statement shows the following values:

In period 03 the actual costs increase to USD 90,000. You deliver a second amount to your customer and send him a second milestone billing for USD 90,000. The total revenue is USD 190,000. The invoiced quantity is 40 units. The order is partially delivered and partially billed. In results analysis, the system calculates the following data:

• Costs affecting net income in the amount of the actual costs of USD 96,000
• Revenue affecting net income of USD 160,000
• Reserves for unrealized costs of USD 6,000
• Revenue surplus of USD 30,000

You then settle the following:

• The calculated revenue to CO-PA together with the actual costs
• The revenue surplus to FI and EC-PCA

The following values are reported in CO-PA:

The income statement shows the following values:

In period 04 the actual costs increase to USD 130,000. You deliver the remaining goods and send the customer the final invoice for USD 10,000. The total revenue is USD 200,000. The invoiced quantity is 20 units. The order is now fully delivered and fully invoiced.

In results analysis, the system calculates the following data:

• Costs affecting net income in the amount of the actual costs of USD 130,000
• Revenue affecting net income: USD 200,000 The calculated revenue is set equal to the actual revenue.

You then settle the following:

• The calculated revenue to CO-PA together with the actual costs
• The cancellation of the revenue surplus to FI and EC-PCA

The following values are reported in CO-PA:

The income statement shows the following values:

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