Let’s go step by step. In Classical ECC (ERP 6.0, before UPA in S/4HANA), Transfer Pricing (parallel valuation) was already available, but the setup was complex and restricted. We essentially had to configure parallel valuations in CO and activate the Material Ledger (ML) to get it fully working.

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🔑 1. Core Concept in ECC

In ECC, Transfer Pricing = Multiple Valuation Approaches:

• Legal Valuation (L): External statutory valuation (e.g., IFRS/Local GAAP).
• Group Valuation (G): Eliminates intercompany profit (goods valued at group cost).
• Profit Center Valuation (P): Shows profit across profit center boundaries (intracompany view).

👉 ECC stored these in separate ledgers/tables (FI/CO not harmonized like S/4HANA).
👉 To enable full transfer pricing, Material Ledger was mandatory (because ML supports multiple valuations of inventory).

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🔑 2. SAP Configuration Steps in ECC for Transfer Pricing

Step 1: Activate Transfer Pricing

• IMG: Controlling → General Controlling → Transfer Pricing → Basic Settings → Activate Transfer Prices
• Choose which valuation approaches you want active:
  • 01 = Legal valuation
  • 02 = Group valuation
  • 03 = Profit center valuation

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Step 2: Define Valuation Approaches

• IMG: CO → Transfer Pricing → Define Valuation Views
• Assign descriptions and determine which views are required for your business.
• Typically, you choose Legal + Group or Legal + Group + Profit-Center.

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Step 3: Assign Valuation Views to Controlling Area

• IMG: CO → Transfer Pricing → Assign Valuation Views to Controlling Area
• This determines which controlling area uses which valuation views.

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Step 4: Material Ledger Activation

• IMG: Logistics General → Material Master → Settings for Key Fields → Activate Valuation Areas for Material Ledger.
• You must activate ML for each valuation area (plant) where multiple valuations are needed.
• In ML Customizing, choose “Parallel Valuation” method and indicate which views (Legal, Group, Profit-Center) should be carried.

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Step 5: Valuation Strategies

• IMG: CO → Transfer Pricing → Define Valuation Strategies
• Define which price (standard cost, actual cost, transfer price, etc.) is used per valuation view.
• Example:
  • Legal = Legal standard cost
  • Group = Group standard cost (no markup)
  • Profit-Center = Standard cost + internal margin

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Step 6: Assign Valuation Strategy to Scenarios

• IMG: CO → Transfer Pricing → Assign Valuation Strategies to Scenarios
• Link your strategy to applications (e.g., Costing, Order Settlement, CO-PA).

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Step 7: Adjust FI/CO Integration

• Ensure you define the accounts in FI to handle postings for each valuation view (separate account determination).
• For example:
  • COGS-Legal → GL A
  • COGS-Group → GL B
  • COGS-PC → GL C

(In practice, many companies used only Legal + Group, because Profit-Center valuation required more reconciliation and special account setup.)

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🔑 3. Limitations in ECC

• Separate Ledgers/Tables:
  Group & Profit Center valuations were stored separately (in ML and PCA ledgers) → reconciliation with FI required.
• CO Objects Limited:
  Group valuation wasn’t available for all CO objects (e.g., internal orders).
• Complex Reporting:
  Parallel valuations were not easily available in one report; required COPA and ML reporting.
• Dependency on ML:
  Without Material Ledger, true parallel valuation of inventory wasn’t possible.

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🔑 4. Example

Let’s say:

• Company A manufactures with a cost of 80.
• Transfer Price to Company B = 100 (20 markup).

In ECC with TP active:

• Legal Valuation (L): COGM = 100 (markup included).
• Group Valuation (G): COGM = 80 (true cost).
• Profit-Center Valuation (P): COGM = 100, but shows margin allocation across PCs.

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✅ In summary:
In ECC, Transfer Pricing configuration required activating parallel valuation, defining valuation approaches, assigning strategies, and activating ML. It was powerful but cumbersome — with fragmented data models and heavy reconciliation effort.

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