Metal arrangements with customers to calculate invoices based on market prices provided by commodity exchange markets are frequently made in commodity-dependent sectors like oil (Platts, CME, LME, NYMEX). A Provisional Invoice must be made if the goods is delivered before the average price. The price difference is billed by generating a Final Invoice once average pricing has ended and the Final Price is known.



Chicago Mercantile Exchange (CME)

London Metal Exchange (LME)

New York Mercantile Exchange (NYMEX)


Use Case

Analyst Varsha is in charge of billing customers for their orders. Varsha contacts Anna, who is in charge of obtaining contracts, purchase orders, and sales orders from clients in order to determine prices for invoices. Since the item that needs to be invoiced is a commodity, figuring out the price is difficult. Varsha requires the final price that must be invoiced to the customer; Anna simply has the contract price.

Business need

Metal or oil-related commodities will be billed at a price set by commodity exchanges. Metal (Copper) is the item that needs to be billed to the customer; copper pricing will be dependent on LME (London Metal Market) prices. The price is always “Price as per LME on delivery date” or average rate when a contract or sales order is agreed upon with the customer. Due to a lead time, it would take a few months to supply the metal to the consumer.

Expected Accounting Entries

1. Date of Order/Contract: 15 September 2021 (Price 1999 USD)

Dr. Customer with the agreed-upon price of the order, which is 1999 USD

Cr. Revenue from Sales and Provisional Revenue in 1999

2. Delivery Period 8 October 2021 (Price 2010 USD)

Dr. Customer with a difference worth of 11 USD at the spot price (delivery date)

Cr. Provisional Revenue / Sales Revenue – 11 USD

3. The price as of October 31, 2021. (Price 1990 USD)

Dr. Sales Revenue/Provisional Revenue: USD 20

Cr. Customer with a final pricing that includes a 20 USD difference

Net impact of differential billing in SAP on accounting revenue.

Dr. Customer with a price of 1990 USD as of October 31

Cr. 1990 USD Sales Revenue

Jessie, an IT solution architect, is contacted by Varsha and Anna.

Utilizing SAP

The SAP recommendation from Jessie IT Architect is as follows:

IFRS 15 provisional pricing

Some contracts might have provisions for provisional pricing, which base the transaction price on the commodity’s spot price on the payment due date. This could happen after the deadline for fulfilling the performance requirement. Contrary to the cases outlined, the standard’s guidance on variable consideration does not apply to variability that results only from changes in the market price after control transfers. This is due to the fact that a receivable already exists at the time of delivery and is covered by the financial instruments standard.

KPMG Revenue IFRS 15 Handbook as a source

Document for Differential Billing

Between the provisional and final billing documents lies the differential billing document. Each delivery item or sales order item is represented by an item pair that is created. The system first constructs a standard billing item using the existing pricing. The delivery item or sales order item’s immediately preceding billing document item is then identified and copied to the billing document with a negative value. The delivery item or sales order item’s billing status is listed as B = Partially processed in the differential billing document. As many difference billing documents as you require may be defined.

Provisional and differential billing documents are not separate in the typical delivery. The system makes an effort to identify the previous billing document item in each situation. The billing document for this delivery item or sales order item is a differential billing document unless none are identified, in which case it is a provisional billing document. One billing document may contain both single items and differential item pairs when invoicing for numerous delivery items or sales order items.

The assistance section of

Last Billing Statement

Similar to the differential billing document, the final billing document generates an item pair. It changes the billing status of the sales order item or delivery item to C, which stands for completely processed.

In the event that the provisional billing document is omitted and the final billing document is created directly, just one billing item will be created for the pertinent delivery item or sales order item. Items for which there is no provisional billing document may be included in a final billing document that bills a number of delivery items or sales order items; only single billing items are issued for these items. A final billing document might thus include both individual items and differential item pairings.

You have the choice to temporarily record revenue as provisions that have no impact on net income using the provisional billing document or differential billing document. These contingencies are resolved and recorded as revenues to the appropriate profit and loss accounts in the final billing document. You can achieve this by specifying the proper account determination parameters for each billing type.

The assistance section of


Procedural steps

There are two techniques to deal with differential billing. Commodity Price Engine is used, and the Final Billing Document’s pricing is updated.


Commodity Price Calculator

A preliminary price is provided by the provisional rule in Formula & Pricing (F&A Pricing). Because the final price of the product has not been determined, the status of the invoice is Provisional. A fresh invoice with the final price is created after the prices from Platts/the market data provider are averaged at month’s end. The system generates a differential invoice by combining the prices from the provisional invoice and the final invoice. The debit or credit amount determined from the price difference between the prior bills is included in the differential invoice.


Revise the final cost on the final billing statement (F2D2)

The business process has the choice to adjust the final price at the order level, which is not based on a commodity.



Temporary / Difference Billing Format

Billing Type Final

After Final Invoicing, the order’s status is displayed as complete.

Provisional Invoice dated 15-Sep-2021 with billing type F2D1

Difference Invoice dated 8 October 21

Final Invoice dated October 31, 2021 with billing code F2D2

After the final invoice, the revenue GL is debited or credited with the difference between the provisional and final invoices.


  • We used sales revenue in both the tentative and final invoices for illustrative purposes. Business requirements, however, can call for posting provisional in Non-Revenue GL. With two different accounting keys and independent condition types in the pricing procedure, this requirement can be met.
  • Please disregard the demo’s content.


  • Up to ECC 6, the billing categories “N” for provisional or differential billing documents and “O” for final billing documents are both available. Please contact SAP for S4 HANA versions as it isn’t offered in the most recent release. Commodity Price Engine includes provisional and final billing (CPE).


Provisional billing is possible with differential posting to customers and revenue when billing categories “O” and “N” are present in the billing type. The final price may be modified on the final billing document and may be charged or credited to the client and revenue. It is possible to achieve revenue recognition for differential/provisional billing in accordance with IFRS 15.