SAP S/4HANA Overview
Core Financial Accounting (FI) Configuration
Master Data
Document Control
Posting Control
Financial Document Clearing

Creating Profit Centers and Segments

Objective

After completing this lesson, you will be able to create profit centers, cost centers, and segments

Profit Centers and Segments

The Segment Characteristic

  • The segment characteristic is a standard account assignment object available in SAP S/4HANA (FI), that allows you to create evaluations for objects or entities below the company code level.

  • The objective of the segment characteristic is to enable a detailed analysis of the various business activity areas, such as markets or products, of a broad-based enterprise.

You can use segments to meet the segment reporting requirements of international accounting principles (=> IFRS/US-GAAP).

The Business area or Profit center objects can be used as alternatives. Segments are provided to meet additional requirements because the business area or profit center were frequently used for different purposes in the past.

Extract from IFRS 8: BUSINESS SEGMENTS

A business segment is a part of a company that meets the following criteria:

  1. A segment is a part of a company carrying out business activities that generate revenues and for which expenses can be incurred (including revenues and expenses in connection with transactions between areas of the same company).

  2. A segment is a part of a company whose operating profits are regularly inspected by the main decision-maker of the company with regard to decisions about the allocation of resources to this segment and the evaluation of its profitability, and

  3. A segment is a part of a company for which there is corresponding financial information.

Derivation of a Segment

In the Profit Center, the Segment field is highlighted.

You can save a segment in the master data of a profit center. When you post to a profit center, the segment is posted automatically. Segment posting does not take place if a profit center does not have a segment. It is standard practice to derive the segment from a profit center. Customers can develop additional solutions or derivations.

Deriving a Segment

Flowchart explaining profit center data sources. Inputs include materials management, sales, and controlling. Derivation links profit center info to general ledger via segment assignment details.

The Segment characteristic is derived from the characteristic Profit Center,which exists in various SAP objects.

As mentioned in SAP Note 1035140, the following principles apply to segments:

  • The use of segments is only officially approved by SAP if they are used simultaneously with profit centers.
  • Segments can only be derived automatically using profit centers.
  • In many business cases, particularly in logistics, you cannot enter segments manually.
  • Various standard interfaces do not support segments.

If you cannot derive the characteristic Segment from the master record of a profit center, you need to look for other ways of assigning a segment.

General Ledger Accounting with document splitting provides the following options:

  • Manual entry
  • BAdI implementation (FAGL_DERIVE_SEGMENT)
  • Definition of substitution rules
  • Assignment of standard accounts

Create Profit Centers, Cost Centers, and Segments

Create Profit Centers, Cost Centers, and Segments

ExerciseStart Exercise

Business Example

You need to map Profit Center Accounting and segment reporting in the General Ledger Accounting. To achieve this, you need to create and assign the required objects. Create segments, profit centers, and cost centers. You like to check, where (Company Code, Groups and Hierarchy, Profit Center) your new cost center is used.

Note

This exercise requires you to use the Company Code, GR##, that you created in the exercise Create a Company Code.

In this exercise, when the values include ##, replace the characters with the number that your instructor assigned to you.

Summary

  • Segments enable detailed analysis below company code level and enable detailed analysis of various activity areas
  • Profit centers are used for internal reporting but also are a key element in segment derivation.
  • Segments can be derived from profit centers automatically. Both organizational units are essential for segment reporting.
  • Document splitting can ensure zero balance for segments in financial statements.
Learning

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