Outlining Global Settings for Profit Center Accounting

Operating Concern is the highest reporting level for profitability, sales and marketing controlling, and the central organizational unit in Profitability Analysis (CO-PA) used to segment and structure the market.

Controlling areas structure the internal accounting operations of an organization within management accounting. They represent closed units that are used to calculate costs. All internal allocations relate solely to objects that belong to the same controlling area.

Company codes are independent accounting units within financial accounting. They represent the smallest organizational units for which an account group can be set up for the purposes of external reporting. The process of external reporting involves recording all relevant transactions and generating all supporting documents for financial reports (such as balance sheets and profit and loss statements).

Profit Centers are organizational units in accounting that reflect a management-oriented structure of the organization for the purpose of internal control. You can analyze operating results for profit centers using either the cost-of-sales or the period accounting approach. By calculating the fixed capital as well, you can use your profit centers as investment centers.

Plant is an organizational unit within Logistics. It is used to break an organization down according to production, procurement, plant maintenance, and material planning considerations. Plants are used in materials management, logistics, production planning and control. In a plant, either materials or goods are manufactured, or services are provided.

In SAP S/4HANA activate the profit center accounting in customizing: Financial Accounting→General Ledger Accounting→Master Data→Profit Center→Activate Profit Center Accounting in Controlling Area.

Activating profit center accounting has got the effect, that additional checks will be executed to ensure a consistent derivation of the profit center during postings. For example, when you define a new cost center master record, the message "Profit Center Accounting active but no profit center specified" appears, when no profit center is entered.

Many companies not only have to create reports according to one specific accounting principle, they also need to meet different information requirements (country-specific requirements, corporate group standards, and so on). This means that financial statements have to be created, for example, local accounting standards like the U.S. Generally Accepted Accounting Principles (GAAP), the German Commercial Code (HGB) and the International Financial Reporting Standards (IFRS).

The accounts approach is widely used in this context. Different valuation approaches post to different accounts (only in cases of differences between the principles for topics like valuation, depreciation, or accruals). When financial statements are created, the financial statement version is used to evaluate the relevant accounts. For example, financial statements according to U.S. GAAP only take into account those accounts that follow this accounting principle.

The ledger approach in SAP S/4HANA allows you (within SAP General Ledger) to manage multiple "general ledgers" in parallel and in this way create different financial statements (ledger approach). These ledgers are all called standard ledgers. A standard ledger contains a full set of journal entries for all business transactions. You can also manage accounts in parallel using additional accounts (accounts approach). In this case, there is exactly one standard ledger in SAP General Ledger – the leading ledger.

Standard Ledger and Extension Ledger

As an additional option, other extension ledgers can be added. Extension ledgers are based on an underlying ledger. An extension ledger is assigned to an underlying ledger and inherits all journal entries of the underlying ledger for reporting. Postings made explicitly to an extension ledger are visible in that extension ledger but not in the underlying ledger.

An extension ledger stores delta values and points to another ledger, thus providing a flexible mechanism for adjustments and reporting. An important use case is management views on top of legal data (IFRS or local GAAP). Besides creating a master record, extension ledgers do not need additional configuration.

In addition, you can build up extensions ledgers that are based on another (= underlying) extension ledger.

Extension Ledger

Reporting on the extension ledger from type Extension Ledger always includes the data of the underlying ledger. Multiple extension ledgers can point to the same underlying ledger. The benefit of reduced data footprint and zero reconciliation effort is that only delta values are kept. Extension ledgers are stored in the universal journal which is the same as standard ledgers. Extension ledgers can be assigned their own booking period variants. This means the standard ledger can be closed and the assigned extension ledger can be open.

In SAP S/4HANA, the universal journal supports additional parallel currencies. These include the following:

• You can configure by company code and ledger to fix currencies, and configure up to eight freely defined currencies.

• You can configure new currency types in customer name-space.

• Freely defined currencies for parallel G/L ledgers are independent of the leading ledger.

• Real-time currency conversion in accounting interface with zero balance per document for all currencies.

The freely defined currencies are integrated in several business processes (for example, open item management), for some specific business processes differences might occur (clearing effects).

The following is a list of the currency fields of ACDOCA:

• Local currency: Currency type 10, ACDOCA field-name HSL

• Global currency: Currency type of controlling area, ACDOCA field-name KSL

• Freely defined currencies 1-8: You can configure your own currency type, as there is no dependency on currency types of the leading ledger

Currency Conversion Settings

The list of currency types is now extensible by customer defined currency types, SAP name-space 0* - 9*, and customer name-space Y* Z*.

The settings definition level defines whether currency conversion settings are maintained either once globally or specifically by a company code.

You can define your own descriptions of the currency types in customer name-space, which is displayed in UIs as field label.

Usage of Corresponding Views: Conversion Settings

You can use the corresponding views for the conversion settings depending on the definition level (global/per company code) as follows:

• Currency - Only for customer defined currency type

• Source currency type (any other currency type can be used as source)

• Exchange rate type

• Translation date type

• Real-time conversion - Operation postings in the period are converted if real-time conversion is set. Otherwise, the currency can be filled with foreign currency valuation in period end close

Note

SAP S/4HANA provides two options to build up transfer prices in the system:

1. The parallel single-valuation ledgers

2. The multi-valuation ledger

For more details concerning the business requirements of transfer prices and its impact on the ledger and currency settings, refer to the Transfer Pricing unit in this training.

The primary task of document splitting is to ensure the assignment of General Ledger (G/L) characteristics to all lines of the document, even in the one-to-one case of having a single expense line. Only with active and properly configured document splitting can a complete balance statement per defined characteristic be produced.

The figure shows a vendor invoice with two different profit centers assigned to the expense lines. With document splitting, the system can distribute the amounts of the other lines onto the profit centers automatically (based on customizable rules). This process is seamless for the person entering the data and does not complicate the document posting process. In the example, only the profit center is shown, however, document splitting can be configured to update any characteristic information to the vendor and tax lines.

In Customizing, specify the characteristics for which you want to carry out document splitting. You define the document splitting characteristics in Customizing for Financial Accounting under General Ledger Accounting→Business Transactions→Document Splitting→Define Document Splitting Characteristics for General Ledger Accounting.

If you want to create a balance sheet for the characteristic, select the Zero balance checkbox. This ensures that the balance of these entities is set to 0 in each posting, which makes a per characteristic balance sheet possible.

Activation of Document Splitting

You activate document splitting in Customizing for Financial Accounting under General Ledger Accounting→Business Transactions→Document Splitting→Activate Document Splitting.

In a further step (in the dialog structure), you can activate or deactivate splitting in each company code in the same transaction.

Inheritance means that you create a customer invoice from one revenue line. An example is the (unique) characteristics that are projected (inherited) to the customer and the tax lines in the general ledger view, even if no splitting rule can be found.

If you want to use a standard account assignment in document splitting, you must first create a new constant in Customizing for Financial Accounting under General Ledger Accounting→Business Transactions→Document Splitting→Edit Constants for Non Assigned Processes.

Document Splitting Process Steps

Active (Rule-Based) Document Splitting

The entities that you defined as document splitting characteristics are inherited to the posting lines without account assignment. As you can see in the figure, the selected characteristics balance to zero. In this rule-based split, the vendor and tax lines (items 1 and 4) are split in the same way as the expense lines, the expense basic item category (items 2 and 3), and expense account 65003000 in the general ledger view.

In the figure, the following characteristics apply:

• Displayed business transaction:

  • G/L accounting posting – Transfer posting within an account.

• System configuration:

  • Document splitting is activated. Document splitting characteristics Profit Center and Segment are defined.

Document Splitting Method

A document splitting method is the sum of all the document splitting rules of all business transactions. It defines the way in which a document split should be carried out. This means that each method contains a definition that describes how the individual item categories are to be treated in the individual business transactions. For example, whether or not the system should copy the account assignment of a customer item from a revenue item to a customer invoice.

A business transaction is a general subgroup of actual business processes, which is delivered by SAP and to which extensive item categories are assigned. The business transaction variant is a specific version of the business transaction provided by SAP, and is a (technical) representation of a real business process for document splitting.

An item category is a (technical) representation of the posted document lines. It describes the items that you can find within a document (a business transaction). Some of the item categories are derived by the system from the account type of the G/L account, others have to be defined in Customizing. In other words, an item category is the semantic description of a posting line for document splitting. The individual splitting rules define which item categories can or should be split (item categories to be edited), and at the same time, determine the basis on which the split can take place (base item categories).

Simulating the General Ledger View

In the SAP S/4HANA application, you can simulate the general ledger view as well as the entry view before posting. This allows you to analyze errors that would cause a termination during posting earlier and more effectively. You can display the detailed data of the document split using the expert mode.

Document Simulation – Expert Mode

The features of the expert mode are as follows:

• The expert mode provides information about the configuration of document splitting, such as the splitting method, business transactions, and business transaction variant.
• The expert mode provides more details and useful information on what configuration rules were used, and how the amount is split for the new lines that are created.

From the document display, you can branch to expert mode, which shows more details pertaining to the configuration of document splitting.

• Profit Center Accounting is embedded in SAP S/4HANA, requiring global settings in SAP General Ledger.
• Ledgers in SAP General Ledger support multiple accounting principles.
• Extension ledgers provide flexible reporting without additional configuration.
• Currency settings in SAP General Ledger support multiple parallel currencies.
• Document splitting ensures assignment of characteristics to all document lines, enabling complete balance statements per characteristic.