Outlining Further Allocation Contexts

Objectives
After completing this lesson, you will be able to:

After completing this lesson, you will be able to:

  • Discuss other allocation contexts

Profit Center and Profitability Analysis Allocations

In addition to the objects discussed, you require a periodic and complete result for different purposes on various additional objects during the closing processes. Some examples include profit center and profitability analysis.

  • Profit center, management-oriented for internal control

  • Profitability analysis, market-oriented for decisions with external impact

SAP S/4HANA offers other allocation contexts to complete the data flow.

In the case of Profit Center Accounting, amounts from one or more sending profit centers are transferred to one or more receiving profit centers. The purpose is to obtain a balance sheet and profit & loss statement per profit center. This allows you to analyze internal profit and loss as well as balance sheet reporting, reflecting your organization (per region, per function, per product, and so on). This task can be performed only after completing all period-end closing operations in the components (Financial Accounting, Management Accounting, sales order management, Materials Management) that integrate with profit centers.

In Profitability Analysis, primary and secondary costs assigned to one or more cost centers are sent to one or more receiving profitability segments. The main goal, in that case, is to provide the decision-making groups in your organization with market-oriented information, to analyze the profitability of segments in your external market.

For profit centers, cycles such as distribution and overhead allocation have already been covered in the previous units.

Regarding profitability analysis, you should know that top-down distribution can be used to distribute aggregated amounts and quantities to a more detailed level based on reference information.

For example, freight invoices cannot easily be assigned to the product level. Therefore, you post them initially at a summarized level, such as the product group, and then use top- down distribution to distribute the amounts to a more detailed level, such as the product, by using sales revenue for each product as a reference.

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