Preparing Segment Reporting in Financial Accounting

Objective

After completing this lesson, you will be able to define segments and segment derivation

Segment Reporting

Paloma has heard from the accountants that they report on levels bellow the company code using segments. She has checked in the system and sees that segments are already maintained, but does a deep dive to find out more about them and their role in financial business transactions and reporting.

Segment reporting breaks down the operations of a company into manageable pieces, or segments, to satisfy US GAAP and IFRS reporting standards. You can define segments in customizing in SAP S/4HANA.

Annual financial statements supplemented by the segment information from segment reporting provide deeper insights into the financial position, asset position, and profit situation of a company.

The image shows the market regions americas mapped to segment 0001, Africa mapped to segment 0002, and Australia mapped to segment 0003.

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.
"

Segment Definition

The screenshot shows an customizing view of Segments for Segment Reporting. It displays a table with three segments: 1000_A, 1000_B, and 1000_C, each with its corresponding description: Segment A, Segment B, and Segment C. The view allows for creating new entries, editing existing ones, and navigating through different data management options.

You find the appropriate activity in customizing for SAP S/4HANA under Enterprise Structure → Definition → Financial Accounting → Define Segment.

Note

If you want to represent segments in two dimensions (primary and secondary segmentation), you can do this as follows: You can use the standard Segment dimension for the primary segmentation and create a custom field (such as Region) as a secondary segmentation element.

Segment Derivation

Since it is impractical (and sometimes impossible) to manually enter a segment in financial accounting transactions, an automatic derivation through the profit center is standard for the multitude of automatic and integrative postings (such as from logistics applications).

The image is a flowchart related to profit center accounting in an organization. It shows the relationship between different modules and the profit center, as well as how general ledger documents are handled without profit center information. The flowchart includes segments for materials management, sales and distribution, and controlling.

You enter a segment in the master record of each profit center.

Usually a system is configured to require a profit center (and thus a segment) for each financial transaction. If this is not the case, you can enter the segment manually. Otherwise, it is always derived from the corresponding profit center.

The profit center itself can be entered manually or automatically derived.

You can also fill the segment on the accounting document line items by defining substitution rules, if a prerequisite is met, the system triggers the substitution of the segment field. Note that if the segment doesn't correspond to the one present in the profit center master record, the system raises an error.

You can also develop your own custom logic for segment derivation using a Business Add-In.

You find the corresponding settings in Customizing under Financial Accounting → Financial Accounting Global Settings → Tools → Customer Enhancements → Business Add-Ins (BAdIs) → Segment Derivation.

An additional element is needed to perform segment reporting: the document splitting procedure. For this, you need to set up a zero balance setting for the Segment characteristic in customizing for General Ledger Accounting underBusiness Transactions → Document Splitting.

In the customizing of document splitting, you can also create a standard account assignment (a constant) for the segment.

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