A controlling area is an organizational unit in SAP that represents a closed system for cost accounting purposes. It provides the framework for planning, allocation, and monitoring of costs. A company can have either one controlling area for centralized management or multiple controlling areas for decentralized management structures. Key considerations for one vs. multiple controlling areas include chart of accounts, posting periods, master data, project management, and cost distribution functions.

1. Controlling Area
Definition
Controlling area is an organizational unit from the Accounting component in the R/3 System, used
to represent a closed system for cost accounting purposes.
In the standard R/3 System, the controlling area constitutes the framework for planning, allocation
and monitoring of costs.
Use
If your enterprise has or plans to have uniform controlling structures , it makes sense to set up
uniform structures for cost accounting.
Before you do this, decide whether to have one or more logical controlling areas. This decision
depends on your company’s corporate policy, that is on whether your company has centralized or
decentralized management structures.
For more information, see:
Controlling area: Notes
Integration
Controlling Area: Integration (Applications)
Controlling Area: Integration (Organizational Unit)
Controlling (CO)
Organizational unit within a company, used to represent a closed system for cost accounting
purposes.
A controlling area may include single or multiple company codes that may use different
currencies. These company codes must use the same operative chart of accounts.
All internal allocations refer exclusively to objects in the same controlling area.
Controlling Area: Notes
One controlling area
When you have one controlling area:
• The same operative chart of accounts is used.

2. Each enterprise entity in the controlling area only uses the specific accounts it requires. You can
use a country chart of accounts to record country-specific requirements.
• Posting periods are always the same. Special periods are, however, an exception.
• You must agree on controlling master data, for example for cost elements, activity types, cost
centers. Uniform procedures should exist for maintaining master data.
• Work on period-end closing must be coordinated (planned and actual work). You must agree on
a time schedule for work on period-end closing. You must define how costs are allocated and
prices are calculated for services per cost center / cost center group
• You have a choice of three currencies. Controlling area currency, object currency and
transaction currency. For cost accounting for several company codes and several countries, the
object currency corresponds to the transaction currency.
• You have unlimited use of the project management function. You can work with one project
definition, one project structure plan and one network. You have unlimited use of project
management and reporting functions.
• You have unlimited use of the cost distribution functions (cost center assessment and internal
activity allocation.
Several controlling areas
You can define several controlling areas if you do not want to merge enterprise units in cost
accounting. Ensure that the organizational structure provides for harmonized procedures and
structures for cost accounting
When you have more than on controlling area:
• You can define a separate operative chart of accounts for each controlling area. You can use
the group chart of accounts for consolidation.
• You can work with different posting periods. Controlling areas that are assigned to the same
operating concern use the same posting periods.
• Work on period-end closing do not need to be coordinated (planned and actual work).
• You define controlling master data such as cost elements, activity types, cost centers for each
specific controlling area.
• You must ensure that the organizational structure caters for comprehensive project
management. You can work with one project definition, one project structure plan and one
network for each controlling area. You have unlimited use of project management and reporting
functions within each controlling area. You may use the Executive Information System (EIS) if you
would like project reporting to cover all controlling areas (cost elements, cost centers, orders).
• You can use the Special Purpose Ledger (FI-SL) or Consolidation (EC-CS) components to draw
up reports for all controlling areas. Ensure that you consolidate the appropriate elements from
different controlling areas.

3. For more information on cost accounting for several controlling areas see OSS note 107293.
Controlling Area: Integration (Applications)
When you work with the following components, you are in one controlling area:
• Overhead Cost Controlling (CO-OM)Cost element accounting, cost center accounting
• Product Cost Controlling (CO-PC) Cost object controlling, costing
• Profit Center Accounting (EC-PCA)
• Project System (PS)
Controlling Area: Integration (Organizational
Units)
You define technical aspects of a controlling area at client level. It is possible, and in the case of
distributed systems even recommendable, to conduct joint cost accounting for all clients (ALE
scenarios).
Controlling areas and cost centers
One or several controlling areas can be assigned to a controlling area. A cost center is assigned
to exactly one controlling area.
Controlling areas and profit centers
One or several profit centers can be assigned to a controlling area.
A profit center is assigned to exactly one controlling area. Costs relevant for the profit center are
entered in this controlling area.
Controlling areas and operating concerns
An operating concern can be assigned to one controlling area. The profitability analysis for this
controlling area is carried out in this operating concern.
Several controlling areas can be assigned to one operating concern.
The costs of the assigned controlling areas are included in the profitability analysis and are
available in the operating concern.
Controlling areas and company codes
Several company codes are assigned to one controlling area. These company codes are included
in cost accounting within that controlling area.

4. You can assign a controlling area to one company code. Cost accounting for the company code
is conducted in this controlling area.
You can assign several company codes to one controlling area when you conduct joint cost
accounting.
For G/L accounting, you may only use the same posting periods for company codes as you use
for the controlling area to which they are assigned.