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© Copyright 2013
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Lessons to Simplify
Profit Center and
Segment Reporting
Activities
Saugata Ghosh
PwC
1
In This Session …
•  We will discuss…
s  How Profit Center accounting in the classic GL compares to its
capabilities in the latest version, i.e., SAP General Ledger
s  Step-by-step guidance for implementing SAP General Ledger
Profit Center accounting functionality
s  Importance of setting up correct master data
s  Walk through various examples and reports
s  Recommendations and best practices
2
What We’ll Cover …
•  Why implement profit center accounting
•  Classic profit center accounting vs. profit center in SAP
General Ledger
•  Step-by-step guide for implementing SAP General Ledger
profit center
•  Wrap-up
3
What We’ll Cover …
•  Why implement profit center accounting
•  Classic profit center accounting vs. profit center in SAP
General Ledger
•  Step-by-step guide for implementing SAP General Ledger
profit center
•  Wrap-up
4
Why Profit Center Accounting?
•  Statutory reporting
s  Various accounting pronouncements require disclosure about
operating segments of an enterprise and related financial information,
particularly for public companies
„  Example: FASB Statement No. 131 (US GAAP), IAS 14 Segment
reporting, IFRS 8 Operating Segments.
s  Increasing importance of IAS/IFRS as global accounting principle is
heightening the need for improved quality and modeling of segment
reporting
•  Management reporting
s  Multi-dimensional analysis of the performance (revenue, expense,
profit, working capital, ROI, etc.) of various operating segments and
responsibility centers within an enterprise has always been in the
priority list for the management information system
•  Profit center accounting is an ideal tool for modeling of your segment
reporting
5
What We’ll Cover …
•  Why implement profit center accounting
•  Classic profit center accounting vs. profit center in SAP
General Ledger
•  Step-by-step guide for implementing SAP General Ledger
profit center
•  Wrap-up
6
SAP General Ledger World
Source: SAP
7
Classic Profit Center Accounting vs. Profit
Center in SAP General Ledger
•  Profit center accounting in Classic GL
s  Primarily for deriving Income Statement for internal responsibility
centers
„  CO objects responsible for revenue and costs (such as cost center,
order, project, customer order) are assigned to profit centers and
updated with the relevant transaction data affecting net income
s  For measuring ROI, select Balance Sheet items (such as fixed assets,
inventory, WIP, AR, AP, Cash) can also be accounted for the profit
centers
s  However, there is no zero-balance functionality for each profit center
•  Profit center accounting in SAP General Ledger
s  Enhanced functionalities for complete financial statements (Income
Statement and Balance Sheet) by profit center, segment, and profit
center group
„  Online document splitting makes it real time
8
Key Differences/Improvements
Profit Center Accounting in Classic GL Profit Center Accounting in SAP
General Ledger
Application •  Use profit center to represent
responsibility centers/BUs for
which you need independent
income statement (Only select B/S
Items can be tracked at profit
center level; for example, Inventory,
WIP, Fixed Assets, A/R, A/P, and
dedicated accounts, like Bank and
Cash)
•  Use profit center to represent
responsibility centers/BUs for which
you need independent financial
statements (income statement, as
well as balance sheet)
Part of CO
vs. FI
•  Part of Controlling (CO) module •  Integrated into FI module
Ledger •  Documents are posted in 8A ledger •  Profit center and partner profit
center are characteristics of FI
postings; no need for separate
ledger
9
Key Differences/Improvements (cont.)
Profit Center Accounting in Classic GL Profit Center Accounting in SAP
General Ledger
Total Table •  GLPCT •  FAGLFLEXT
•  Characteristics like profit center and
segments are part of this table
Allocation •  Use CO profit center allocations
(assessment 3KE5 and distribution
4KE5)
•  Use FI to perform actual allocation
(assessment and distribution) of
account balances, including balance
sheet items
•  CO allocations can be posted in FI
real time with the functionality of
real-time reconciliation (CO with FI)
Period-End
Process
•  Period-end B/S readjustment
(TCode: F.5D and F.5E)
•  Periodic transfer of payables and
receivables (TCode: 1KEK)
•  No period-end processing (B/S
readjustment) required
•  With document splitting, AR and AP
lines are distributed real time to
respective profit centers
10
Key Differences/Improvements (cont.)
Profit Center Accounting in Classic GL Profit Center Accounting in SAP
General Ledger
Fixed Asset
Master
•  Profit center derivation is based on
cost center as maintained in asset
master
•  (EHP 5) Profit center and segment
fields added in asset master for
enhanced reporting
Dummy
Profit
Center
•  Unassigned postings go to dummy
profit center
•  No need for dummy profit center
•  New functionality of “Constant” as
part of document splitting
Segment •  Not available •  A new account assignment object
(org. unit) added for enhanced
segmental reporting
11
What We’ll Cover …
•  Why implement profit center accounting
•  Classic profit center accounting vs. profit center in SAP
General Ledger
•  Step-by-step guide for implementing SAP General Ledger
profit center
•  Wrap-up
12
Step-by-Step Guide for Implementing SAP
General Ledger Profit Center
•  Configuration
•  Master data
•  Transaction data (derivation)
•  Planning
•  Reporting
13
Implementation Guidelines
•  Define profit centers and segments based on segment reporting needs
•  Ensure every FI document line has correct profit center/segment
s  Assign scenarios to your ledgers
s  Set up master data for derivation of “profit center” and “Segment” in
transactions
„  Use Assignment Monitor
s  Set up additional derivation logic
„  Default profit center assignment (FAGL3KEH)
„  Document splitting
„  Substitution, BAdI
s  Manually enter profit center in transactions
•  Every FI document needs to be self-balanced by profit center/segment
s  Zero balance and mandatory field check
s  Real-time integration of CO with FI
14
Segment — A New Organizational Unit in
SAP General Ledger
•  SAP had introduced “segment,” a standard account assignment
object, as part of SAP General Ledger
•  Segment can be used to represent your business segments
(segmentation based on product lines, geography, or customer)
•  Segment can be viewed as a group of profit centers
s  Then what is the rationale of having “segment,” too?
„  Unlike profit center group, segment is assigned to
transaction records
„  Unlike profit center group, segment is available for most of
the GL reports (part of selection parameters in every
standard SAP General Ledger report)
15
Segment — Definition
•  Segment creation is a configuration setup
16
Segment — Derivation
•  Segment is automatically derived from profit center
•  It’s possible to develop custom derivation logic using BAdI
FAGL_DERIVE_SEGMENT
•  For many business transactions, especially in logistics, segment
can’t be entered manually
s  This is why the segment is recommended to be used along with
profit centers
s  However, if you want to use segment without profit center, you
should ensure that segment can be derived using the BAdI
FAGL_DERIVE_SEGMENT or substitution rules for all your
business transactions
17
Profit Centers — Assigned to Segments
•  TCode: KE51/KE52/KE53 for Create/Change/Display
•  Profit centers are assigned to segments (master data “Basic Data Screen”)
•  Multiple profit centers can be assigned to a segment (n:1 relationship)
•  Profit center can go across company codes, but not across Controlling
Area
18
Changing Segment in Profit Center
•  In standard settings, once posting is made to a profit center, the
assigned segment cannot be changed
•  To allow change of segment in profit center master data,
configuration needs to be done in view V_FAGL_SEGM_PRCT
using TCode SM30
s  Once this configuration is done, the segment will be allowed to
be changed in the profit center master data (KE52)
19
Scenarios for Profit Center and Segment
•  “Scenario” defines which fields are updated in the SAP General Ledger
tables during posting
s  Scenario for profit center is FIN_PCA
s  Scenario for segment is FIN_SEGM
•  Scenarios are SAP-delivered; you can’t define your own
•  Scenarios need to be assigned to leading and/or non-leading ledgers
20
Profit Center Derivation in Transactions
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
21
Profit Center Derivation in Transactions (cont.)
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
22
Profit Centers in Asset Accounting
•  Prior to EHP 5
s  Only cost center is available in
the asset master
s  Profit center is derived from the
cost center
•  EHP 5 onwards
s  SAP added profit center and
segment fields in asset master
s  This enables you to create asset
reports at the profit center or
segment level
•  Profit center should be same in asset master and in the cost
center assigned to the asset
23
Asset Accounting — Make “Profit
Center” Required
•  In the screen layout, set profit center (and cost center) as
mandatory
•  Assign screen layout to Asset Class: TCode OAOA
24
Profit Center Derivation in Transactions
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
25
Material Master — Make “Profit
Center” Required
•  In field selection settings for material, set the profit center as a
required entry
s  Transaction codes – OMSR and OMS9
26
Profit Center Derivation in Transactions
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
27
Cost Center — Make “Profit
Center” Required
•  There is no field status configuration for cost centers
•  Standard SAP displays a warning message when saving a cost
center without entering a profit center
•  Change the message control to display an error message
s  Transaction code – OBA5
s  Application Area – KS
s  Message Number – 096
28
Internal Order — Make “Profit
Center” Required
•  In the field selection settings in the “Define order type”
configuration, set the profit center as a required field
•  Transaction code: KOT2
29
WBS Elements — Make “Profit
Center” Required
•  In the field selection settings for WBS Element, set the profit
center field as required
30
CO Production/Process Order — Profit Center
Derivation
•  The profit center in CO Production/Process Order is proposed from FG material
master (to review assigned profit center, use TCode CO03 ª Assignment tab)
•  The following FI entries get generated while processing CO Production/Process
Order:
s  Confirmation/Goods Issue
„  Dr. RM Consumption (1)
„  Cr. RM Inventory (2)
s  Confirmation/Goods Receipt
„  Dr. FG Inventory (3)
„  Cr. Cost of Goods Manufactured (4)
•  Analysis
s  (1) and (4) posted to profit center maintained in the Production/Process Order
s  (2) and (3) inventory posted to profit center maintained in material master’s RM/FG
•  Note:
s  If profit center in consumption line (1)/COGM line (4) is different from the Inventory
line and if “zero balancing” is active the system will automatically create inter-
profit center clearing lines
31
Sales Order — Profit Center Derivation
•  Profit center is proposed in the Sales Order line from material
master
•  Proposed profit center can, however, be changed manually (VA02)
or by using a substitution rule
s  Example scenario for substitution: Selling profit centers are
different from the profit center responsible for the
manufacturing plant (where inventory is sitting) and you want to
book sales in the selling profit centers
•  To review profit center determined, use TCode VA03 ª GoTo ª
Item ª Account Assignment tab
32
Sales Order — Profit Center Derivation (cont.)
•  Sales Order
s  The following FI entries get generated while processing sales orders:
„  Delivery/PGI
§  Dr. Cost of Goods Sold (1)
§  Cr. Inventory (2)
„  Invoice
§  Dr. Customer (3)
§  Cr. Revenue (4)
•  Analysis
s  (2) will be posted to the profit center maintained in the material
master
s  (1) and (4) will be posted to the profit center maintained in sales
order
s  (3) Profit center will be inherited from line (4)
33
Profit Center Derivation in Transactions
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
34
Setting Up Default Profit Centers
•  A new transaction (FAGL3KEH) is available for maintaining default
Profit Center for a combination of Company Code and GL A/C
(Classic GL transactions 3KEH and 3KEI are not valid in SAP
General Ledger)
•  Alternatively, BAdI FAGL_3KEH_DEFPRCTR can be used for
determining Profit Centers
35
Setting Up Default Profit Centers (cont.)
•  For these GL accounts, the system needs to be set so that profit
center is not allowed for manual entry. This can be accomplished
by suppressing the profit center field in the field status group
assigned in the master data of the GL account.
36
Profit Center Derivation in Transactions
•  Profit and Loss Accounts
s  Expense Accounts
s  Revenue Accounts
•  Balance Sheet Accounts
s  Fixed Assets
s  Inventory
s  Cash & Bank
s  Accounts Receivable
s  Accounts Payable
s  Other Accounts
Master data/ Cost objects
Master data/ Material/ SO
Master data/ Assets
Master data/ Material
Default Assignment
Document Splitting
Document Splitting
Manual Entry
Financial Statement Items Derivation
37
Manually Enter Profit Center — Other Accounts
•  There are some balance sheet and revenue accounts for which the
profit center cannot be derived
s  For such accounts, the profit center needs to be manually
assigned during document entry
•  For these accounts, the system should be configured to set the
Profit Center field as “required” during posting
s  This can be accomplished by making the profit center field a
required entry in the field status group assigned in the master
data of the GL account (TCode OBC4)
38
Profit Center Derivation in Transactions
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
39
Profit Center Derivation for AR and AP
•  In classic profit center accounting (PCA), AR and AP line items get
transferred to PCA only during period end (TCode 1KEK)
•  With SAP General Ledger, profit centers can be derived for AR
and AP line items real time from the offsetting lines
s  This can be achieved by activating document splitting and zero-
balancing functionalities
•  Remember that real-time document split postings are only in the
SAP General Ledger, not in the AR or AP sub-ledgers
40
Customizing — Define Document Splitting
Characteristics
•  Characteristics are the organizational elements based on which
document splitting functionality is performed
•  In the example below, document splitting is performed based on
profit center and segment
41
Balance Sheet for Profit Center and Segment
•  Activate “document splitting” with profit center and segment as
splitting characteristics
s  Set the “zero balance” indicator to ensure self-balancing
s  Set the “Mandatory Field” check indicator to ensure that profit
center and segment are populated in all postings
•  Define “Zero-Balance Clearing Account”
42
Customizing — Activate Document Splitting
•  Document splitting method: Defines how splitting is to be performed
•  Inheritance: Characteristics of a line item get copied into the offsetting
item
•  Constant: Default splitting characteristics
43
Customizing — Activate Document Splitting
(cont.)
•  Selected company codes can be deactivated
44
Customizing — Define Constants
•  Constants are used to
define default values for
splitting characteristics,
such as profit center,
segment, etc.
45
Views in Accounting Document
•  When SAP General Ledger is active, an FI document always has
two views: Entry view and the General ledger view
•  Entry View
s  This is how a user makes a document entry
s  This is how a document also appears in the sub-ledgers
•  General Ledger view
s  This is how SAP General Ledger is updated with the postings
„  Document splitting is only relevant for the general ledger; it
is not visible in Entry View
46
Example of a Vendor Invoice — Entry View
•  No profit center in the vendor line item in the Entry View
•  To view the profit center assignment, click General Ledger View
47
Example of a Vendor Invoice — General
Ledger View
•  Vendor line gets split; profit center is derived from offsetting lines
s  Split line items are stored in actual line items table FAGLFLEXA
s  Totals updated in table FAGLFLEXT
48
Configuration — Zero-Balance Clearing
Account
•  In this configuration, you specify a GL account for zero-balance
posting – Example: Inter Profit Center Clearing
49
Example of Vendor Payment — Entry View
•  This is a cross-profit center payment (from corporate P0000 to
P1000 and P1100)
•  For the bank line item (GL Account 113130), the profit center
derived was P0000 (from FAGL3KEH configuration)
•  No profit center in the vendor line item in the Entry View
•  To view the profit center assignment, click General Ledger View
50
Example of Vendor Payment — General
Ledger View
•  Note the AP and Inter-PC Clearing lines
51
Example of Vendor Payment — Analysis of
General Ledger View
•  Bank line item (GL Account 113130)
s  Profit center derived was P0000 (as set in FAGL3KEH)
•  Accounts payable line item
s  Split based on the document splitting configuration, and the
profit center was derived from the original invoice for which the
payment was made
•  The Inter-Profit Center Clearing Account (GL Account 194500)
s  These line items were created as a result of cross-profit center
posting and the configuration of zero-balancing functionality
s  System creates a receivable in P0000 and stores the partner
profit center information P1000 and P1100
s  System creates payables in P1000 and P1100 with the partner
profit center information P0000
52
Example of Vendor Payment — Analysis of
General Ledger View (cont.)
•  Shown below is the same document sorted and summarized by
profit center
•  With the addition of inter-profit center clearing line items, the
document is now balanced by profit center and also by segment
53
CO/FI Real-Time Integration
•  Secondary allocations within CO, across profit center or segment,
should be accounted for in FI as reconciliation
s  Example: Cost center assessment
•  In SAP General Ledger, the system can be configured to reconcile
CO and FI on a real-time basis
•  IMG menu path:
54
CO/FI Real-Time Integration — Example
•  Cost center assessment
s  Sender: Cost Center CCP1000 (Profit Center P1000, Segment
S000)
s  Receiver: Cost Center CCP1100 (Profit Center P1100, Segment
S100)
s  Both belong to Company Code 0006
•  CO document:
55
CO/FI Real-Time Integration — Example (cont.)
•  Reconciliation Document (Entry View)
•  Reconciliation Document (SAP General Ledger View)
Line 0003 and 0004 generated due to
document splitting
56
Profit Center Derivation in Transactions
•  Profit and loss accounts
s  Expense accounts
s  Revenue accounts
•  Balance sheet accounts
s  Fixed assets
s  Inventory
s  Cash and bank
s  Accounts receivable
s  Accounts payable
s  Other accounts
Master data/cost objects
Master data/material/SO
Master data/assets
Master data/material
Default assignment
Document splitting
Document splitting
Manual entry
Financial Statement Items Derivation
57
Assignment Monitor
•  Use the assignment tool provided by SAP to find out if there is
any master data that is not assigned to the profit center (TCode
1KE4)
58
Step-by-Step Guide for Implementing SAP
General Ledger Profit Center
•  Configuration
•  Master data
•  Transaction data (derivation)
•  Planning
•  Reporting
59
Planning — Classic GL vs. SAP General Ledger
•  Profit center accounting in Classic GL
s  Planning for cost centers/orders happens in the CO module (CO-OM)
s  Integrated planning (CO ª EC-PCA) is used to transfer plan data to
classic profit center accounting (online)
•  Profit center accounting in SAP General Ledger
s  Profit center is now integrated with FI planning functionality
s  FI planning is possible using any combination of characteristics,
such as GL Account/Profit Center/Partner Profit Center/Profit Center
Group/Segment/Functional Area/Cost Center
„  Plan data gets updated in FAGLFLEXP (plan Line Items) and also in
total table FAGLFLEXT
s  Planning for cost centers/orders continues in CO module (CO-OM).
The plan data is transferred online to FI with characteristics such as
profit center and segment (only for primary cost elements).
60
SAP General Ledger Profit Center Planning
•  IMG: Financial Accounting (New) ª General Ledger Accounting
(New) ª Planning
•  This functionality can be used for plan vs. actual reporting
61
SAP General Ledger Profit Center Planning —
Enter Plan Values (TCode GP12N)
•  Transaction Codes
s  GP12N: Enter plan Values
s  GP12NA: Display Plan Values
s  GLPUP: Upload From Excel
62
SAP General Ledger Profit Center Planning —
Copy Data to Plan (TCode FAGLGP52)
•  Copy 2010 actual data to 2011 plan
63
Step-by-Step Guide for Implementing SAP
General Ledger Profit Center
•  Configuration
•  Master data
•  Transaction data (derivation)
•  Planning
•  Reporting
64
Profit Center and Segment Reporting
(Standard Reports)
•  SAP has provided a set of
new reports as part of the
SAP General Ledger
•  SAP Easy Access screen:
Accounting ª Financial
Accounting ª General
Ledger ª Information
System ª General Ledger
Reports (New)
•  New reports have profit
center and segment as
selection criteria for
segment reporting needs
65
Profit Center and Segment Reporting
(Design Your Own Reports)
•  You can define your own reports using IMG path: Financial
Accounting (New) ª General Ledger Accounting (New) ª
Information System ª Drilldown Reports (G/L Accounts)
66
Report — GL Balance by Profit Center/
Segment (FAGLB03)
Replaces classic GL report FS10N
67
Report — GL Line Item by Profit Center/
Segment (FAGLL03)
Replaces classic GL report FBL3N
68
Report — Financial Statements
(S_PL0_86000032)
69
Standard SAP General Ledger Reports
Financial Statement: Actual/
Actual Comparison –
S_PL0_86000028
70
Standard SAP General Ledger Reports (cont.)
Financial Statement plan
vs. actual comparison
(S_ PL0_86000029)
71
Standard SAP General Ledger Reports (cont.)
Financial
Statement
S_ALR_87012284
72
Profit Centers in Asset Accounting Reports
•  To generate reports with profit
centers, you can create a sort
variant (Transaction Code OAVI)
73
Profit Centers in Asset Accounting Reports
(cont.)
•  Use a new sort variant
to generate profit
center-wise asset
reports
74
What We’ll Cover …
•  Why implement profit center accounting
•  Classic profit center accounting vs. profit center in SAP
General Ledger
•  Step-by-step guide for implementing SAP General Ledger
profit center
•  Wrap-up
75
Where to Find More Information
•  http://service.sap.com *
s  SAP Note 756146: SAP ERP new General Ledger: General
information
s  SAP Note 826357: Profit Center Accounting and New General
Ledger
s  SAP Note 321190: Difference between business area and profit
center
s  SAP Note 812919: SAP ERP new general ledger: Migration
s  SAP Note 1070629: FAQs: New general ledger migration
s  SAP Note 1534197: SAP LT: Transformation Solution- Profit
Center Reorganization
* Requires login credentials to the SAP Service Marketplace
76
7 Key Points to Take Home
•  Ensure every FI document line has the correct profit center/segment derived
s  Understand the importance of setting up master data correctly
s  Set Profit Center field as mandatory in the relevant master data wherever possible
•  Take advantage of document splitting
s  Ensure every FI document is zero-balanced by profit center/segment, so that you
can report complete financial statements for your profit centers/segments
s  Have AR and AP items distributed to profit center/segment real time
•  Configure real-time CO-FI integration for secondary allocations across profit center/
segment
•  Use FI planning using profit center/segment for plan vs. actual analysis
•  Use new reports (introduced by SAP as part of SAP General Ledger) for segment
reporting needs
•  If you are currently using classic profit center accounting, you may continue to use
the same in parallel after migration to SAP General Ledger. However, it’s not
recommended on a long-term basis due to the increased data volume and additional
time and effort.
•  Despite all new functionalities in SAP General Ledger, the user interfaces for data
entry are virtually identical with the earlier version
77
Your Turn!
How to contact me:
Saugata Ghosh
saugata.ghosh@us.pwc.com
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FIN2013_Ghosh_Lessonstosimplifyprofit

  • 1. © Copyright 2013 Wellesley Information Services, Inc. All rights reserved. Lessons to Simplify Profit Center and Segment Reporting Activities Saugata Ghosh PwC
  • 2. 1 In This Session … •  We will discuss… s  How Profit Center accounting in the classic GL compares to its capabilities in the latest version, i.e., SAP General Ledger s  Step-by-step guidance for implementing SAP General Ledger Profit Center accounting functionality s  Importance of setting up correct master data s  Walk through various examples and reports s  Recommendations and best practices
  • 3. 2 What We’ll Cover … •  Why implement profit center accounting •  Classic profit center accounting vs. profit center in SAP General Ledger •  Step-by-step guide for implementing SAP General Ledger profit center •  Wrap-up
  • 4. 3 What We’ll Cover … •  Why implement profit center accounting •  Classic profit center accounting vs. profit center in SAP General Ledger •  Step-by-step guide for implementing SAP General Ledger profit center •  Wrap-up
  • 5. 4 Why Profit Center Accounting? •  Statutory reporting s  Various accounting pronouncements require disclosure about operating segments of an enterprise and related financial information, particularly for public companies „  Example: FASB Statement No. 131 (US GAAP), IAS 14 Segment reporting, IFRS 8 Operating Segments. s  Increasing importance of IAS/IFRS as global accounting principle is heightening the need for improved quality and modeling of segment reporting •  Management reporting s  Multi-dimensional analysis of the performance (revenue, expense, profit, working capital, ROI, etc.) of various operating segments and responsibility centers within an enterprise has always been in the priority list for the management information system •  Profit center accounting is an ideal tool for modeling of your segment reporting
  • 6. 5 What We’ll Cover … •  Why implement profit center accounting •  Classic profit center accounting vs. profit center in SAP General Ledger •  Step-by-step guide for implementing SAP General Ledger profit center •  Wrap-up
  • 7. 6 SAP General Ledger World Source: SAP
  • 8. 7 Classic Profit Center Accounting vs. Profit Center in SAP General Ledger •  Profit center accounting in Classic GL s  Primarily for deriving Income Statement for internal responsibility centers „  CO objects responsible for revenue and costs (such as cost center, order, project, customer order) are assigned to profit centers and updated with the relevant transaction data affecting net income s  For measuring ROI, select Balance Sheet items (such as fixed assets, inventory, WIP, AR, AP, Cash) can also be accounted for the profit centers s  However, there is no zero-balance functionality for each profit center •  Profit center accounting in SAP General Ledger s  Enhanced functionalities for complete financial statements (Income Statement and Balance Sheet) by profit center, segment, and profit center group „  Online document splitting makes it real time
  • 9. 8 Key Differences/Improvements Profit Center Accounting in Classic GL Profit Center Accounting in SAP General Ledger Application •  Use profit center to represent responsibility centers/BUs for which you need independent income statement (Only select B/S Items can be tracked at profit center level; for example, Inventory, WIP, Fixed Assets, A/R, A/P, and dedicated accounts, like Bank and Cash) •  Use profit center to represent responsibility centers/BUs for which you need independent financial statements (income statement, as well as balance sheet) Part of CO vs. FI •  Part of Controlling (CO) module •  Integrated into FI module Ledger •  Documents are posted in 8A ledger •  Profit center and partner profit center are characteristics of FI postings; no need for separate ledger
  • 10. 9 Key Differences/Improvements (cont.) Profit Center Accounting in Classic GL Profit Center Accounting in SAP General Ledger Total Table •  GLPCT •  FAGLFLEXT •  Characteristics like profit center and segments are part of this table Allocation •  Use CO profit center allocations (assessment 3KE5 and distribution 4KE5) •  Use FI to perform actual allocation (assessment and distribution) of account balances, including balance sheet items •  CO allocations can be posted in FI real time with the functionality of real-time reconciliation (CO with FI) Period-End Process •  Period-end B/S readjustment (TCode: F.5D and F.5E) •  Periodic transfer of payables and receivables (TCode: 1KEK) •  No period-end processing (B/S readjustment) required •  With document splitting, AR and AP lines are distributed real time to respective profit centers
  • 11. 10 Key Differences/Improvements (cont.) Profit Center Accounting in Classic GL Profit Center Accounting in SAP General Ledger Fixed Asset Master •  Profit center derivation is based on cost center as maintained in asset master •  (EHP 5) Profit center and segment fields added in asset master for enhanced reporting Dummy Profit Center •  Unassigned postings go to dummy profit center •  No need for dummy profit center •  New functionality of “Constant” as part of document splitting Segment •  Not available •  A new account assignment object (org. unit) added for enhanced segmental reporting
  • 12. 11 What We’ll Cover … •  Why implement profit center accounting •  Classic profit center accounting vs. profit center in SAP General Ledger •  Step-by-step guide for implementing SAP General Ledger profit center •  Wrap-up
  • 13. 12 Step-by-Step Guide for Implementing SAP General Ledger Profit Center •  Configuration •  Master data •  Transaction data (derivation) •  Planning •  Reporting
  • 14. 13 Implementation Guidelines •  Define profit centers and segments based on segment reporting needs •  Ensure every FI document line has correct profit center/segment s  Assign scenarios to your ledgers s  Set up master data for derivation of “profit center” and “Segment” in transactions „  Use Assignment Monitor s  Set up additional derivation logic „  Default profit center assignment (FAGL3KEH) „  Document splitting „  Substitution, BAdI s  Manually enter profit center in transactions •  Every FI document needs to be self-balanced by profit center/segment s  Zero balance and mandatory field check s  Real-time integration of CO with FI
  • 15. 14 Segment — A New Organizational Unit in SAP General Ledger •  SAP had introduced “segment,” a standard account assignment object, as part of SAP General Ledger •  Segment can be used to represent your business segments (segmentation based on product lines, geography, or customer) •  Segment can be viewed as a group of profit centers s  Then what is the rationale of having “segment,” too? „  Unlike profit center group, segment is assigned to transaction records „  Unlike profit center group, segment is available for most of the GL reports (part of selection parameters in every standard SAP General Ledger report)
  • 16. 15 Segment — Definition •  Segment creation is a configuration setup
  • 17. 16 Segment — Derivation •  Segment is automatically derived from profit center •  It’s possible to develop custom derivation logic using BAdI FAGL_DERIVE_SEGMENT •  For many business transactions, especially in logistics, segment can’t be entered manually s  This is why the segment is recommended to be used along with profit centers s  However, if you want to use segment without profit center, you should ensure that segment can be derived using the BAdI FAGL_DERIVE_SEGMENT or substitution rules for all your business transactions
  • 18. 17 Profit Centers — Assigned to Segments •  TCode: KE51/KE52/KE53 for Create/Change/Display •  Profit centers are assigned to segments (master data “Basic Data Screen”) •  Multiple profit centers can be assigned to a segment (n:1 relationship) •  Profit center can go across company codes, but not across Controlling Area
  • 19. 18 Changing Segment in Profit Center •  In standard settings, once posting is made to a profit center, the assigned segment cannot be changed •  To allow change of segment in profit center master data, configuration needs to be done in view V_FAGL_SEGM_PRCT using TCode SM30 s  Once this configuration is done, the segment will be allowed to be changed in the profit center master data (KE52)
  • 20. 19 Scenarios for Profit Center and Segment •  “Scenario” defines which fields are updated in the SAP General Ledger tables during posting s  Scenario for profit center is FIN_PCA s  Scenario for segment is FIN_SEGM •  Scenarios are SAP-delivered; you can’t define your own •  Scenarios need to be assigned to leading and/or non-leading ledgers
  • 21. 20 Profit Center Derivation in Transactions •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 22. 21 Profit Center Derivation in Transactions (cont.) •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 23. 22 Profit Centers in Asset Accounting •  Prior to EHP 5 s  Only cost center is available in the asset master s  Profit center is derived from the cost center •  EHP 5 onwards s  SAP added profit center and segment fields in asset master s  This enables you to create asset reports at the profit center or segment level •  Profit center should be same in asset master and in the cost center assigned to the asset
  • 24. 23 Asset Accounting — Make “Profit Center” Required •  In the screen layout, set profit center (and cost center) as mandatory •  Assign screen layout to Asset Class: TCode OAOA
  • 25. 24 Profit Center Derivation in Transactions •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 26. 25 Material Master — Make “Profit Center” Required •  In field selection settings for material, set the profit center as a required entry s  Transaction codes – OMSR and OMS9
  • 27. 26 Profit Center Derivation in Transactions •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 28. 27 Cost Center — Make “Profit Center” Required •  There is no field status configuration for cost centers •  Standard SAP displays a warning message when saving a cost center without entering a profit center •  Change the message control to display an error message s  Transaction code – OBA5 s  Application Area – KS s  Message Number – 096
  • 29. 28 Internal Order — Make “Profit Center” Required •  In the field selection settings in the “Define order type” configuration, set the profit center as a required field •  Transaction code: KOT2
  • 30. 29 WBS Elements — Make “Profit Center” Required •  In the field selection settings for WBS Element, set the profit center field as required
  • 31. 30 CO Production/Process Order — Profit Center Derivation •  The profit center in CO Production/Process Order is proposed from FG material master (to review assigned profit center, use TCode CO03 ª Assignment tab) •  The following FI entries get generated while processing CO Production/Process Order: s  Confirmation/Goods Issue „  Dr. RM Consumption (1) „  Cr. RM Inventory (2) s  Confirmation/Goods Receipt „  Dr. FG Inventory (3) „  Cr. Cost of Goods Manufactured (4) •  Analysis s  (1) and (4) posted to profit center maintained in the Production/Process Order s  (2) and (3) inventory posted to profit center maintained in material master’s RM/FG •  Note: s  If profit center in consumption line (1)/COGM line (4) is different from the Inventory line and if “zero balancing” is active the system will automatically create inter- profit center clearing lines
  • 32. 31 Sales Order — Profit Center Derivation •  Profit center is proposed in the Sales Order line from material master •  Proposed profit center can, however, be changed manually (VA02) or by using a substitution rule s  Example scenario for substitution: Selling profit centers are different from the profit center responsible for the manufacturing plant (where inventory is sitting) and you want to book sales in the selling profit centers •  To review profit center determined, use TCode VA03 ª GoTo ª Item ª Account Assignment tab
  • 33. 32 Sales Order — Profit Center Derivation (cont.) •  Sales Order s  The following FI entries get generated while processing sales orders: „  Delivery/PGI §  Dr. Cost of Goods Sold (1) §  Cr. Inventory (2) „  Invoice §  Dr. Customer (3) §  Cr. Revenue (4) •  Analysis s  (2) will be posted to the profit center maintained in the material master s  (1) and (4) will be posted to the profit center maintained in sales order s  (3) Profit center will be inherited from line (4)
  • 34. 33 Profit Center Derivation in Transactions •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 35. 34 Setting Up Default Profit Centers •  A new transaction (FAGL3KEH) is available for maintaining default Profit Center for a combination of Company Code and GL A/C (Classic GL transactions 3KEH and 3KEI are not valid in SAP General Ledger) •  Alternatively, BAdI FAGL_3KEH_DEFPRCTR can be used for determining Profit Centers
  • 36. 35 Setting Up Default Profit Centers (cont.) •  For these GL accounts, the system needs to be set so that profit center is not allowed for manual entry. This can be accomplished by suppressing the profit center field in the field status group assigned in the master data of the GL account.
  • 37. 36 Profit Center Derivation in Transactions •  Profit and Loss Accounts s  Expense Accounts s  Revenue Accounts •  Balance Sheet Accounts s  Fixed Assets s  Inventory s  Cash & Bank s  Accounts Receivable s  Accounts Payable s  Other Accounts Master data/ Cost objects Master data/ Material/ SO Master data/ Assets Master data/ Material Default Assignment Document Splitting Document Splitting Manual Entry Financial Statement Items Derivation
  • 38. 37 Manually Enter Profit Center — Other Accounts •  There are some balance sheet and revenue accounts for which the profit center cannot be derived s  For such accounts, the profit center needs to be manually assigned during document entry •  For these accounts, the system should be configured to set the Profit Center field as “required” during posting s  This can be accomplished by making the profit center field a required entry in the field status group assigned in the master data of the GL account (TCode OBC4)
  • 39. 38 Profit Center Derivation in Transactions •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 40. 39 Profit Center Derivation for AR and AP •  In classic profit center accounting (PCA), AR and AP line items get transferred to PCA only during period end (TCode 1KEK) •  With SAP General Ledger, profit centers can be derived for AR and AP line items real time from the offsetting lines s  This can be achieved by activating document splitting and zero- balancing functionalities •  Remember that real-time document split postings are only in the SAP General Ledger, not in the AR or AP sub-ledgers
  • 41. 40 Customizing — Define Document Splitting Characteristics •  Characteristics are the organizational elements based on which document splitting functionality is performed •  In the example below, document splitting is performed based on profit center and segment
  • 42. 41 Balance Sheet for Profit Center and Segment •  Activate “document splitting” with profit center and segment as splitting characteristics s  Set the “zero balance” indicator to ensure self-balancing s  Set the “Mandatory Field” check indicator to ensure that profit center and segment are populated in all postings •  Define “Zero-Balance Clearing Account”
  • 43. 42 Customizing — Activate Document Splitting •  Document splitting method: Defines how splitting is to be performed •  Inheritance: Characteristics of a line item get copied into the offsetting item •  Constant: Default splitting characteristics
  • 44. 43 Customizing — Activate Document Splitting (cont.) •  Selected company codes can be deactivated
  • 45. 44 Customizing — Define Constants •  Constants are used to define default values for splitting characteristics, such as profit center, segment, etc.
  • 46. 45 Views in Accounting Document •  When SAP General Ledger is active, an FI document always has two views: Entry view and the General ledger view •  Entry View s  This is how a user makes a document entry s  This is how a document also appears in the sub-ledgers •  General Ledger view s  This is how SAP General Ledger is updated with the postings „  Document splitting is only relevant for the general ledger; it is not visible in Entry View
  • 47. 46 Example of a Vendor Invoice — Entry View •  No profit center in the vendor line item in the Entry View •  To view the profit center assignment, click General Ledger View
  • 48. 47 Example of a Vendor Invoice — General Ledger View •  Vendor line gets split; profit center is derived from offsetting lines s  Split line items are stored in actual line items table FAGLFLEXA s  Totals updated in table FAGLFLEXT
  • 49. 48 Configuration — Zero-Balance Clearing Account •  In this configuration, you specify a GL account for zero-balance posting – Example: Inter Profit Center Clearing
  • 50. 49 Example of Vendor Payment — Entry View •  This is a cross-profit center payment (from corporate P0000 to P1000 and P1100) •  For the bank line item (GL Account 113130), the profit center derived was P0000 (from FAGL3KEH configuration) •  No profit center in the vendor line item in the Entry View •  To view the profit center assignment, click General Ledger View
  • 51. 50 Example of Vendor Payment — General Ledger View •  Note the AP and Inter-PC Clearing lines
  • 52. 51 Example of Vendor Payment — Analysis of General Ledger View •  Bank line item (GL Account 113130) s  Profit center derived was P0000 (as set in FAGL3KEH) •  Accounts payable line item s  Split based on the document splitting configuration, and the profit center was derived from the original invoice for which the payment was made •  The Inter-Profit Center Clearing Account (GL Account 194500) s  These line items were created as a result of cross-profit center posting and the configuration of zero-balancing functionality s  System creates a receivable in P0000 and stores the partner profit center information P1000 and P1100 s  System creates payables in P1000 and P1100 with the partner profit center information P0000
  • 53. 52 Example of Vendor Payment — Analysis of General Ledger View (cont.) •  Shown below is the same document sorted and summarized by profit center •  With the addition of inter-profit center clearing line items, the document is now balanced by profit center and also by segment
  • 54. 53 CO/FI Real-Time Integration •  Secondary allocations within CO, across profit center or segment, should be accounted for in FI as reconciliation s  Example: Cost center assessment •  In SAP General Ledger, the system can be configured to reconcile CO and FI on a real-time basis •  IMG menu path:
  • 55. 54 CO/FI Real-Time Integration — Example •  Cost center assessment s  Sender: Cost Center CCP1000 (Profit Center P1000, Segment S000) s  Receiver: Cost Center CCP1100 (Profit Center P1100, Segment S100) s  Both belong to Company Code 0006 •  CO document:
  • 56. 55 CO/FI Real-Time Integration — Example (cont.) •  Reconciliation Document (Entry View) •  Reconciliation Document (SAP General Ledger View) Line 0003 and 0004 generated due to document splitting
  • 57. 56 Profit Center Derivation in Transactions •  Profit and loss accounts s  Expense accounts s  Revenue accounts •  Balance sheet accounts s  Fixed assets s  Inventory s  Cash and bank s  Accounts receivable s  Accounts payable s  Other accounts Master data/cost objects Master data/material/SO Master data/assets Master data/material Default assignment Document splitting Document splitting Manual entry Financial Statement Items Derivation
  • 58. 57 Assignment Monitor •  Use the assignment tool provided by SAP to find out if there is any master data that is not assigned to the profit center (TCode 1KE4)
  • 59. 58 Step-by-Step Guide for Implementing SAP General Ledger Profit Center •  Configuration •  Master data •  Transaction data (derivation) •  Planning •  Reporting
  • 60. 59 Planning — Classic GL vs. SAP General Ledger •  Profit center accounting in Classic GL s  Planning for cost centers/orders happens in the CO module (CO-OM) s  Integrated planning (CO ª EC-PCA) is used to transfer plan data to classic profit center accounting (online) •  Profit center accounting in SAP General Ledger s  Profit center is now integrated with FI planning functionality s  FI planning is possible using any combination of characteristics, such as GL Account/Profit Center/Partner Profit Center/Profit Center Group/Segment/Functional Area/Cost Center „  Plan data gets updated in FAGLFLEXP (plan Line Items) and also in total table FAGLFLEXT s  Planning for cost centers/orders continues in CO module (CO-OM). The plan data is transferred online to FI with characteristics such as profit center and segment (only for primary cost elements).
  • 61. 60 SAP General Ledger Profit Center Planning •  IMG: Financial Accounting (New) ª General Ledger Accounting (New) ª Planning •  This functionality can be used for plan vs. actual reporting
  • 62. 61 SAP General Ledger Profit Center Planning — Enter Plan Values (TCode GP12N) •  Transaction Codes s  GP12N: Enter plan Values s  GP12NA: Display Plan Values s  GLPUP: Upload From Excel
  • 63. 62 SAP General Ledger Profit Center Planning — Copy Data to Plan (TCode FAGLGP52) •  Copy 2010 actual data to 2011 plan
  • 64. 63 Step-by-Step Guide for Implementing SAP General Ledger Profit Center •  Configuration •  Master data •  Transaction data (derivation) •  Planning •  Reporting
  • 65. 64 Profit Center and Segment Reporting (Standard Reports) •  SAP has provided a set of new reports as part of the SAP General Ledger •  SAP Easy Access screen: Accounting ª Financial Accounting ª General Ledger ª Information System ª General Ledger Reports (New) •  New reports have profit center and segment as selection criteria for segment reporting needs
  • 66. 65 Profit Center and Segment Reporting (Design Your Own Reports) •  You can define your own reports using IMG path: Financial Accounting (New) ª General Ledger Accounting (New) ª Information System ª Drilldown Reports (G/L Accounts)
  • 67. 66 Report — GL Balance by Profit Center/ Segment (FAGLB03) Replaces classic GL report FS10N
  • 68. 67 Report — GL Line Item by Profit Center/ Segment (FAGLL03) Replaces classic GL report FBL3N
  • 69. 68 Report — Financial Statements (S_PL0_86000032)
  • 70. 69 Standard SAP General Ledger Reports Financial Statement: Actual/ Actual Comparison – S_PL0_86000028
  • 71. 70 Standard SAP General Ledger Reports (cont.) Financial Statement plan vs. actual comparison (S_ PL0_86000029)
  • 72. 71 Standard SAP General Ledger Reports (cont.) Financial Statement S_ALR_87012284
  • 73. 72 Profit Centers in Asset Accounting Reports •  To generate reports with profit centers, you can create a sort variant (Transaction Code OAVI)
  • 74. 73 Profit Centers in Asset Accounting Reports (cont.) •  Use a new sort variant to generate profit center-wise asset reports
  • 75. 74 What We’ll Cover … •  Why implement profit center accounting •  Classic profit center accounting vs. profit center in SAP General Ledger •  Step-by-step guide for implementing SAP General Ledger profit center •  Wrap-up
  • 76. 75 Where to Find More Information •  http://service.sap.com * s  SAP Note 756146: SAP ERP new General Ledger: General information s  SAP Note 826357: Profit Center Accounting and New General Ledger s  SAP Note 321190: Difference between business area and profit center s  SAP Note 812919: SAP ERP new general ledger: Migration s  SAP Note 1070629: FAQs: New general ledger migration s  SAP Note 1534197: SAP LT: Transformation Solution- Profit Center Reorganization * Requires login credentials to the SAP Service Marketplace
  • 77. 76 7 Key Points to Take Home •  Ensure every FI document line has the correct profit center/segment derived s  Understand the importance of setting up master data correctly s  Set Profit Center field as mandatory in the relevant master data wherever possible •  Take advantage of document splitting s  Ensure every FI document is zero-balanced by profit center/segment, so that you can report complete financial statements for your profit centers/segments s  Have AR and AP items distributed to profit center/segment real time •  Configure real-time CO-FI integration for secondary allocations across profit center/ segment •  Use FI planning using profit center/segment for plan vs. actual analysis •  Use new reports (introduced by SAP as part of SAP General Ledger) for segment reporting needs •  If you are currently using classic profit center accounting, you may continue to use the same in parallel after migration to SAP General Ledger. However, it’s not recommended on a long-term basis due to the increased data volume and additional time and effort. •  Despite all new functionalities in SAP General Ledger, the user interfaces for data entry are virtually identical with the earlier version
  • 78. 77 Your Turn! How to contact me: Saugata Ghosh saugata.ghosh@us.pwc.com Please remember to complete your session evaluation
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