Lessons to Simplify

Profit Center and

Segment Reporting
Activities

Saugata Ghosh
PwC

Copyright 2013
Wellesley Information Services, Inc.
All rights reserved.
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

1
What Well 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

2
What Well 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
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
4
What Well 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
SAP General Ledger World

Source: SAP

6
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
7
Key Differences/Improvements
Profit Center Accounting in Classic GL Profit Center Accounting in SAP
General Ledger
Application Use
profit center to represent Useprofit center to represent
responsibility centers/BUs for responsibility centers/BUs for which
which you need independent you need independent financial
income statement (Only select B/S statements (income statement, as
Items can be tracked at profit well as balance sheet)
center level; for example, Inventory,
WIP, Fixed Assets, A/R, A/P, and
dedicated accounts, like Bank and
Cash)

Part of CO Part of Controlling (CO) module Integrated into FI module

vs. FI
Ledger Documents are posted in 8A ledger Profit
center and partner profit
center are characteristics of FI
postings; no need for separate
ledger
8
Key Differences/Improvements (cont.)
Profit Center Accounting in Classic GL
Total Table GLPCT
Allocation Use
CO profit center allocations
(assessment 3KE5 and distribution
4KE5)
Period-End Period-end B/S readjustment
Process (TCode: F.5D and F.5E)
Periodic transfer of payables and
receivables (TCode: 1KEK)
Profit Center Accounting in SAP
General Ledger
FAGLFLEXT
Characteristics
like profit center and
segments are part of this table
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)
No period-end processing (B/S
readjustment) required
With document splitting, AR and AP
lines are distributed real time to
respective profit centers
9
Key Differences/Improvements (cont.)
Profit Center Accounting in Classic GL Profit Center Accounting in SAP
General Ledger
Fixed Asset Profit
center derivation is based on (EHP5) Profit center and segment
Master cost center as maintained in asset fields added in asset master for
master enhanced reporting

Dummy Unassigned postings go to dummy No need for dummy profit center

Profit profit center New functionality of Constant as
Center part of document splitting

Segment Not available A newaccount assignment object

(org. unit) added for enhanced
segmental reporting

10
What Well 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

11
Step-by-Step Guide for Implementing SAP
General Ledger Profit Center
Configuration
Master data
Transaction data (derivation)
Planning
Reporting

12
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

13
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)

14
Segment Definition

Segment creation is a configuration setup

15
Segment Derivation
Segment is automatically derived from profit center
Its possible to develop custom derivation logic using BAdI
FAGL_DERIVE_SEGMENT

For many business transactions, especially in logistics, segment

cant 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
16
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

17
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)

18
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 cant define your own
Scenarios need to be assigned to leading and/or non-leading ledgers

19
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
20
Profit Center Derivation in Transactions (cont.)

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
21
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
22
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

23
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
24
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

25
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
26
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

27
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

28
WBS Elements Make Profit
Center Required
In the field selection settings for WBS Element, set the profit
center field as required

29
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 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 masters 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
30
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 GoTo
Item Account Assignment tab

31
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)

32
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
33
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

34
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.

35
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and Loss Accounts
s Expense Accounts Master data/ Cost objects
s Revenue Accounts Master data/ Material/ SO
Balance Sheet Accounts
s Fixed Assets Master data/ Assets
s Inventory Master data/ Material
s Cash & Bank Default Assignment
s Accounts Receivable Document Splitting
s Accounts Payable Document Splitting
s Other Accounts Manual Entry
36
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)

37
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
38
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

39
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

40
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

41
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

42
Customizing Activate Document Splitting
(cont.)
Selected company codes can be deactivated

43
Customizing Define Constants

Constants are used to

define default values for
splitting characteristics,
such as profit center,
segment, etc.

44
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

45
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

46
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

47
Configuration Zero-Balance Clearing
Account
In this configuration, you specify a GL account for zero-balance
posting Example: Inter Profit Center Clearing

48
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

49
Example of Vendor Payment General
Ledger View
Note the AP and Inter-PC Clearing lines

50
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
51
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

52
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:

53
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:

54
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

55
Profit Center Derivation in Transactions

Financial Statement Items Derivation

Profit and loss accounts
s Expense accounts Master data/cost objects
s Revenue accounts Master data/material/SO
Balance sheet accounts
s Fixed assets Master data/assets
s Inventory Master data/material
s Cash and bank Default assignment
s Accounts receivable Document splitting
s Accounts payable Document splitting
s Other accounts Manual entry
56
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)

57
Step-by-Step Guide for Implementing SAP
General Ledger Profit Center
Configuration
Master data
Transaction data (derivation)
Planning
Reporting

58
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 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).
59
SAP General Ledger Profit Center Planning

IMG: Financial Accounting (New) General Ledger Accounting

(New) Planning
This functionality can be used for plan vs. actual reporting

60
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

61
SAP General Ledger Profit Center Planning
Copy Data to Plan (TCode FAGLGP52)
Copy 2010 actual data to 2011 plan

62
Step-by-Step Guide for Implementing SAP
General Ledger Profit Center
Configuration
Master data
Transaction data (derivation)
Planning
Reporting

63
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 Financial
Accounting General
Ledger Information
System General Ledger
Reports (New)
New reports have profit
center and segment as
selection criteria for
segment reporting needs
64
Profit Center and Segment Reporting
(Design Your Own Reports)
You can define your own reports using IMG path: Financial
Accounting (New) General Ledger Accounting (New)
Information System Drilldown Reports (G/L Accounts)

65
Report GL Balance by Profit Center/
Segment (FAGLB03)

Replaces classic GL report FS10N

66
Report GL Line Item by Profit Center/
Segment (FAGLL03)

Replaces classic GL report FBL3N

67
Report Financial Statements
(S_PL0_86000032)

68
Standard SAP General Ledger Reports
Financial Statement: Actual/
Actual Comparison
S_PL0_86000028

69
Standard SAP General Ledger Reports (cont.)

Financial Statement plan

vs. actual comparison
(S_ PL0_86000029)

70
Standard SAP General Ledger Reports (cont.)

Financial
Statement
S_ALR_87012284

71
Profit Centers in Asset Accounting Reports

To generate reports with profit

centers, you can create a sort
variant (Transaction Code OAVI)

72
Profit Centers in Asset Accounting Reports
(cont.)
Use a new sort variant
to generate profit
center-wise asset
reports

73
What Well 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

74
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

75
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, its 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
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Your Turn!

How to contact me:

Saugata Ghosh
saugata.ghosh@us.pwc.com
Please remember to complete your session evaluation
77
Disclaimer

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This content is for general information purposes only, and should not be used as a substitute for consultation with
professional advisors.

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www.pwc.com/structure for further details.
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