Practical Guide to SAP S/4HANA Profit Center Accounting - 2nd Edition

2.1 Profit center

As discussed in the previous chapter, the structure of the profit centers is meant to define a responsibility reporting view of the organization. Once the master data is defined, the profit centers are arranged in a hierarchy to represent the responsibility structure of the enterprise. During the design of the system, the nature of that responsibility structure should be determined. Along what lines does the business divide itself? Is it on a geographical basis, a functional basis, a product line basis, some other method, or a combination of some of the above?

Technically, the name of this hierarchy is defined first in the configuration settings and assigned to the controlling area before the profit center masters can be created. This is the case for both classic PCA and for PCA in the new GL. In classic PCA, it is also required to create a dummy profit center before you can start using the standard hierarchy. The concepts of dummy profit center and standard hierarchy are discussed more fully in the following sections.

The creation of the profit center master data is the same regardless of whether you are using classic PCA or new GL PCA. In traditional SAP GUI, transactionransaction KE51 is used to create profit centers (see Figure 2.1). In S/4HANA, you use the tile Manage Profit Centers to access most of the master data functions.

Figure 2.1: Create profit center initial screen

Before you start creating pieces of master data, such as profit centers, it is important to understand how you are going to name or number them. Unlike some master data objects in SAP, profit center numbering is not driven by a number range object. In fact, it is pretty much freeform. You are limited by a field size of up to 10 characters, and there are a few special characters such as * that will be rejected; otherwise, you can use any alpha-numeric combination you choose. You should also be aware that the profit center, like the cost center, exists in the controlling area, so it is not possible to have a duplicate value within the same controlling area.

Because your profit centers will be tied in some way to other organizational objects in SAP, such as company codes and cost centers, it is prudent to have an overall numbering strategy for these objects before you start creating them in the system. This should reflect the responsibility structure of the organization and be designed to facilitate reporting. Often, the structure or the nature of a business will lead to a certain strategy for profit center numbering. For example:

• An organization with a primary focus on manufacturing may be largely concerned with results at a plant level, so may wish to reflect the plant structure somehow in the profit center numbering and hierarchy.
• An organization with a primary focus on re-selling may be more concerned with results at a regional or product line level. so may want to reflect that in the numbering and hierarchy.

As a fictional example, an organization that manufactures and sells toys and games is setting up profit centers. They are interested in looking at their results regionally. They operate in four regions: United States, Canada, Europe, and Asia. They are also interested in results by product line. These are: video games, board games, and card games.

When you have decided on your profit center number, you can go ahead and create the data using transaction KE51 (see Figure 2.2) or this can be done using the Manage Profit Centers tile in Fiori (see Figure 2.3).

Figure 2.2: Create profit center—General Data

Figure 2.3: Create Profit Center via Fiori—General Information

In SAP ECC, the most important information about the profit center is contained on the Basic Data tab. In S/4HANA, this is now called General Information.

The profit center is considered to be a time-based object in controlling, which means it is created with a validity period and you can create different data for different time periods. In configuration, certain fields on the master data can be flagged as time dependent, resulting in SAP storing a new master record whenever a time-dependent field is changed on a profit center. The ability to create time-based objects is a very important aspect of controlling because it enables you to view master data values at different time periods. For example, the person responsible for the profit center may change next year. If person responsible is a time-dependent field, then you will have a view of the profit center master when Sally was the person responsible, and then a new view starting when person responsible is reassigned.

The time dependency of the profit center is checked when you create another object with a relationship to it, such as a cost center. If you created your profit center to be valid from 01/01/2015 onwards, you will not be able to create a cost center assigned to that profit center with a valid-from date earlier than 01/01/2015.

Other key fields on the Basic Data/General Information tabs are Person Respons. / Person Responsible. This is the person who is responsible for the results of the profit center. The User Responsible field links to the user master in the SAP system. This field is not mandatory because it is possible that the person responsible for the profit center does not exist as a user in the SAP system. The Department field is a free-text field that can be used to store an external department number. The entry in this field is not validated, so the user creating the profit center can enter any value they choose.

The Profit Ctr Group field sets up the link between the profit center and its place in the standard hierarchy. In Fiori this field is called Standard Hierarchy Node. The profit center group selected here is a node in the hierarchy. In the initial setup of the profit center structure, there are several different approaches to populating this field. If you are creating other master data, such as material masters which may be dependent on a profit center number, you may want to load or create all the profit centers before you have fully thought out all the levels in the hierarchy. In this case, you may wish to create all the profit centers and assign them to the top hierarchy node and then distribute them later. Alternately, you may have your hierarchy in place and may choose to directly assign each profit center to its correct level during the initial creation.

The final field we will look at on the Basic Data/General Information tabs is the Segment field. The segment is an organizational element that was introduced to SAP as part of the new GL. If you have not migrated to the new GL, you will not see the segment as a field in your profit center master and you will not have to worry about it. If you have either migrated to the new GL or have always used new GL, then you will have the segment on your profit center master and you will have considered how the segment is used in your organization.

The segment object was introduced along with other new GL functions, such as parallel ledgers and document splitting, to address evolving accounting standards for both IFRS and US-GAAP. The segment and the document splitting functionality in SAP was aimed towards complying with emerging requirements for segment reporting, which are now defined under IFRS 8 or ASC 280 (US-GAAP). There are still significant differences between US-GAAP and IFRS in the area of segment reporting. For a complete understanding, you should review the relevant accounting guidelines.

For purposes here, it is important to know that SAP designed the segment to be derived from the profit center to which it is assigned. Other enhancements may be made to the system to derive the segment in other ways, but the default is to link the profit center to the segment. The segment can thus be seen as a grouping of profit centers, but the segment will not necessarily fulfill all the functions of a profit center group. Instead, the segment should be seen as simply an organizational construct intended to enable the organization to produce balanced financial statements at a level that is different from the company code.

The tracking of segment-level data in the new GL is activated by assigning scenario FIN_SEGM to a ledger in the configuration for financial accounting, in the same way that you assigned FIN_PCA. You can look again at Figure 1.2 to see this. The assignment of the segmentation scenario results in the update of the segment, partner segment, profit center, and partner profit center. Remember from Chapter 1 that in S/4HANA this assignment is automatic, and configuration for this is no longer available.

The segment values themselves are defined in the configuration of the enterprise structure under the definition of financial accounting. The definition of the segment is simply an identifier and a description (see Figure 2.4).

Figure 2.4: Definition of segments

The segmentation scenario in the new GL is designed to meet the needs of segment reporting under either IFRS or US-GAAP, however, even if you do not have to file segment-level reports, you may still find some internal use for the segment field in your SAP environment.

Once you have entered the segment in the profit center and saved the master record, you cannot change the value of the Segment field. It will appear with a grey background and is not directly editable (see Figure 2.5.)

Figure 2.5: Segment field in profit center master

If there have been no postings made to the profit center, you can still change the segment value if you have access to SM30. If you do not have access, then ask your SAP technical support team to do this for you. Use transaction SM30 to access the table called V_FAGL_SEGM_PRCT (see Figure 2.6 and Figure 2.7) and in change mode, select the checkbox to enable the segment to be changed in the profit center.

Figure 2.6: Table V_FAGL_SEGM_PRCT

Figure 2.7: Checkbox to enable change of segment in profit center

The Segment field is now open for changes in the profit center master (see Figure 2.8).

Figure 2.8: Segment field is now editable

Additional control information is found on the Indicators tab (see Figure 2.9) and on the Company Codes tab (see Figure 2.10). The History tab is now called Change Log in S/4HANA. It is useful because it shows who created the profit center, and when, and provides links to the change documents.

On the Indicators tab, you can lock the profit center to prevent postings. If the locked profit center is assigned to another object and you try to make a posting using the linked object, you receive an error message, and the transaction is not posted.

On the Company Codes tab, you can determine which company codes are assigned to your profit center. By default, if you create the profit center manually, your profit center is linked to all the company codes. If you want to restrict this, you need to go into the Company Codes tab and deselect the assignment. The profit center must be assigned to at least one company code.

Figure 2.9: Profit center Indicators tab

Figure 2.10: Profit center company code tab

The two other tabs, Address and Communication, enable you to enter the address, tax jurisdiction, language, telephone, fax, etc. for the profit center. If you have a requirement to store this information at the profit center level, then the fields are available, but not mandatory.

Once you have entered your data, you can save your profit center. Unlike other master data in SAP, it is not sufficient to press the save button . If you just press save, you will receive the message shown in Figure 2.11. You can proceed, but the profit center will be saved in inactive status and will not be able to receive postings.

Figure 2.11: Message when saving the profit center

If you want to use the profit center right away, click the activate button . This will create and save the profit center in active status, and you will not see the message shown in Figure 2.11.

Additionally, when you make changes to the profit center in KE52, you also need to activate the changes. Note that the activation of profit centers is no longer necessary if you use the Manage Profit Centers Fiori app. Once you create the profit center through the app, it is ready for use.