Account Assignment in TRM Financial Transactions - Profit Center

[JustinZheng]

This article describes how to use Profit Center for financial transactions in Treasury and Risk Management (TRM) of in S/4HANA Public Cloud, mainly focus on using profit center in account assignments which will influence the posting journals arising from TRM transactions.

1. There are some connections and differences between profit center and cost center, so it is recommended first reading the blog Account Assignment in TRM Financial Transactions - Cost Center regarding how cost center is determined in posting journal items generated from TRM transactions.

2. When a cost center can be determined for the posting journal items of cost elements generated for TRM transaction, a profit center can always be retrieved from the cost center master data (the profit center assigned to the cost center in cost center’s master data) and apply to the corresponding posting journal items.

The profit center of a journal entry item (ACDOCA) without cost center assigned, e.g. a balance sheet account, can ‘inherit’ the profit center of the opposite item (in the same posting journal) which already has its profit center derived (for example, the opposite item is posted to a cost element which has cost center derived so that its profit center is determined from cost center master data), when:

• Profit center is defined as a Document Splitting Characteristic in configuration activity 102322 (Define Document Splitting Characteristics for General Ledger Accounting)

• And, 'Inheritance' is selected in configuration Activate Document Splitting (IMG activity SIMG_FAGL_ACTIV_SPLI). This is default configuration in S/4HANA Public Cloud.
• In configuration activity 102247 (Classify Document Types for Document Splitting), the document type uses the appropriate Business Transaction and Business Transaction Variant which support splitting for the needed item category based on the correct item category. 

The logic for profit center determination mentioned here is from accounting module instead of TRM. Therefore, the determined profit center is not reflected in any part of the TRM transactions.

3. In configuration activity 120100 (Edit Constant for Nonassigned Processes), a default profit center can be specified.

For example, YB900 is defined as the default profit center for controlling area A000 under constant 0DFLT here:

The consequence is, for example, within a journal entry generated from TRM, if all journal items post to balance sheet accounts (e.g. Debit: long term investment, Credit: bank clearing account), and there are no other means to derive the profit center, then YB900 will be adopted in posting journal items in general ledger accounting (ACDOCA).

The prerequisite for specifying a constant profit center is that 'Standard A/C Assgnment' is selected and constant 0DFLT is assigned in configuration Activate Document Splitting (IMG activity SIMG_FAGL_ACTIV_SPLI). This is default configuration in S/4HANA Public Cloud.

Moreover, if 'Inheritance' is also selected in configuration Activate Document Splitting (IMG activity SIMG_FAGL_ACTIV_SPLI), then 'Inheritance' will have higher priority than default profit center of constant 0DFLT. That means, default profit center of constant 0DFLT applies to a journal item only when no profit center can be inherited from other journal items in the same posting journal.

The logic for profit center determination mentioned here (default profit center of constant 0DFLT) is from accounting module instead of TRM. Therefore, the determined profit center is not reflected in any part of the TRM transactions.

If the requirement is to account TRM financial transactions by different profit centers for both profit/loss accounts and balance sheet accounts (e.g. account position for debt/investment by profit centers), then the configuration activity Edit Constant for Nonassigned Processes is not able to meet the requirement.

4. Through configuration activity 102639 (Manage Default Account Assignments), you can define the default profit center for a specific cost element (must be with cost element category 11 - Revenue) within a company code.

Usually TRM relevant cost elements are not set up with category 11 - Revenue. Therefore, in most cases, this method is not applicable to TRM related postings.

If the TRM relevant cost elements were set up with category 11, then this configuration can help you to determine the profit center for related posting journal items. Please note that the profit center assigned here is not reflected in any part of the TRM transactions, because this configuration takes effects during creation of postings in financial accounting.

5. Through configuration activity 102529 (Assign Default Profit Center to Accounts), you can define the default profit center for a specific range of G/L accounts within a company code, and the TRM posting journal items for the configured G/L account & company code will have the default profit center assigned (if there is no another profit center determined via other means, e.g. inheritance). Please note that the profit center assigned here is not reflected in any part of the TRM transactions, because this configuration takes effects during creation of postings in financial accounting.

Please note the configuration activity 102529 only works for cash accounts and cross-company clearing accounts. Therefore, this method could be useful when you have TRM postings containing cash account, and profit center of cash account can be defaulted, and it is even acceptable that other journal items inherit the profit center from cash account.

6. Implementing the BAdI FIN_ACDOC_ITEM_SUBSTITUTION or FIN_CODING_BLOCK_SUBSTITUTION might be beneficial as it offers more flexible development extensibility, allowing for customized coding block substitutions to better meet complex business requirements to determine profit center from accounting module. For more details, please refer to help document https://help.sap.com/docs/SAP_S4HANA_CLOUD/e5ec5859d8e54df98492d80564a734c0/6d95f6fa596646f59cfb9dd0....

Please note that the profit center determined via BAdI implementation is not reflected in any part of the TRM transactions, because they take effects during creation of postings in financial accounting.

7. When creating transactions for certain product categories (600, 760, 620), a profit center can be entered in sub-area Additional Fields of Administr. tab. For example, below is a FX forward transaction (product category 600):

When doing so in the transactions of product category 600 or 760 (OTC FX option), the major purpose is using profit center as a differentiation criterion in hedge management to match the FX exposure and FX derivative at the level of profit center. For more details regarding differentiation criteria in hedge management, please refer to help document https://help.sap.com/docs/SAP_S4HANA_CLOUD/e5ec5859d8e54df98492d80564a734c0/618b3d58eaa89144e1000000....

Unlike cost center, the column of profit center is unavailable in position indicator by default, unless that profit center is enabled as a differentiation term through configuration activity 104115 Define and Assign Differentiations (which will be introduced later). That means, profit center can't even be manually entered in the Position Indicator of TRM transactions, and consequently, the profit center (entered in sub-area Additional Fields of Administr. tab) will NOT be carried over to the posting journals generated from the transaction. In a word, it has no impact on postings.

8. Through the app Additional Account Assignments - Substitution Rules, you can create a substitution rule for profit center from TRM side.

This app provides comprehensive preconditions (characteristics from TRM transactions) which can help to determine the profit center based on complicated combinations of multiple characteristics from TRM transactions.

Just one simple example:

The substitution rule defined in this app take effect when TRM is transferring data to accounting interface, therefore, the determined profit center is not reflected in any part of the TRM transactions.

Usually, the determined profit center via this app will apply to journal items which are primary cost-irrelevant (e.g. balance sheet accounts, non-operating profit/loss accounts, cost element like revenue). As for the primary cost (cost element category 01) related journal items, they require cost object like cost center, so the profit center in the cost center master data has higher priority than the profit center determined via this app.

For more details of this app, please refer to help document https://help.sap.com/docs/SAP_S4HANA_CLOUD/e5ec5859d8e54df98492d80564a734c0/b06cfc3ba30a46809a181952....

9. Through configuration activity 104115 (Define and Assign Differentiations), you can define a differentiation which includes term Profit Center, and then assign this differentiation to proper valuation area(s) and/or accounting code(s).

Afterwards, when creating a financial transaction within the related accounting code or for related valuation area, in the tab Administr., you will see the field Profit Center within the subarea Position Assignment. And this Profit Center field is mandatory to be entered with a value.

The profit center entered in sub-area Position Assignment of Administr. tab is stored in the position indicator of this transaction. In the position indicator, the profit center column is grayed out, because it must be identical with the profit center specified in sub-area Position Assignment of Administr. tab.

Consequently, the profit center stored in position indicator will be carried over to posting journal items generated from this transaction, and the related posting journal items are the ones that are primary costs-irrelevant (e.g. balance sheet accounts, non-operating profit/loss, cost element for revenue). As for the primary costs (cost element category 01) related journal items, they require cost object like cost center, so the profit center in the cost center master data has higher priority than the profit center in position indicator.

As mentioned, the profit center field is available by default in the subarea Additional Field in tab Administr. of the transactions of certain product categories 600, 760, 620. For the transactions of a product category other than 600, 760, 620, you can enable profit center as a differentiation via Define and Assign Differentiations, then profit center field will be available in the subarea Position Assignment in tab Administr.. This method can be useful when requiring separate and manual determination of the profit center and store it in tab Administr. of the transaction, and this profit center should be used to record the positions of balance sheet accounts and primary cost-irrelevant profit/loss arising from this transaction from accounting perspective.

Sometimes, the profit center as differentiation term might be different from the profit center determined via other means (e.g. via Additional Account Assignments - Substitution Rules). Under this circumstance, the profit center as differentiation term has the highest priority (for balance sheet accounts and primary cost-irrelevant profit/loss), and TBB1 or TPM10 will raise warning message TPM_TRAC1261 if the profit center determined via Additional Account Assignments - Substitution Rules is different from the profit center as differentiation term (result: the profit center as differentiation term will be kept).

The important thing is that the decision to use Define and Assign Differentiations should be made cautiously, as it not only makes the Profit Center field visible in transactions but also has several significant impacts on transaction processing and accounting, which need to be thoroughly evaluated before configuration (not limited to following points):

• For every transaction within the valuation area and/or accounting code which is assigned with this differentiation, profit center field will be a mandatory field to entered in financial transactions.
• Because of the above point, the intercompany trading (e.g. transaction mirroring for intercompany investment and borrowing) won’t function properly, because profit center will be the mandatory field for the mirrored transaction, but it can’t be automatically derived.
• Position and quantity of financial transactions will be split according to profit centers in addition to predefined differentiations, this effect is especially obvious for financial transactions and class positions of securities (e.g. bond, stock).
• Because of above point, the profit/loss (for example, realized gain/loss when derecognition) of securities class positions will be measured and accounted in line with each profit center.

And please also note the limitations of Define and Assign Differentiations:

• Once there are business transactions for a valuation area and/or an accounting code, it is no longer possible to assign a differentiation to that valuation area and/or accounting code in the same tenant.
• When there are transactional data in production tenant, even if it is possible to assign differentiation in customizing tenant, transporting this customizing to production system will be very critical for position management in production system.
• Once the configuration is done in Define and Assign Differentiations and there are already business transactions, it is not recommended that the assignment of differentiation is changed or deleted, as it is very critical for position management.

Therefore, it is strongly recommended that you first understand the implications of the configuration of Define and Assign Differentiations at the beginning of the implementation project of TRM. If possible, thoroughly tests in a reference system, such as a starter system, is recommended. Only after this should you proceed to configure it in the official customizing tenant, conduct comprehensive testing in the test tenant before transporting the configuration to the production tenant.