Account Assignment in TRM Financial Transactions - Cost Center

[JustinZheng]

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

1. When creating transactions for certain product categories (600, 760, 620), a cost 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 cost center as a differentiation criterion in hedge management to match the FX exposure and FX derivative at the level of cost 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....

The cost center entered in sub-area Additional Fields of Administr. tab will not be reflected in the position indicator of this transaction, and consequently, the cost center will NOT be carried over to the posting journals generated from the transaction. In a word, it has no impact on postings.

2. Through configuration activity 102639 (Manage Default Account Assignments), you can define the default cost center for a specific cost element within a company code specifically, and the TRM posting journal line items for this cost element & company code will have the default cost centers assigned. Please note that the cost 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.

This method is useful when you have TRM specific cost elements (such as charge, interest income/expense, valuation gain/loss, etc.), and it is reasonable to assign a single default cost center to the postings related to this cost element from multiple TRM transactions, simplifying cost management but also meeting the requirements for cost management at the cost center level.

3. Through configuration activity 105341 (Allocate Additional Account Assignments to Account Assignment References), you can assign a cost center to a combination of company code and account assignment reference (AAR).

Afterwards, when creating a TRM transaction, the cost center can be derived from company code and AAR, and it is stored in the position indicator. Then in the posting journals arising from this transaction, this cost center will be assigned to the cost element related line items by default.

This method is useful when you have multiple AARs, and different AARs should derive their corresponding cost centers.

When using this method, the level of detail in the cost centers can be derived depends on how detailed the AARs are defined and the preconditions on which the AARs are based. For more details on the derivation of AARs, please refer to the help document https://help.sap.com/docs/SAP_S4HANA_CLOUD/e5ec5859d8e54df98492d80564a734c0/713cc111330d4439a7331df9....

4. In app Manage Substitution / Validation Rules - Journal Entries, you can create a substitution rule with the business context Coding Block. The preconditions in the substitution rule should be comprehensive enough to derive the proper cost center (otherwise it doesn’t have advantage compared to other means), and its preconditions might rely on results of other substitutions in advance.

Please note that the cost center derived via substitution rule is not reflected in any part of the TRM transactions, because they take effects during creation of postings in financial accounting.

5. Comparing to app Manage Substitution / Validation Rules - Journal Entries, implementing the BAdI 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. For more details, please refer to help document https://help.sap.com/docs/SAP_S4HANA_CLOUD/e5ec5859d8e54df98492d80564a734c0/6d95f6fa596646f59cfb9dd0....

Please note that the cost 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.

6. Through configuration activity 104115 (Define and Assign Differentiations), you can define a differentiation which includes term Cost 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 Cost Center within the subarea Position Assignment. And this Cost Center field is mandatory to be entered with a value.

The cost center entered in sub-area Position Assignment of Administr. tab is stored in position indicator of this transaction, and consequently, the cost center will be carried over to the cost element related line items of the posting journals generated from this transaction. In the position indicator, the cost center column is grayed out, because it must be identical with the cost center specified in sub-area Position Assignment of Administr. tab.

As mentioned, the cost 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 cost center as a differentiation via Define and Assign Differentiations, then cost 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 cost center and store it in tab Administr. of the transaction, and this cost center should be used to record the profit/loss arising from this transaction from accounting perspective.

However, the decision to use Define and Assign Differentiations should be made cautiously, as it not only makes the Cost 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, cost 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 cost 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 cost centers in addition to predefined differentiations, this effect is especially obvious for financial transactions and class positions of securities (e.g. bond, stock, fund).
• Because of the above point, the profit/loss (for example, realized gain/loss when derecognition) will be measured and accounted in line with each cost 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.

7. You may also manually specify a cost center in position indicator (when it is possible). The cost center specified in position indicator will be carried over to the cost element related line items of the posting journals generated from this transaction.

This method can be used in circumstances when a different cost center than the one derived via other means is required due to specific exceptions, or a cost center should be manually entered for each single transaction when configuration activity 104115 (Define and Assign Differentiations) is not preferred.