In the SAP ERP system with classic general ledger accounting, profit centers were purely controlling objects and in a separate submodule. This is not the case in SAP S/4HANA.

With the introduction of the new general ledger in SAP S/4HANA Finance, the profit center became more important in financial accounting because it’s the object used to derive and fulfill the requirements for segment reporting. The profit center was designated for that role because it’s an account assignment that was already integrated into most other components of the system.

The figure below shows a non-exhaustive list of ways the profit center is derived during posting. In addition, a few options for direct assignment of the segment are also mentioned. Segments should always be derived by the profit center, but there are also a few alternative assignment methods possible, especially for the few cases in which it may not be possible to derive the profit center automatically.

The first step to define profit centers is to design their hierarchy. All profit centers in the client are assigned to a profit center hierarchy, and the profit center hierarchy is assigned to the controlling area in Customizing, as shown in the next figure. This means that all company codes assigned to the controlling area can also potentially post to the profit center.

In a second step, you assign the profit centers to the hierarchy. The hierarchy can be flat or structured. Structuring the hierarchy into groups and subgroups makes sense for selection during reporting, planning, and so on. This figure shows a hierarchy structured into groups.

When you create a profit center, you select the controlling area and then assign the company codes the profit center is valid for, as shown below. You must assign the profit center to the hierarchy by indicating the profit center group it belongs to. You also maintain the relevant segment to be derived from the profit center.

When you’re done entering the data, you activate the profit center and can then enter it during posting and assign it to other objects.

Editor’s note: This content was originally posted on the SAP PRESS Blog and has been adapted from a section of the book SAP S/4HANA Financial Accounting Certification Guide: Application Associate Exam by Stefanos Pougkas. Used with permission of SAP PRESS. All rights reserved.