SAP Scene

Need to produce 'Financial Statements' by other than legal entity?

A common requirement which seems to be of concern to some, is to be able to produce Financial Statements, specifically Balance Sheets by some entity other than the legal entity (I shall call this the SBU - Strategic Business Unit).  These SBU's are either below the legal entity or sometimes run across the legal entities.

If this is a requirement on your project, the first step is not to take this 'stated' requirement entirely at face value.   Dig a little deeper - ask for examples of current reporting, use "what-ifs", to determine the real or practical requirement.  Sometimes it is not a full Balance Sheet that is required, especially if the SBU's are not fully autonomous, but more specifically the ability to report some Balance Type information by SBU in order.  For example to provide some ROI type reporting.

If this is the case, the options are broader and implementation and use may be simpler.

The options in SAP are to implement the SBU's as :

1. SAP Business Areas
2. SAP Company Codes, if they do not run across legal entities
3. SAP Profit Centres

These options are discussed below.  Note that requirements or impacts in other modules must also be considered and may influence this decision. Organisation Structure and Integration must be properly understood.

1. SAP Business Areas

The SAP Business Area is an FI organisational element which is intended to provide Financial Statements below or across company codes.  The standard GL, financial statement functionality and reporting all support this.

However it is important  to understand how SAP implements this, because it is by no means the same as the company code.  The following points must be noted:

• SAP company code will always be in balance, all the time, document by document.   The SAP Business Area will not. IE: it is possible to post a DR to one Business Area and a CR to another, or to leave one line item with a blank business area.
• Business Area is not a mandatory field.  It is dangerous to attempt to force this.  It is not always possible for the system to determine the appropriate business area, it will then post a blank business area (unless you have 'forced' a substitution, which often just has the effect of replacing 'blank' with some other default).
• SAP 'rectifies' this out of balance situation by providing period end programs which 'clean up' and post adjusting journals or inter-business area journals depending on the situation.  See the documentation on these period end programs in the GL module.
• Reporting by Business Area is available during the month (albeit out of balance) and visible within GL accounts. Compare with Profit Centre implementation below.

2. SAP Company Codes, if they do not run across legal entities

This is potentially a dangerous route, because of the possible across the board impact on day to day operational transactions, not just in FI, but in other modules. 'Test' all scenarios. SAP intends the SAP company code to be implemented as the legal entity and thus there is fairly 'rigorous' functionality around the company code.  If you decide to implement SBU's as SAP company codes, you want to be sure that the majority and the key business transactions will be within one SBU.

In order not to compromise legal entity reporting, you should only take this option if the SBU's are subsets of a single legal entity.  You can then use the standard multi- company summarisation reporting, or the consolidation functionality to provide your legal entity reporting.

3. SAP Profit Centres

This could be a good option if you do not require full/rigorous balance sheet by SBU, but are looking for some ROI type information.  Standard configuration exists to :

• flow revenues and expenses automatically through to Profit Centres.   (Expenses via cost centres, and revenues through a fairly complex 'assignment to profit centre' configuration logic) 
• transfer at period end balance sheet info such as payable, receivable, fixed assets, material stocks and work in process
• allow specification of additional Balance Sheet accounts to be transferred.   You must then ensure that a profit centre has been nominated on all the line items, or else a default profit centre will be used.  The issues with some accounts here will be the same as with attempting to force or identify a business area.  See above.

Standard reporting is available to do ROI reporting, however this will of course only be available after the period end programs have been.