Introduction

This blog post is the latest in a series on controlling-related subjects that revolves around showcasing new functionalities in S/4HANA Cloud, contrasting functionalities between S/4HANA Cloud and SAP S/4HANA, and general subjects to be taken into account from a management reporting/controlling point of view when implementing S/4HANA.

This blog post’s main topic is a discussion of the new intercompany allocation feature offered by Universal Allocation. As of release 2021, this feature is available in SAP S/4HANA. This indicates that a modification for changing the trading partner in the posts, which was necessary in SAP ECC, is no longer necessary (see note 1630884 ). As there are no totals records updated and reporting is based on the Universal Journal, the only true source of information, that kind of modification is likewise no longer permitted in SAP S/4HANA.

Intercompany cost allocations may be necessary to allocate costs for services supplied by a centralised shared service centre or other costs incurred at one legal organisation but owed to many legal entities. Costs that need to be charged back may also be included. After this process, there is usually still a requirement for actual invoicing for both parties. The universal allocation focuses on dividing the costs across legal organisations (e.g. to get correct tax bookings).

Pre-requisites to enable the Intercompany Allocation

To enable the intercompany allocations there are a few steps that are needed from master data and system configuration.

  • Master Data
    • General Ledger Accounts
      • Allocation (assessment) accounts need be created
      • Intercompany clearing accounts, each allocation account needs to be mapped to an intercompany clearing account, these must be of the G/L account type Nonoperating Expense or Income

 

    • Cost objects
      • Cost centers are always senders, but receivers can be either Cost centers or WBS. Cost center groups can be beneficial for selecting the receiving cost All cost objects (and company codes) should belong to the same controlling area in SAP S/4HANA.

 

  • Configuration
    • The configuration is found in the following path: Controlling -> Cost Center Accounting -> Intercompany Postings

Figure 1: Showing the configuration nodes required to enable Intercompany allocations.

  • A) You need to decide whether to allow Intercompany allocation postings for all company codes or only for selected companies. The “Allow only listed ICO postings” can be beneficial when dealing with countries or companies, where cross-company allocations are not allowed (either due internal controls or country specific legal requirements).

Figure 2: Showing the options to allow/block intercompany allocations.

  • Below is seen the “Allowlist” configuration (used when Intercompany allocations are only allowed for certain company code “pairs”):

Figure 3: There is an option to allow intercompany allocations only for certain company code pairs, as shown above.

  • B) The Cost/Revenue Accounts (the allocation accounts) and their corresponding Clearing Account (Debit / Credit) must be kept up to date for the intercompany allocation. Here, you match up certain intercompany clearing accounts with the allocation accounts. This indicates that they are utilised in place of “conventional” OBYA setup accounts (which are used in other intercompany processes, e.g. intercompany stock transfers). In this manner, you can also regulate the kinds of expenditures that may be allocated. By way of illustration, you may keep separate Intercompany Allocation Accounts and Clearing Accounts for IT, R&D, or audit charges. Afterward, only opening accounts in company codes with related functions are available.

Figure 4: Showing mapping of intercompany allocation accounts with their respective intercompany clearing accounts.

  • C) Lastly, you need to maintain posting keys that are used in the journal entries created by the intercompany allocation.

Figure 5: Posting keys are required to be maintained for the intercompany allocation.

System Example

The “Manage Allocations” Fiori app is used to create an Intercompany allocation cycle. The procedure is the same as when using this programme to create any other allocation cycle. The primary distinction is that, as shown in the figure below, you must choose the “Intercompany Allocation” allocation type. Only one business code may be allocated using the other two cost centre allocation types (Overhead Allocation and Distribution). I suggest reading this earlier post (Link: Allocations & Universal Allocation | SAP Blogs) if you are unfamiliar with the Universal allocation or establishing cycles.

Figure 6: Manage Allocations Fiori app, used to create an intercompany allocation cycle.

Both the actual numbers and the plan numbers can be used for the intercompany allocation. The Segments, which contain the information for the allocations, are formed after the header has been created.

  • For each segment you need to select the allocation account (which you need to have mapped in the configuration mentioned previously).
  • Sender rules can be maintained as: Posted Amounts / Fixed Amounts / Fixed Rates.
  • Receiver rules can be maintained as: Fixed percentages / Fixed portions / Variable portions.

Figure 7: Showing the creation of a segment to the Intercompany allocation cycle, in the “Manage Allocations” fiori.

Only one company code should be used as the sender for each segment, although there may be one or more company codes used as the receiver. One transmitting cost centre, which sends fixed quantities, is used in this case.

Figure 8: Maintenance of sender details in the Manage Allocations fiori app.

The below figure shows the cost center receivers, which are maintained as a cost center group, but it could also be a range.

  • The cost center group is created with (Manage cost center groups Fiori app in SAP S/4HANA.
    • In case you use cost center ranges, instead of groups, you should be careful when maintaining ranges, as those cost centers can belong to many different company codes

 

  • The receivers can be cost centers or WBS’s

Figure 9: Maintenance of receivers in the Manage Allocations fiori app.

The receiver basis is maintained under the last tab.

Figure 10: Maintenance of receivers basis (rules to split the sending cost) in the Manage Allocations fiori app.

The allocation can now be used by pressing the “Run” button in the Manage Allocations Fiori, which will take you directly to the “Run Allocations” Fiori where you can make additional cycle-running selections (E.g., for which dates the allocation should be executed). You can examine the results by clicking “Run Allocation” after which you are taken directly to “Allocation Results.” If there are any mistakes (for instance, a cost centre that is closed for postings), you can rerun the cycle straight from “Allocation results” (presuming you made your corrections beforehand), as demonstrated in figure 11 below.

Figure 11: Allocation Results fiori app showing status of allocations and showing the Re-Run button.

A summary of the allocation outcomes is provided by the network graph. As shown below, company code 1010 is used to do the allocation, which is then distributed to companies 1210 and 1710. (according to the portions maintained in the cycle).

Figure 12: Network graph, showing allocation results, in the “Allocation Results” Fiori app.

Other ledgers are replicated with the values that were posted to the leading ledger (2L in in this example). Additionally, you can view the three journals that were created, one for each company code, under the Journal entries tab in the Allocation Result Fiori app.

Figure 13: Allocation Result Fiori app showing the Journal entries created by the allocation.

You can choose any of the diary entries from the above display and click on them to go further. The journal entry in company 1710 is depicted in the image below. The line items in the journal entry include the posted amounts from both the sender and the receiving cost centre (1010). This needed to be modified for SAP ECC, however it is now considered standard functionality.

The related allocation documents can also be seen under the “Related documents” tab

Figure 14: Manage Journal entries fiori app showing on the created journal entries.

 

Manage cost center group fiori app can be used for maintaining the required cost center groups for the allocation.

Figure 15: Manage cost center group showing a created cost center group.

Considerations

This can be automated, for example, by activating the sales intercompany billing capabilities and utilising the Intercompany clearing accounts utilised by the allocation. When setting up the intercompany allocation, you typically need to remember to take care of invoicing as well (e.g., DIP profile configuration).

It’s important to remember that mark-up functionality is not available in the universal allocation’s intercompany allocation. If mark-up is important to you, I advise you to become familiar with the alternate method for intercompany cost allocations that Stefan Walz and Sebastian Doll describe in their top-notch blog (Link) (DIP profile can also be used with this second approach, by mapping the activity types to relevant billing items).

Conclusion

This blog post’s main focus was on how to set up intercompany allocations using the “Manage Allocations” Fiori, demonstrating how it can be done quickly and, hopefully, providing some food for thought on what to take into account when doing so. Simply put, setup is quick and easy.