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Cost Center Master Data Design in Exploration & Production Companies

You might have already noticed my previous blog on Key Master Data elements in Upstream Industry.
In case you want to, you can still refer: Key Master Data Element’s in Upstream SAP
Implementation

I would like to talk about more specific topic now i.e. about Cost Center Master Data Design in the
Upstream Industry.

Whenever we go for any implementation we need to create the master data in this case master data
being cost center.

However the following generic questions automatically comes to our mind:
· What do business mean by cost center master data & what does it represent in this particular
industry in question?
· How to establish the design for the same?
· What are the dependencies?
· What is the process for Maintenance (Create/Change)?
· What are the important considerations?

Now let see how can we address these questions & considerations.

Probably its worth to know What is a Cost Center & How do we define that in Exploration &
Production Companies:
The definition of cost center master data depends on where costs and revenues are incurred. Typically
for an Exploration & Production companies this will highlight the lowest organizational unit like Well,
department, component, prospect or portion of a pipeline or plant, well completions, segments of
pipelines or facilities etc.

Now we might be in a position to appreciate the related detailed discussions for the Cost Center
Master data.

Cost Center Master Data has many fields however some of the important fields that contributes to the
key design considerations are as follows:

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Cost Center Category
Cost Center Hierarchy
Business Area
Functional Area
Profit Center
Joint Venture & related fields i.e. Equity Group

Cost Center Master Data important fields

Cost Center Category:
Cost center category determines the type of cost center. It could represent division, district offices or
functional departments .In upstream industry we may find the following types i.e.

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Development
Exploration
Production
Facility
Administration
Gas Plant
Terminals
Marketing etc.

System wise, cost center category controls the lock indicator for different posting types and also which
functional area it is linked to.

Functional Area is an Account assignment characteristic that sorts operating expenses according to functions.Functional Area: By definition. Business Area: Business Area could represent a geographical location or area in terms of country or more specifically could also represent states if we are saying about big country like USA. . Each industry will have its own operating expenses for example: A major Oil & Gas Upstream company might have the functional area in the form of – · · · · · · · · · · · Production Expense Gas Plant Exploration Seismic Dry Hole Terminals & Rail Abandonment Drilling Corrective Maintenance Preventive Maintenance Refurbishment Cost Center Standard Hierarchy: The cost center standard hierarchy in any organization represents a roll up of the management responsibilities of the company and this is the reason why it is considered as the driving factor to prepare the management reporting. Cost Center Standard hierarchy could as well be ideal to prepare SEC segment & divisional reporting.

could be new offices. Many a times we notice that it is typically defined at the lease level. Joint Venture: We all know a joint venture partnership consists of an operating partner (operator) and one or more non-operating partners who combine monetary or personnel resources to share a project’s expenses and revenues. So it defines joint ownership associated with all operational aspects attributable to that ownership. track allocations. payroll costs.  If can also be purely due to administrative reasons i.e.  If it is related to new well. Now let's focus on business considerations & other important necessary details to create the Cost Center Master Data: The trigger point to create the new cost center master data can be related to either the reason being new well coming into the picture or this is required purely due to administrative reasons. Many organizations aspire to have balance sheet view at the profit center level and profit center can represent:  Gas Plant  Pipeline  Field etc.Profit Center: A profit center group can represent an asset. . general & administrative costs etc. Land Management & Joint Venture Team comes into the picture.

land management team must be important one to start with. it will not be possible to complete the cost center master data creation and business cannot start using this master data in system even though it’s available and created using the dummy or default venture master data. Equity Group. System wise prerequisite to create Cost Center Master Data: Before we crate the cost center master data the following settings & Master Data must be available in the system: .  Approval processes must be followed according to the prescribed guidelines stipulated in the organization (could be manual based on filling the form or automated method of workflow approval process).Approvals for creation:  Creation of Cost Center Master Data requires necessary approvals from respective departments like Land Management.  Approval must be provided only after proper review to ensure the accuracy & completeness of the data with which the cost center will be created in the system. Why Joint Venture Team ? This team is responsible to provide the relevant details of the Joint Venture like JV Master Data. Why Land Management or Property Management comes into the picture ? As wells will be drilled in a particular land and these could be leasehold land or own. JV Object Type etc. Recovery Indicator. Administrative/Management team’s approvals as well as approval from respective Business Unit for which the cost center is being created. Unless JV team provides these information. Joint Venture.

 Its paramount importance lies in analyzing the impacts of any change or changes to the cost center master data as it could be the fact that the cost center master data is already being referenced in the other master data in the system i. business area.· · · · · · · Definition of the org structure (Controlling Area. notifications can be sent to all impacted parties either following the workflow process or e-mail etc. Company Codes) Definition of Cost Center Category Cost Center standard hierarchy Functional Area Business Area Joint Venture Master Data Profit Center Master Data Cost Center Master Data Change/modification: · First: Once the cost center is created. Joint Venture Master etc. · Second: However certain field value change are allowed only after careful review of the request for change and required approval. For example Profit Center. WBS. Joint Venture etc.e. PM Order. Once the requested changes are made. cost center category. right functional area. PO. Allocation Master data. the reason being either we cannot modify these to make an exception to the standard process followed or sap standard has its inherent limitations. . right joint venture. Important Considerations:  Its utmost important to create the cost center with the right dependent field values for example with right profit center.and it could also be the fact that entries already exist in the system. many field value cannot be modified or changed after the postings to these cost centers are being made in the system.

Many a times the decision changes based on the impact analysis of the existing settings so evaluating the pros & cons are must. .e. Advance notification of the communication pertaining to the changes to all impacted parties are must for any change in the field values of the existing cost center master data so that they will be in a position to apprehend the impact and circle it back to the notification source to enable the appropriate course of action i. whether process change is required or only master data change will suffice.

Maintain Controlling area settings . . 1. 4. This is as per OSS Note 119428. o The checkbox Elimination of internal business volume for Profit Center Accounting is ticked for the controlling area OP01 o Currencies: o Profit Center Local Currency Type = Controlling area currency o Profit Center Local Currency = USD (as this is the group reporting currency) o Store Transaction currency: Yes o Valuation view = Legal valuation o ALE Distribution method: No distribution to other systems o Currency Type changed to 30. o The first step you need to take is to enter the name of the standard hierarchy of profit center master data. o The dummy profit center receives all the postings in your system to objects.0KE5 o In this IMG activity you define the general control parameters for the controlling area. If there is no Business Area concept maintained in that particular client. 3.SAP CO-PCA: Profit Centre Accounting Purposes 1. Represent the lines of business on which the costs and revenues are aggregated. This field is displayed here for informational purposes only. The Pre requisite are that retained earnings accounts have been maintained. 5. PCA –Allow balance C/F: In PCA the balances have been configured to allow carry forward. which are not assigned to a profit center. Postings made in PCA are real-time with the exception of AR and AP. Profit Centre Accounting is the source for many other reporting systems. 4. Activate Average Balance Ledger – 0KE6: The average balance ledger is not being used hence the 8Z ledgers have been kept as deactivated. these balances are transferred to PCA at month end 6. 3. Set Controlling area – OKKS 2. You create the dummy profit center under Master data -> Dummy center. 2. Key points while PCA configuration: Profit Center Accounting (EC-PCA) is being used to determine profits and losses by profit center using period accounting approach. All Financial Postings will require assignment to a Profit Centre. The system creates the standard hierarchy automatically when you save. Lowest Organizational Level where a Trial Balance can be generated from SAP R/3. This ensures that your data will be complete in Profit Center Accounting. Replaces Business Areas.This note recommends keeping the PCA currency type to 30 if the currency type for the controlling area is 30 since the currency type in Controlling area settings is 30 the PCA Currency type is changed to 30.

Perform Account Control for Valuation Differences: When payables and receivables are transferred to Profit Center Accounting. (to rectify data posted from Finance and other modules) are posted during the test phases for the period end scenario. In this activity. you decide which account these adjustments through foreign currency revaluation are to be posted to. This can be done while changing the Profit center or can be done collectively. The transaction currency. Third currency determines which currencies are stored for this document type has been used. the system adjusts valuation differences arising from foreign currency revaluation. other than reconciliation accounts. you define which accounts or account intervals you want to transfer to Profit Centre Accounting. Transaction KE52. 6. 11. however. 9. and should not be reported against any particular COB from a 'day to day' perspective. This needs to be used when correction documents. where the COB cannot be determined. The three check boxes are for: a. They are. There are two possibilities here: . BS readjustment: The balance readjustment program read all AR.5. Maintain Automatic account assignment – OKB9 Choose Accounts: 3KEH: In this activity. Derivation Rules for Finding the Profit Center: 3KEI: 3KEH configuration is used for determining default profit centres for all Balance Sheet accounts.This means we have double counting in PCA in the AR/AP area. KE56 13. This process will be used only during the test phases and hence this document type will not be transported to Production.GB02: The number assignment is dependent on the company code 8. Maintain Document Types: GCBX -> Document type maintained is A0. the system uses the default profit center for the account or account interval. Assignment of Profit Centres to Co codes: In this activity the profit centres are assigned to company codes. Local/company code currency and c. b. If no profit center is specified in a posting. Certain Balance Sheet accounts are defaulted to DUMMY because the COB cannot be determined at time of posting. a. 10. SL: Maintain additional document type. AP and TAX postings (posted without or with profit center DUMMY). Set Control Parameters for Actual Data -1KEF: As soon as Financial Accounting entries are been made the PCA – 8A Ledgers will be updated simultaneously. 7. dealt with during the period end and eventually are allocated to the COB's guidelines. Adding fields to PCA distribution /assessments: Transaction GCA6: View/Table: V_T811I 12. The offset postings are updated real time. These accounts are therefore. It allocates the correct profit center to AR/AP and TAX and creates postings in FI and In the period end-closing schedule we also run the PCA AR/AP update where all open items (AR/AP) are updated in total in PCA per profit center. Maintain Number ranges for local documents . assigned to Corporate or Financing. To solve this the readjustment accounts are removed from 3KEH.

  Posting to the General Ledger account for payables/receivables Posting to the balance sheet adjustment account of the general ledger account for payables/receivables .

Before cost center create make sure you have cost center categories in place (standard) otherwise create your own. Make sure you have created OKB9 account determination (wherever necessary) 13. 1. Create Cost Center Groups 8. Activate reconciliation ledger 4. Create Automatic / manual cost elements 7. Maintain Document Number for Controlling Area 6.Activate CCA and PCA 2. Make PCA controlling area settings . Maintain Version 5. 12. Assign company codes to controlling area OKKP 3. . Maintain PCA number ranges in GB02 Use KSB1 for cost center line items Use KE5Z for profit center line items. Create Cost Centers (should have standard hierarchy) 9.0KE5 (make sure you have dummy profit center and standard hierarchy) 11. Main 3KEH settings.There is not much configuration in CO (Except Product Costing and COPA) but most conceptual knowledge you should have in CO. 10. Create Controlling area OKKP .

You have following master data GL Account Vendor Customer House Bank Bank Asset Cost Element Cost Center Activity Type Statistical Key Figure Internal Order Profit Center SD Billing Document The graphic below illustrates how the system determines the profit center for an SD billing document. . In Profit center Accounting. the data in the MM document is posted to the profit center determined by the system.

For an SD billing document. The profit center making the sale must be determined using a substitution when the customer billing document is created (see cross-company transaction in the graphic). the sales order item always contains the sender profit center. Note Cross-Company Scenario With cross-company transactions.with one exception . . the profit center is . This profit center is used both for the internal settlement and the goods issue (see normal case in the graphic).always determined indirectly via the preceding document.

. EC-EIS is integrated with other information systems in SAP through the architecture of the SAP Open Information Warehouse. You can use corresponding interfaces to transfer data from General Ledger Accounting (FI-GL). You can also analyze the results of the consolidation immediately in EC-EIS.Role of Profit Center Accounting in the SAP System Role in Enterprise Controlling (EC) The Enterprise Controlling component (EC) is a powerful. Material Management (MM). Asset Accounting (FI-AA). Executive Information System (EC-EIS) The Executive Information System presents up-to-date aggregated data and provides user-friendly tools for analyzing the critical success factors for your company or entire group. up-to-date information for controlling your group or company. This is possible due to powerful consolidation functions built on top of flexible structures. Consolidation (EC-CS) Consolidation (currently in development) gives you a reconciled view of your group’s financial data and lets you create the reports required by corporate law (by group. Consolidation (EC-CS) and Profit Center Accounting (EC-PCA). The data basis can be supplied either internally (SAP system or other applications) or from external sources. integrated system which provides efficient. EC consists of the applications Executive Information System (EC-EIS). company or business area) as well as reports which reflect your company’s internal management structure (by profit center or region). Sales and Distribution (SD) and Profit Center Accounting.

you can reconcile the data here with that in Financial Accounting.defined according . Profit Center Accounting is account-based. EC-PCA provides you with a comprehensive and flexible information system for analyzing your data by period. Using the report/report interface. like Profit Center Accounting. That means that the profitability segments in CO-PA are accounting assignment objects and are thus directly integrated in the flow of data in cost accounting. you have the option of valuating goods movements with transfer prices in Profit Center Accounting. CO. EC-PCA lets you analyze certain balance sheet items by profit center. It then summarizes this data according to profit centers. You can modify or supplement both actual and plan data taken from the operative components to meet your company’s requirements for Profit Center Accounting (assessment/distribution). Through the elimination of internal business you can also represent data at higher hierarchical levels. and so on) make it possible to analyze data in different ways in multidimensional organizations. Multiple profit center hierarchies (profit-oriented. it is incorporated in operative cost accounting. with which it is integrated in real-time. functional. the values are updated in EC-PCA according to account. and so on directly to identify potential weaknesses. In contrast to EC-PCA. You can access the original postings from FI. SD. CO-PA lets you analyze the profitability of different segments of your operative business -. which reflect the internal structure of areas of responsibility within your company. is another form of profitability accounting. Consequently. This also makes it possible to control the necessary key figures for an area of responsibility. MM. However. where profits are found for areas of responsibility within the company. The Distinction Between Profit Center Accounting and Profitability Analysis (CO-PA) Profitability Analysis (CO-PA). It reflects the actual and plan postings from operative controlling and settlement components.Profit Center Accounting (EC-PCA) Profit Center Accounting forms an interface between the operative controlling (CO) applications and the Enterprise Controlling (EC) module. regional. you can drill down to the information systems of other components. In addition. You can then use this data as a basis for a more strategic analysis using EC-EIS. you can also analyze results using the cost-of-sales approach. If the function area is specified for the data in the controlling components. Profit Center Accounting primarily serves to calculate internal (plan and actual) results according to the period accounting approach. That means. If you store values flows in multiple fields using different valuation methods.

On the contrary. The Distinction Between Profit Center Accounting and Special Purpose Ledgers (FI-SL) The component Special Purpose Ledgers (FI-SL) is primarily used to perform company-specific accounting-tasks which cannot be performed using the SAP standard functionality. you can create a company-specific multidimensional structure for analysis. PCA Planning configuration Introduction This entry describes how to configure PCA Planning. allowing you both a market-oriented viewpoint as well as a responsibility. which are already used in various standard applications. see the SAP Library. Rather. product management and corporate planning with information about the market. CO-PA lets you use an account-based or a costing-based approach. They share functionality. EC-PCA and CO-PA should not be regarded as alternative components. You can define the master data and basic structures in CO-PA flexibly to meet your company’s specific requirements. or any combinations or groups of these -. .to products. SAP divides PCA planning into cost/revenue. you can define your own value fields for analysis.or organizational units. Unlike EC-PCA. the values are represented in accounts. Profit Center Accounting is based largely on the technology in FI-SL. this would require a significant amount of programming and additional maintenance. such as company codes or business areas. orders. By choosing just the objects for evaluation (characteristics) and key figures you require. The aim of CO-PA is to provide the accounting department and decision-makers in sales. For example. under CO-PA Profitability Analysis . they complement one another and jointly provide you with a flexible and comprehensive profitability accounting tool. with exception of the plan layouts. it makes available a number of abstract tools. In the costing-based approach.and person-oriented one. The transactions listed are for cost/revenue planning. customers. In account-based CO-PA. and statistical key figure planning. This component contains no predefined business functionality. You may wish to use the special purpose ledgers to supplement Profit Center Accounting if your requirements cannot be entirely met there. marketing. For more details about CO-PA and how it differs from EC-PCA. However. balance sheet.

    Choose Planning .Maintain Plan Versions Using Planning Transaction 7KE1 allows for manual cost/revenue planning. You may have to unprotect the sheet to work with it.Plan Versions . you can go to Profit Center ==> Planning. Click the diskette icon 'User Master Record' if this is the main type of planning to be done by the user.[edit] Steps Import standard planning layouts . choose File -. choosing the planning profile defined in Customizing. . and PLANNING3.Profit Center Accounting . SAP will indicate the status of the upload. You can import either a single file.menu path SPRO . you can upload the plan data through excel for profit center. then click diskette icon in SAP menu bar to save.Transaction code KP34PC Copy layout (probably want to copy 8A-411 Profit Centers/Account Group) into Z layout         Drill down into Profit Center Accounting . if the planning is configured as above. change the decimal notation field to 1. with an asterisk (example PLANNING*. Enter in desired profit center and account parameters.Planning .transaction code 7KEA for costs/revenue. The following example is given for cost center planning. enter in all CAPS a . PLANNING2. This is a Report Painter   layout.TXT would all be imported. enter your amounts. For example. Execute.   Maintain Planner Profile .89. and enter default parameters.TXT) Choose File .Layouts for PCA . Then. Transaction 7KEX allows for spreadsheet upload of plans. SAP will pull in all files with the naming convention in the folder.234. If you choose the folder option. Enter values. Save the sheet as a text.Set Planner Profile. then execute. If you configure in this way. PLANNING1.transaction code 7KEJ Maintain planning layout .Default Parameters Choose Integrated Excel Double-click. Remove the totals line at the bottom of the sheet. If the user does not already have a template for spreadsheet upload.txt name for the files that will be uploaded.Save as to save the Excel template to be used later to upload spreadsheet plan data Set up Plan Version . However.Basic Settings for Planning .     First update the spreadsheet. then click on Overview (mountain icon) Click 'Save File Description' icon Save Excel Layout Click on Generic File. tab delimited file. or multiple files in a folder.TXT.TXT. Remaining are same except 7KE1.Save as from the Excel menu.567.

In ZSAPALL planner profile. With the same file name you need upload the plan data by using KP06. Tick Integrate Excel. you need enter the data and save it.This is controlled by planning are in your planning profile. Once the popup for KP06 comes. You need to use "Cost ctrs: Cost element/activity inputs" planning area for this purpose. You cannot change SAPALL as it is standard. In KP06 . IMG ==> Controlling ==> Cost Center Accounting ==> Planning ==> Manual Planning User Defined Layouts . It would generate the file name. To do integrated excel upload of cost center plan data. Hope you are conversant with Integrated excel upload. IMG ==> Controlling ==> Cost Center Accounting ==> Planning ==> Define User Defined Planner Profiles Copy the SAPALL to ZSAPALL. select proper planning area and enter your layout.Create your own layout or copy from standard layout and change it.

.Extras ==> Excel Planning ==> Upload Select the file as prepared in accordance with format at the time of generating the file name. Hope this solves your problem.

Choose Goto ® Assignment ® Object links. By assigning balance sheet items (asset portfolio. material stocks. This also makes it possible for you to analyze a number of key figures by profit center. the Profit center assignment box may appear on the optional second object link assignment screen. work in process) to profit centers. you can analyze your company's business locations by profit center. square meters. cash flow. EC-PCA allows you to:  Determine profits and losses by profit center using either period accounting or the cost-ofsales approach  Analyze fixed capital and statistical key figures (number of employees. you can calculate all the key figures commonly used in cost accounting (return on investment. By assigning business locations to profit centers. The profit center differs from a cost center in that cost centers merely represent the units in which capacity costs arise. working capital and cash flow. including return on investment. Procedure To assign a profit center to a business location master record: 1. thus using them as investment centers. On the Change Business Location: Initial Screen. and so on). payables and receivables. A profit center is a management-oriented organizational unit used for internal controlling purposes. To display this screen. Depending on the configuration of your system. and so on) by profit center Consequently. 2. choose Goto .Linking the Business Location to a Profit Center Use Profit Center Accounting (EC-PCA) is a part of the Enterprise Controlling (EC) module. thus treating them as "companies within the company". You can also assign a profit center to a business location when you create a business location. you can analyze areas of responsibility and delegate responsibility to decentralized units. sales per employee. enter the location ID of the business location that you want to change. The Change Business Location: Object Link Details screen appears. whereas the person in charge of the profit center is responsible for its balance of costs and revenues.

This enhancement calls user processing during the initial load of the profit center data and during PAI (process after input) on the profit center assignment input fields. Use the matchcode search if necessary to determine the correct profit center record. If a red cross or X icon appears. Save the data.® Assignment ® Object links 2. You can use the profit center maintenance transaction to establish the cause of the problem.  Enter the number and controlling area of the profit center that you wish to use to depict the business location in your system. 5. . there is a problem with the profit center. Choose Enter to validate the profit center details that you have entered. A green tick or check icon confirms a valid profit center. The message Business location <location ID > has been changed appears If you wish to code additional checks for the profit center to which you are assigning the business location. you need to activate enhancement OIFA0202. for example it may be flagged for deletion or blocked for use. You return to the initial screen for changing the business location master record. 4.