SEGMENT REPORTING
IFRS 8 is relevant for public listed entities, in which information for operating segments should be disclosed to the stakeholders. The company can be divided into segments based on geographical locations or product lines.
In SAP, usually geographical locations are structured as separate company codes and accounting on company code level gets recorded. However, multiple segments based on product lines, production areas, plant etc, can be configured as segments despite being a private limited company. As a Pvt (Ltd) company, if client wishes to extract financial statements based on segments, it is easily available via the functionality of document splitting.
Profit center and segment should be allowed for doc splitting characteristics and then segment reporting gets active in the system. Line item wise information also gets available and combines as a report that can be used for management and financial purposes.
I will give example of a business here, The Silent Way has 5 reportable segments based on variety of services they offer. It deals in education but all 5 serves different streams of education, hence a CODM (Chief Operating Decision Maker) is appointed and is responsible for segment reporting in the organisation.
PUBLIC CLOUD SEGMENT REPORTING
In S/4 Hana Public Cloud, enterprise structure is configured via a diagram before starting with configuration activities. Unlike FI org structure node wise, company codes can be configured on the front face of the template provided by Public Cloud. However, segments configuration needs to be accessed via Enterprise structure ➡️ Define Segments. Please note that segments can be renamed, added but cannot be deleted from configuration so need to be careful here.
Under General Ledger Accounting, document splitting characteristics need to be defined as default for profit center and segment. While creating a profit center, segments gets mandatory and needs to be added in the master data. That is how mapping between profit center and segment works for document splitting on line item level. Line by line, it gets clubbed into the report that can be extracted for any period segment wise. Data is available in comparison for any period which can be used for further analysis by the relevant stakeholders.
The wish to extract separate financial statements of the relevant users gets fulfilled by SAP. As per IFRS 8, 10% and 75% rule needs to be followed but that is only required for PLCs, in SAP Pvt Ltd can open segments as per their choice and can present the report to the management and auditors, without following the 10% and 75% rule.
I hope my blog provides an insight into the accounting principle and SAP segment reporting that how they compliment each other and how management can take on better decisions despite being a Plc or not.
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