Organizational Management Setup for Segment Reporting
Usually, when setting up companies, you will, in Org Management, assign the “SEGMENT” property to the org unit of the company or below.
In case your company is split into divisions where companies are executing for several divisions, an alternative implementation approach is possible.
The figure below outlines an approach, where aspects of operational responsibility are not influencing the legal structure.
On the left, you see the “legal structure”, on the right, the “Reporting Structure”. In case a transaction takes place in, e.g. “Consulting Division I”, it will determine a cost center (in this case, it is “SaaS Consulting”). At this level, assign a “deviating business residence”, which will led to a business residence derivation in the legal structure, and a company by climbing up in the left tree. From a profitability perspective, it will assign org unit “SaaS” as profit center and “Cloud Services” as segment. This allows you to avoid a multiplication of profit centers and segments.
In the legal structure, you will need a profit center and a segment as well. But it can be a single one called “administration” or similar capturing activities from the indirect cost centers (those in the legal structure).