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Author's profile photo Dick Westman

Intercompany Allocations, using the Universal Allocation



This blog post continues a series of Controlling related topics, which circle around showcasing new functionalities in S/4HANA Cloud, comparing functionalities between S/4HANA Cloud and SAP S/4HANA, as well as general topics to be considered from Management reporting/Controlling point of view when implement S/4HANA.

Focus of this blog posting is to discuss new functionality of intercompany allocations using Universal Allocation. This functionality was released to SAP S/4HANA as of release 2021. This means that there is no need for a modification for updating trading partner in the postings, which was relevant in  SAP ECC (see note 1630884 ). That type of modification is also no longer allowed in SAP S/4HANA, as there are no totals records updated and reporting is based on the Universal Journal, the single source of truth.


Intercompany cost allocations can be required to distribute costs, that occur at one legal entity, but belong to multiple legal entities, e.g. services provided by a centralized shared service center. It can also be a case of costs, which should be recharged. The universal allocation focuses on distributing the costs across legal entities, after this process, there is still typically a need for actual invoicing for both parties (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) There is a need to maintain the Cost/Revenue Accounts (the allocation accounts) for the intercompany allocation, as well as their respective Clearing account (Debit / Credit). Here you pair the allocation accounts with specific intercompany clearing accounts. This means, that these accounts are used instead of “traditional” OBYA configured accounts (which are used in other intercompany processes, e.g. intercompany stock transfers). This way you can also control what type of costs can be allocated. E.g. by maintaining separate Intercompany allocation accounts and clearing accounts for IT, R&D or audit costs.  Then opening the accounts only in the company codes where relevant 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


Creating an Intercompany allocation cycle is done using the “Manage Allocations” Fiori app. The process is similar as creating any other allocation cycle with this app. The main difference is that you need to select Allocation Type “Intercompany Allocation”, as seen in the figure below. The two other allocation types for cost centers (Overhead Allocation and Distribution) allow allocation only within one company code. If you are not familiar with the Universal allocation or creating cycles, I recommend checking this previous posting (Link: Allocations & Universal Allocation | SAP Blogs).


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


The intercompany allocation can be done for both plan and actual figures. Once you have created the header, you create the Segments, which contain the details for the allocations.

  • 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.

For each segment there should be only one company code as sender, but on the receiver side, you can have one or multiple company codes. In this example there is one sending cost center, which sends fixed amounts.


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.

Once the segment is saved, the allocation is ready to be executed, by pressing the “Run” button in the Manage Allocations Fiori, this will transfer you directly to the “Run Allocations” Fiori, for selecting further settings for running the cycle (E.g., for which dates the allocation should be executed). Then, the “Run Allocation” transfers you directly to “Allocation Results”, to view the results. In case there are errors (e.g., cost center is closed for postings), you can re-run the cycle directly from “Allocation results” (assuming you made your corrections before), as shown in figure 11 below.


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


The network graph gives an overview of the allocation results. In the below example, the allocation is done from company code 1010  and distributed to company 1210 and 1710 (according to the portions maintained in the cycle).


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


The values posted to the leading ledger are copied to other ledgers (2L in in this example). Furthermore, under the Journal entries tab, (in the Allocation Result Fiori app) you can see the 3 journals created, one in each company code.


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

From the above view you can select any of the journal entries and drill down to them. The below picture is showing the journal entry in company 1710. The line items in the journal entry, has the posted amounts on the receiving cost center, as well as from the sender (1010). In SAP ECC this required a modification, but now it is 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.



When setting up the intercompany allocation you usually need to remember, to take care of invoicing as well, this can be automated e.g., by configuring the sales intercompany billing functionality, taking benefit of the Intercompany clearing accounts used by the allocation (e.g., DIP profile configuration).

Also, it is good to note, that the intercompany allocation of universal allocation does not have a functionality for mark-up. In case mark-up is relevant for you , then I suggest you to familiarize the alternative process for Intercompany Cost Allocations presented by Stefan Walz and Sebastian Doll in their excellent blog (
Link) (DIP profile can also be used with this second approach, by mapping the activity types to relevant billing items).


This blog post was focusing on how to setup intercompany allocations using the “Manage Allocations” Fiori, showing how it can be easily setup and hopefully giving some food for thought on what to consider when setting it up. In short; it is simple and quick to setup.

  • What are your experiences with Intercompany allocations? Please share and let me know in the comments below.



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      Author's profile photo Erno Nykanen
      Erno Nykanen

      Excellent blog Dick, as usual! Interesting comment about the usage of DIP profile, need to check that out in more detail.

      One comment regarding the Cost/Revenue Account (the assessment account) used for the intercompany allocation:

      As it seems it's only possible to define one Cost/Revenue account for both credits and debits, doesn't it mean that it will not be possible to separate the ICO allocated costs from revenues on the financial statement as the credits on the sender and debits on the receiver are shown on the same account? As I understand, the idea would be to assign the Cost/Revenue account in the same node on the financial statement for Financial reporting as the ICO clearing accounts, in order to not show revenue or cost before the invoice is posted so while the ICO clearing enables the differentiation based on debit/credit, that doesn't help as still the common node would have to be used.

      Different assignment on FSV based on whether the balance is credit or debit doesn't might be an option but as the company code can be both the receiver as well as sender of the ICO allocations and netting them doesn't seem optimal. To me this seems that this can only be used for companies where it's allowed to net the costs and revenues

      Author's profile photo Dick Westman
      Dick Westman
      Blog Post Author

      Thank you for the comment and questions Erno, interesting points!

      I am not 100% sure if I understood the first question fully, but I think you would need to define a separate account for allocating revenue vs. allocating costs (and optimally you would not post revenue to cost center at all).

      From my previous experience I have only seen use cases of allocating costs and then to have different assignment of credit and debit balance in the FSV for the ICO clearing account, similarly as you described also, you can also configure separate account for credit and separate for debit balance (my example  was having the same). Furthermore, you should aim to do the IC invoicing  to offset the IC clearing accounts from the IC billing, and to do this billing during the same month, as otherwise you will easily have exchange rate differences, which complicates this a bit further.

      Let's connect to discuss your use-case in more detail.


      Author's profile photo GIANLUCA TACCONE

      Hello Dick,

      thanks for this excellent blog and explanation.

      One consideration regarding OSS note 1630884

      This note was also useful in ECC to fill the trading partner in internal CO allocations (and not only intercompany allocations). Some customers need to see the Trading Partner for example in cost centers allocations within the same company code.

      My understanding is that for this requirement we still have no reply in S/4.

      What do you think?




      Author's profile photo Dick Westman
      Dick Westman
      Blog Post Author

      Thank you Gianluca!

      The intercompany allocation type works only in intercompany scenario (between company codes), if you try to add a cost center from same company as sending you will get an error.

      I share your understanding; for intracompany allocations (within same company code) trading partner information is not inherited when doing e.g. an overhead cost allocation within the same company code, in standard.

      Typically trading partner is used for intercompany transactions (between two company codes), but of course there can be exceptions to how the trading partner field is used or requirements for it.


      Author's profile photo Alexander Sterin
      Alexander Sterin

      Hello Dick,

      thanks for the insights of the IC allocation functionalities within universal allocations.

      1. I noticed, that there is no functionality to allocate in transaction currency within the allocation type "intercompany allocation". On the other hand, allocation type "overhead allocation" includes this functionality. Are you aware why the allocation in transaction currency (Cycle set up -> Checkmark in the section "Field Groups" -> Actual Transaction Currency) is not available for intercompany allocations?
      2. I noticed, that there is no functionality to create a new cycle, respective segments INCLUDING the percentages (Receiver values) in the receiver basis tab of the segment. Receiver values need to be updated for each segment individually via a separate upload file or manually of each cycle. It is pretty time-consuming on a monthly basis. Are you aware, if there is a functionality (Fiori App or customizing) available which I might be not aware off!?

      Your feedback is highly appreciated.

      Thanks a lot and kind regards,




      Thanks and Kind regards,



      Author's profile photo Dick Westman
      Dick Westman
      Blog Post Author

      Hi Alexander,

      Thank you for the comments and questions!

      Regarding the first question there is no such functionality planned right now. Could you share what is the business case and requirement for using transaction currency in an IC allocation?

      I would also recommend to visit Influence SAP ,there you can easily add requests for new functionalities (see e.g. following note for instructions 1515837 - How To: Enhancement Request Process using the Customer Influence and Adopt site). You can also search and vote regarding functionalities, so that they would be implemented sooner. There is also a search functionality, e.g. with “universal allocation” you can find items that are already listed:  Search Results - Customer Influence (

      Regarding the second question, there is the following app, which can be used to upload values to allocation segments,  Import Allocation data – values. As of right now only available in S/4HANA, Public Cloud edition, but is planned to be available in the next release for   S/4HANA and S/4HANA, Private edition.



      Dick Westman

      Author's profile photo Alexander Sterin
      Alexander Sterin

      Hi Dick,

      thanks for your prompt reply.

      1. The possibility to allocate in transactional currency in IC allocation cases would enable the user to analyze the derivation between actual and plan especially with the focus if the derivation comes from currency fluctuations.
      2. The App "Import allocation data" is what I was looking for. Thanks. I did not find the information in the roadmap explorer, that this app is going to be available also on S/4HANA premise. So, you say it will be available on 2023 release verison, right?

      Thanks a lot and KD,


      Author's profile photo Ijaz Hussain Shah Bukhari
      Ijaz Hussain Shah Bukhari

      Hello Dick

      No doubt very useful E2E intercompany allocation through Universal Allocation.

      One query, allocation posting in clearing account, how receivable/payable will be realized. Do we need to post FI invoice manually to book receivable/payable. Earlier KALC do this.

      In S4HANA, if we have OBYA setup and run KSU5 there is no clearing account, directly posting to Vendor/Customer as receivable/payable.

      i appreciate your effort and waiting for reply.