FI / FICOintermediate

FICO Cost Center Accounting Part 3: Allocation Cycles — Distribution and Assessment

Key takeaway

Allocate overheads at month-end: distribution (keeps primary cost elements) vs assessment (uses an assessment cost element), cycle structure with segments, senders and receivers, tracing factors (fixed %, SKF, posted amounts), test runs, iterative cycles and reversals.

Explanation

📌 KEY POINTS
✅ Distribution moves primary costs keeping the original cost elements — detailed but more lines.
✅ Assessment summarizes costs under an assessment (secondary) cost element — fewer lines, less detail.
✅ Cycles contain segments: sender, receivers, sender values, tracing factors.
✅ Always run in test mode, check sender/receiver totals, then post; cycles can be reversed and rerun.
⚠️ Allocations must run after all primary postings (accruals, depreciation) — otherwise costs are left behind.

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▶ WHERE WE ARE
Part 2 covered postings. Now allocations.

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▶ 1. DISTRIBUTION VS ASSESSMENT

Detail vs summarization.

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▶ 2. CYCLE STRUCTURE

Header, segments, sender/receiver rules.

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▶ 3. TRACING FACTORS

Fixed %, fixed amounts, SKFs, posted values.

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▶ 4. EXECUTION

Test run, detail list, update, reversal.

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▶ 5. SEQUENCING

Iterative cycles; order of cycles.

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▶ STEP BY STEP

Create an assessment cycle for IT costs by headcount.
Enter SKF values.
Test and post the cycle.

✅ CHECKPOINT: sender cost center is zero and receivers carry costs proportionally.

Code example

ABAP Code

===== TRANSACTIONS =====KSV1 create distribution | KSV5 execute distributionKSU1 create assessment | KSU5 execute assessmentAssessment cost element: GL account of type secondary cost (category 42) ===== EXAMPLE =====IT cost center 90,000 → receivers by headcount 30/20/10 → 45,000 / 30,000 / 15,000

Real project scenario

During month-end, finance found costs left on the IT cost center because the assessment ran before the IT accrual was posted. Moving the cycle after accruals in the close calendar ended the rework.

Common mistakes

Running before accruals.
Missing SKFs.
No test run.
Unclear cycle names.
Wrong allocation method.

Best practices

Correct sequence.
Update SKFs.
Test first.
Naming conventions.
Choose method by reporting need.

Interview angle

Questions: "Distribution vs assessment?", "What is a tracing factor?", "How do you troubleshoot a cycle?"
Strong answer: methods, cycle structure, factors, execution, sequencing.

Practice this lesson

Quick check

1. What is the key functional difference between distribution and assessment when allocating costs between cost centers?

2. What is the key difference between distribution and assessment?

3. How does periodic reposting differ from distribution as a cost allocation method?

Interview questions

1. IT costs must be allocated to departments by headcount monthly. Design and troubleshoot the allocation.

Answer it in your own words first, then compare.

2. What are the most important design decisions, trade-offs, and best practices in Cost Center Accounting?