Sem Bcs Key Design Considerations For Integration With Sap Ecc

Table of contents Table of contents..................................................................................................................1 SEM BCS: KEY DESIGN CONSIDERATIONS FOR INTEGRATION POINTS............2 I. Enterprise Structure:.........................................................................................................2 II. Company ID and Trading Partner...................................................................................2 III. Group Chart of Accounts and mapping to GL Accounts...............................................4 IV. Financial Statement versions:........................................................................................4 V. Legal and Management Reporting (New GL ECC 6.0)..................................................5 VI. Functional area...............................................................................................................6 VII. Group Currency / Parallel currency..............................................................................7 VIII. Tax, Local GAAP vs. US GAAP requirements...........................................................8 IX. Asset Accounting...........................................................................................................8 X. Depreciation Areas and GAAP requirements ................................................................9 XI. Transaction Types..........................................................................................................9 XII. AP/AR Account Group/Trading Partner for Inter-company vendors/customers........10 XIII. Controlling:...............................................................................................................11 XIV. Allocations and Secondary Cost Element design......................................................11 XV. Functional area derivation..........................................................................................12 XVI. Profit Center Accounting..........................................................................................13

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SEM BCS: KEY DESIGN CONSIDERATIONS FOR INTEGRATION POINTS SAP ECC Integration Points

I. Enterprise Structure: • Company Code Key Integration Points: - Company Code is mapped to a company ID which is the legal unit used for Consolidation. i.e., Company Code is used as part of the Consolidation Unit. Consolidation Unit: -Normally, there is a 1:1 relationship between company code and Consolidation ID (unit). Key Design Considerations: - Company code is the legal structure from which auditable financial statements are generated. - The following attributes of the Company code definition is also used as attributes in Consolidation Unit: 1. Currency (required in Consolidation Unit) 2. Fiscal Year (required in Consolidation Unit) 3. Country (required) 4. Address (optional) - If parallel currency is activated, that amount can flow into SEM-BCS as Group Currency. - The assigned value for company code will be the same value used for Consolidation Unit e.g., company code 1000 is XYZ Corp, 1000 will also be the Consolidation Unit. Questions: - Is company code used to define legal entities? - Have all the companies been identified? - How many companies will use SAP ECC? - How many companies will not use SAP ECC? - How many are operational companies? How many will be trial balance companies? Recommendations: - Define legal entities as company codes. - Assign a code for all companies within the firm whether it will be an SAP ECC or nonSAP ECC company. That will be the unique code assigned for that company and the same code that will be used for SEM-BCS as well. - Assign company ID/trading partner for all company codes. (IMG > Enterprise Structure > Assignment > Financial Accounting > Assign company code to company)

II. Company ID and Trading Partner

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Key Integration Points: - Company ID is the smallest element in a corporate group structure that can be used as a basis for consolidation. Company Id is also called “Trading Partner”. - Company ID or Trading Partner is VERY, VERY important in SEM-BCS because that will be key for defining inter-company transactions and elimination of inter-company transactions. Key Design Considerations: - All SAP ECC companies MUST be assigned a Trading Partner/Company ID. - Non-SAP ECC companies can be defined as Company ID/Trading Partner. - Company ID is a 6-digit field as opposed to Company code which is a 4-digit field. - Trading Partner can be derived from company code assignment, inter-company vendor/customer assignment. - New in ECC 6.0: Rule-based assignments. You can set-up rules that will automatically assign inter-company documents based on rules e.g., comparing contents of certain fields. Also, for inter-company postings, documents that could not be assigned to each other or that contain posting errors are presented in a user-interface geared towards finding the reasons for inter-company differences and supporting the communications between accountants involved in the reconciliation process. Questions: - Have company IDs been configured? - Have you identified which GL accounts are inter-company accounts? - Have cross-company configurations been made? Did you use GL or customer/vendor accounts for cross-company configuration? - Will rule-based assignments be used for non-SAP ECC companies to determine the trading partner? Recommendations: - As much as possible, use the same ID for Company ID/Trading Partner and Company Code. E.g., 1000 ABC Corp is assigned to Company ID Trading Partner - Use separate GL reconciliation account for inter-company sub-ledgers i.e., separate from third party AR or AP reconciliation account. This is to facilitate mapping this account to a separate FS Item (Group Account) in SEM-BCS where trading partner will be a mandatory field. - As much as possible, use separate (non-reconciliation) GL accounts for inter-unit postings and eliminations e.g., Inter-company Sales/Revenue account different normal third Party Sales/Revenue Account. This is to facilitate making the trading partner as a mandatory field. Validations are normally created to ensure that trading partner field is populated for these inter-company accounts. - Review which document types will be used for inter-company and cross-company postings. (IMG > Financial Accounting > Financial Accounting Global Settings > Document > Document Header > Define Document Types). Change those document types to allow for cross-company postings (activate “Inter-company postings) or for manual trading partner input (activate “Enter Trading Partner”). - In order to automatically derive trading partner for cross-company configurations (IMG > Financial Accounting > General Ledger Accounting > Business Transactions > Prepare Cross-Company Code Transactions):

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1. Use posting key 01 for Receivables, 31 for Payables to activate customers/vendors. 2. Use actual inter-company customer number for receivables and inter-company vendors for payables, instead of using normal GL account. 3. This way, the trading partner from these master data will be automatically derived when there are cross-company postings.

III. Group Chart of Accounts and mapping to GL Accounts Key Integration Points: - Group Chart of Accounts is used as a basis for building the Item Master in SEM-BCS. Item is the lowest level of financial reporting for SEM-BCS. - There is a one to one relationship between Group Account and Item Master. Key Design Considerations: - Each company can be assigned one operational Chart of Accounts and one alternate/Country/local Chart of Accounts. - Multiple companies can use the same operational chart of accounts. - Operational Chart of Accounts can be assigned to the Group Chart of Accounts. Group Chart of Accounts and FS Item will be the same. The length of Group Account is the same as FS item. - Companies in the same Controlling should use the same Operational Chart of Accounts. Questions: - What’s the Operational Chart of Account? How many? Length? - Will country Chart of Accounts be used? For what purpose and for which companies? - Is Group Chart of Accounts set-up? Length? Recommendations: - Standardize the Operational Chart of Accounts. As much as possible, use only one Operational Chart of Accounts. - Standardize the Group Chart of Accounts. As much as possible, use only one Group Chart of Accounts. When designing of Group Chart of Accounts, keep in mind the level of detail required in Consolidation. - Map the Operational Chart of Accounts to the Group Chart of Accounts. - Map the GL master to the Group Account (chart of accounts level). - Ensure that all GL accounts are mapped to a Group Account. - Use Country Chart of Accounts if there is a local statutory requirement. e.g., France, Italy, Belgium. - Reserve number range for secondary Cost Element (even though it is not defined in GL master).

IV. Financial Statement versions: Key Integration Points: -4-

- Financial Statement Versions for Group Chart of Accounts will be used as basis for building the FS Item Hierarchy in SEM-BCS. - This is very useful in reconciling data between SAP ECC and SEM-BCS. Key Design Considerations: - New in 6.0: Financial Statement Version are now stored in transparent tables. It has the following advantages: 1. FS Versions can now be transported using Business configurations 2. 20 hierarchy levels are available (previously 10) 3. 1000 sub-items per item (previously 99) 4. Fixed Item for Financial Statement notes - FS version is used to run standard trial balance in SAP ECC per company (RFBILA00). - Trial balance can be run in local currency or in Group Currency. Questions: - How many FS versions will be created for: § Operational Chart of Accounts § Group Chart of Accounts Recommendations: - Build at least one Financial Statement Version for Operational Chart of Account. - Build at least one Financial Statement version for Group Account. - If there are more than one Financial Statement versions, this will be created as alternate hierarchy in SEM-BCS. - As much as possible, create the FS items (at certain level) consistent between Operational Chart of Accounts and Group COA. This will facilitate reconciliation between Operational trial balance and Group. - Ensure the names/description used for each level reflect names required in Consolidated Balance Sheet and Income Statement. - Ensure the calculated P&L Revenue and Expense item is part of the Retained Earnings section.

V. Legal and Management Reporting (New GL ECC 6.0) Key Integration Points: - SEM-BCS can perform both legal and management consolidation. - Need to determine where data from SAP ECC will be captured. Key Design Considerations: - New in ECC 6.0: 1. The new GL can fulfill requirements for both legal and management reporting. 2. PCA functions are integrated in the new GL (except for transfer pricing). 3. Segment reporting for IAS and US GAAP is now possible. 4. Contains functional area dimension 5. Real-time integration with CO – no need for reconciliation ledger. Questions: - New GL has option for extending data structure. What additional dimensions are added for Nortel in new GL?

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Recommendations: - Check dimensions required for Consolidation (Legal and Management). - Use parallel ledgers for multiple GAAP requirements. Use Lead Ledger for US GAAP. Use other ledgers for local GAAP requirements.

VI. Functional area Key Integration Points: - Functional area is a structure used to classify operational expenses by function such as, administration, sales and distribution, marketing and production. - Functional area can be a required field in Consolidated Statements. Therefore, the functional area design in SAP ECC impacts the functional area reporting in SEM-BCS. Key Design Considerations: - New in 6.0: Functional Area can be derived as soon as the account assignment is entered on the coding block and is consequently available for the CO Line Item validation before the postings are made. - Functional area can be defined in the GL Master (Chart of Accounts level), Cost Element or CO cost object. - If Functional Area is defined in the GL master, the attribute is taken over to the Primary Cost Element Master. - Functional Area defined in Cost Element master takes precedence over Functional Area defined in Cost Object. - Functional area derivation is determined from the real cost object. For instance, 1. If Internal Order/Project is real, then functional area is derived from Internal Order/Project. 2. If Internal/Project is statistical, then functional area is derived from real object e.g., Cost Center or WBS. 3. PA segment is a real object. 4. Profit Center is always a statistical object. Therefore, functional area is not derived from Profit Center. Questions: - Will functional area be required in the Consolidation Reports or Management reporting? Recommendations: - Determine if functional area is required for Consolidation reporting. - If yes, ensure that the functional area field is populated in the relevant P&L line items by using any of the following: 1. If there’s only one functional area to be used for the cost element, default functional area in GL (which will be taken over cost element). Otherwise leave functional area field in the Cost Element master blank. 2. For cost elements that can be used across functional areas, default the functional area from the cost object. Ensure that the functional area is made mandatory for the cost object e.g., cost center.

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3. If cost element or cost object derivation does not work, use substitution rules for derivation of functional area. 4. Use user-exits for complex derivation of functional area.

VII. Group Currency / Parallel currency Key Integration Points: - Transaction, Local currency and Group Currency values from SAP ECC can be pulled over to SEM-BCS. - Group currency is defined as one of the key figures in SEM-BCS. - Group Currency is the basis for Consolidation reporting. - Local Currency of the Company Code is also used as the local currency in SEM-BCS. Key Design Considerations: - Group currency is the currency assigned when a client is created. - Parallel currency can use Group currency as another local currency for the company. - Special Ledger can use Group currency as the ledger currency, if Special Ledger is used. - Controlling area can use Group currency as the Controlling Area currency. - Profit Center Ledger currency (Ledger 8A) is derived from Controlling Area currency. Questions: - What is the client/group currency? - Will parallel currency be used? - What is the Controlling Area currency defined as? Recommendations: - Ensure that the currency defined in the client/group currency is the same as the Consolidation currency e.g., USD. If more than one consolidated reporting currency is used, use the currency most used. - Define Group currency as the Controlling Area to ensure consistency between FI and CO especially if parallel currency is activated. This is also critical when management consolidation is implemented in SEM-BCS to ensure consistency of data between SAP ECC and SEM-BCS. Revaluation/Currency Translation Key Integration Points: - SEM-BCS pulls local currency from SAP ECC. - SEM-BCS can also pull transaction and group currency from SAP ECC. - Revaluation in SAP ECC will be pulled over to SEM-BCS. Key Design Considerations: - SAP revaluation is used to translate foreign currency accounts (not the same as the local currency) from transaction currency to local currency. - Currency translation is used to translate local currency balances to Group or Reporting currency based on FAS52. - ‘M’ rate is the exchange rate used at the time of transaction posting. Questions: - What exchange rate type is used for revaluation?

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- Where will currency translation be done? Recommendations: - Revaluation is always done in SAP ECC. - SEM-BCS has robust functionality for Currency translation. However, if management reporting is part of Consolidation reporting, take into consideration the consistency of data between SAP ECC and SEM-BCS. If currency translation is done in SEM-BCS, it is NOT pulled back to SAP ECC.

VIII. Tax, Local GAAP vs. US GAAP requirements Key Integration Points: - Since SEM-BCS pulls data from SAP ECC, the decision regarding handling GAAP reporting in SAP ECC impact SEM-BCS. Key Design Considerations: - New in ECC 6.0: Parallel Accounting: The new GL allows you to perform parallel accounting i.e., multiple ledgers in parallel. During posting, you can have data posted to all ledgers, to a specified selection of ledgers or to a single ledger. - Fixed Assets can have multiple depreciation areas to handle multiple GAAP requirements. Questions: - Are there multiple GAAP requirements? E.g., US GAAP vs local (e.g., Canadian) GAAP - If so, how will multiple GAAP be handled? Recommendations: - Use ledgers to differentiate GAAP requirements e.g., Lead Ledger for US GAAP, Local ledger for local GAAP.

IX. Asset Accounting Asset Classes Key Integration Points: - GL Account assignment is defined per Asset Class. - GL Accounts are assigned to FS Items. - FS item is the lowest level from which Consolidation can report on. - It is important to check the level of reporting required in Consolidation report and ensure that the enough details are tied to the GL account and Asset Class. - If Assets require different GL accounts, then it needs to be broken down to appropriate Asset Class. Key Design Considerations: - Asset Classes are assigned to a set of GL accounts (Asset acquisition, Depreciation, Accumulated Depreciation etc). - Asset Classes can be defined to the same set of GL accounts.

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- If Assets require different GL accounts, then it needs to be broken down into appropriate Asset Class. Questions: - For Fixed Assets, what is the level of detail required for reporting? - Are there enough Asset Classes defined to break down this level? Recommendations: 1. Create separate Asset Classes for different GL account assignment requirements. 2. Check mapping of these GL Accounts to Group Accounts against the Consolidated Balance Sheet and P&L Reports to ensure that requirements are met.

X. Depreciation Areas and GAAP requirements Key Integration Points: - Depreciation Areas can be created in Fixed Assets to handle multiple GAAP requirements e.g., Local GAAP vs. US GAAP. - This can be mapped to separate GL accounts/FS Items or separate versions in SEMBCS. Key Design Considerations: - Trading Partner is derived from the inter-company vendor/customer master. - All inter-company vendors/customers MUST be assigned a Trading Partner/Company ID. - Company ID is a 6-digit field as opposed to Company code which is a 4-digit field. Questions: - Is there a requirement for multiple GAAP reporting? - IF so, where is Depreciation Area 01 (Book Depreciation) mapped to? Local GAAP or US GAAP? Recommendations: 1. Check whether there is multiple GAAP reporting. 2. Design Depreciation Area to handle multiple GAAP requirements. 3. Determine where Depreciation Area 01 is mapped to (Local vs US GAAP).

XI. Transaction Types Key Integration Points: - Consolidation reports normally requires a Consolidated Fixed Asset schedule that shows acquisition, depreciation, transfers etc… - SEM-BCS handles this through consolidation transaction types (which is different from Fixed Asset movement types) -9-

- Fixed Asset transaction types are assigned to Consolidation transaction types. Key Design Considerations: - Fixed Asset transaction types are assigned to SEM-BCS transaction types. - Any new Fixed Asset transaction type must be assigned to Consolidation transaction type. Questions: - Are there plans to create new Asset transaction types? If so, ensure that all asset transaction types are mapped to the Consolidation transaction type. Recommendations: 1. Check which asset transaction types to be used. 2. Ensure that all asset transaction types (especially new ones) are mapped to the Consolidation transaction type. (IMG > Enterprise Controlling > Consolidation > Integration: Preparation for Consolidation > Preparations Related to All Consolidation Types > Transaction Type Account Assignment > Assign Asset Transaction Types)>Accounts Payable / Accounts Receivable

XII. AP/AR Account Group/Trading Partner for Inter-company vendors/customers Key Integration Points: - Company ID or Trading Partner is VERY, VERY important in SEM-BCS because that will be key for defining inter-company transactions and elimination of inter-company transactions. Key Design Considerations: - Trading Partner is derived from the inter-company vendor/customer master. - All inter-company vendors/customers MUST be assigned a Trading Partner/Company ID. - Company ID is a 6-digit field as opposed to Company code which is a 4-digit field. Questions: - How are the AR/AP Account Groups defined? - Is there a separate Account Group for Inter-company customer/vendor? - If yes, is trading partner required? What is the number range assigned? - Have cross-company configurations been made? Did you use GL or customer/vendor accounts for cross-company configuration? Recommendations: 1. Create separate Account Groups for inter-company vendors and Customers and make the Trading Partner field mandatory. Use separate GL reconciliation account for inter-company subledgers i.e., separate from third party AR or AP reconciliation account. This is to facilitate making the trading partner as a mandatory field for all inter-company vendors and customers. 2. A separate GL reconciliation account should be mapped to inter-company customers/vendors. (See GL trading partner). 3. Also, as much as possible, use the same trading partner ID for inter-company customers/vendors. This is to facilitate checking that the right trading partner is assigned

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to the inter-company vendor/customer. Therefore, recommend to use an external number range for inter-company customer/vendors from 000001 to ZZZZZZ.

XIII. Controlling: Controlling Area currency Key Integration Points: - If Consolidation is also used to generate Consolidated Management reporting, then data from Controlling will be captured. - Consolidation can capture all three types of currency data: transaction currency, object currency and Controlling Area currency. Key Design Considerations: - If there’s only one company assigned to the same Controlling area, most likely the currency type is: 10 – Company code currency. - However, if multiple company codes are assigned to the same Controlling Area, the currency type that are normally used are as follows: 1. 20 – Controlling Area currency 2. 30 – Group Currency - If FI has activated parallel currency, most likely, it will be mapped to Group currency. - Or if you have activated Special ledger, the ledger currency is most likely, Group currency. - Profit center is activated by Controlling Area. Questions: - How are Controlling Areas defined? How many? Which currency type is it assigned to? Recommendations: 1. Use Group currency (currency type 30) for Controlling Area currency to ensure consistency between FI parallel currency (if activated), Special Ledger (Ledger Currency), Profit Center and CO. (IMG > Controlling > General Controlling > Organization > Maintain Controlling Area > Maintain Controlling Area. Under Basic Data)

XIV. Allocations and Secondary Cost Element design Key Integration Points: - If Consolidation is also used to generate Consolidated Management reporting and requires data from allocations (which uses secondary cost elements), then these data will be captured in SEM-BCS. Key Design Considerations: - If allocation data from CO is required in SEM-BCS, these needs to be mapped to the FS items in SEM-BCS.

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- Infoobject 0ACCOUNT is extracted from SAP ECC. This includes both GL accounts and secondary cost elements. It also includes the mapping for Group Accounts which is normally used as FS Items in SEM-BCS. - Secondary Cost Elements will have to be mapped to FS items. Questions: - Are there plans in the future to see Consolidated Management reporting in SEM-BCS? - If so, how are secondary cost elements designed? - Are allocations done across companies? Will FI/CO reconciliation be used to synchronize FI and CO? Recommendations: 1. Check to see that the secondary cost element design meets future reporting requirements in Consolidation. 2. Check to make sure that secondary cost elements can be mapped to Group Accounts/FS items (Note: mapping done in BW infoobject 0ACCOUNT and not in SAP ECC) 3. Allocations across companies generates inter-company postings in FI when FI/CO Reconciliation is performed. 4. Use a separate document type for FI/CO Reconciliation Ensure document type allows for inter-company and cross-company postings. (IMG > Financial Accounting > Financial Accounting Global Settings > Document > Document Header > Define Document Types). Change those document types to allow for cross-company postings (activate “Inter-company postings) or for manual trading partner input (activate “Enter Trading Partner”).

XV. Functional area derivation Key Integration Points: - Functional area can be a required field in Consolidated Statements. - Therefore, the functional area design in SAP ECC impacts the functional area reporting in SEM-BCS. - Normally, functional area is required from operational/overhead expenses in the P&L. Key Design Considerations: - New in 6.0: Functional Area can be derived as soon as the account assignment is entered on the coding block and is consequently available for the CO Line Item validation before the postings are made. - Functional area can be defined in the GL Master (Chart of Accounts level), Cost Element or CO cost object. - If Functional Area is defined in the GL master, the attribute is taken over to the Primary Cost Element Master. - Functional Area defined in Cost Element master takes precedence over Functional Area defined in Cost Object. - Functional area derivation for cost objects is determined from the real object. For instance,

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1. If Internal Order/Project is real, then functional area is derived from Internal Order/Project. 2. If Internal/Project is statistical, then functional area is derived from real object e.g., Cost Center or WBS. 3. PA segment is a real object. 4. Profit Center is always a statistical object and does not have functional area. Questions: - Will functional area be required in the Consolidation Reports or Management reporting? - Please provide list of functional areas. Recommendations: - Determine if functional area is required for Consolidation reporting. - If yes, ensure that the functional area field is populated in the relevant P&L line items by using any of the following: 1. If there’s only one functional area to be used for the cost element, default functional area in GL (which will be taken over cost element). Otherwise leave functional area field in the Cost Element master blank. 2. For cost elements that can be used across functional areas, default the functional area from the cost object. Ensure that the functional area is made mandatory for the cost object e.g., cost center. 3. If cost element or cost object derivation does not work, use substitution rules for derivation of functional area. 4. Use user-exits for complex derivation of functional area.

XVI. Profit Center Accounting Profit centers Key Integration Points: - SEM-BCS handles both legal and management Consolidation. - For management consolidation reporting, normally data from Profit center is captured as either: 1. Part of Consolidation Unit 2. As a sub-assignment - In order to have full profit center reporting, Cost objects such as Cost Center needs to be assigned to a Profit Center. Key Design Considerations: - New in ECC 6.0: 1. The new GL can fulfill requirements for both legal and management reporting. 2. PCA functions are now integrated in the new GL (except for transfer pricing). 3. Segment reporting for IAS and US GAAP is now possible. 4. Contains functional area dimension 5. Realtime integration with CO – no need for reconciliation ledger. - The following objects can be mapped to a Profit Center: 1. Materials

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2. Fixed Assets 3. Cost Centers 4. Internal Orders 5. Projects - Normally, profit center is a derived field. Profit Center derivation for cost objects is determined from the real object. For instance, 1. If Internal Order/Project is real, then profit center is derived from Internal Order/Project. 2. If Internal/Project is statistical, then profit center is derived from real object e.g., Cost Center or WBS. 3. PA segment is a real object. 4. Profit Center is always a statistical object i.e., it is not a real cost object. - There are certain Balance Sheet accounts that can be mapped to a Profit Center (determined through period-end processing) 1. Accounts Receivable 2. Accounts Payable - A default Profit center can be defined for Profit center - Elimination of internal business volume using Partner Profit Center is not currently available in ECC 6.0 but planned for future release. Questions: - How is profit center designed? How many profit centers are there? - Please provide standard Profit Center Hierarchy design and list of profit centers. - Is profit center required for Consolidation reporting? - Is profit center reporting required for Balance Sheet as well? If so, is it full Balance Sheet or only certain Balance Sheet accounts? - Will allocations be done in Profit Center? Recommendations: - Determine if profit center is required for Consolidation reporting. If so, ensure that the design meets the required level of reporting. - Check if full trial balance or only P&L data is required for Profit Center reporting. - If full trial balance, 1. Run period end processing to determine profit centers for certain balance sheet accounts such as Accounts Receivable, Accounts Payable, Fixed assets. 2. For all other Balance Sheet accounts, default a common (not dummy) profit center. 3. Ensure that there are no postings to dummy profit center.

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