What is derivation hierarchy in SAP FI-GL - General Ledger Accounting?

SAP Term: derivation hierarchy

• Component: FI-GL

• Component Name: General Ledger Accounting

• Description: Hierarchy of object types that need to be reorganized. This hierarchy depicts the dependencies between these object types in terms of their content. The hierarchy can take the form of a tree structure with different hierarchy levels. &EXAMPLE& During a profit center reorganization, the derivation hierarchy describes how the profit center is determined when an object of a given object type such as “Material” is created: When creating a material, the user specifies the profit center directly in the material master record hence the profit center assignment is made independently of the other object types. In this way, the object type “Material” is located on the first level of the derivation hierarchy. When an unassigned purchase order item is created, it receives the profit center from the ordered material. Consequently, the object type “Purchase Order Unassigned” appears beneath the object type “Material” in the derivation hierarchy.

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• Key Concepts: 
  Derivation hierarchy is a feature of SAP FI-GL General Ledger Accounting that allows users to create a hierarchical structure of accounts. This structure can be used to simplify the process of creating and managing accounts, as well as to provide a more organized view of the financial data. 
  
  How to use it: 
  To use the derivation hierarchy, users must first create a hierarchy structure. This can be done by creating a parent account and then adding child accounts to it. The parent account will be the top-level account in the hierarchy, while the child accounts will be lower-level accounts. Once the hierarchy is created, users can then assign values to each account in the hierarchy. This allows users to easily track and manage their financial data. 
  
  Tips & Tricks: 
  When creating a derivation hierarchy, it is important to keep in mind that each account should have a unique name and description. This will help ensure that the accounts are easily identifiable and can be quickly located when needed. Additionally, it is important to ensure that all accounts are properly linked together in order for the hierarchy to function properly. 
  
  Related Information: 
  For more information on how to use derivation hierarchies in SAP FI-GL General Ledger Accounting, please refer to the official SAP documentation. Additionally, there are many online tutorials available that provide step-by-step instructions on how to create and manage derivation hierarchies.