Cost allocation

Roles that need it

• Business Controller
• FP&A Analyst
• Commercial Finance Analyst
• Finance Transformation Consultant
• General Accountant

Skills it belongs to

• Cost accounting and product costing
• Profitability analysis (margins, contribution)
• Cost structure and efficiency levers

Related concepts

• Management accounts (management reporting)Management accounts are internal financial reports, usually monthly, that show results by business line, product or region against budget and forecast, with commentary. IFRS 8 segment reporting is based on this internal view as reviewed by the chief operating decision maker.
• FTP (funds transfer pricing)Funds transfer pricing is the internal system that charges business units for the funding they use and credits them for the funding they raise, including interest rate and liquidity costs. It isolates rate risk in treasury and makes product margins comparable.
• BudgetA budget is the approved financial plan for a future period, usually a year, setting targets for income, costs, headcount and investment by unit. It becomes the baseline against which actual results and later forecasts are compared.
• RAROC (risk-adjusted return on capital)RAROC divides a risk-adjusted profit (revenue minus costs and expected loss) by the economic or regulatory capital a deal or business consumes. Banks compare it with a hurdle rate to price loans and decide where to allocate capital. RORAC is a close variant.

Sources

• IFRS 8 Operating Segments, IFRS Foundation (external site) accessed 31 Oct 2026
• Guidelines on liquidity cost benefit allocation, EBA (external site) accessed 31 Oct 2026

Updated 31 Oct 2026.