The below is an issue which we encountered in our R12 12.1.3 TEST instance. I am posting this here, just in case it helps anyone else having the same issue. This below mentioned is not the only cause for this issue.
Issue: While creating requisition the approval list was not getting generated and it was coming up with the message "Approval List could not be generated".
Cause: In our case, the issue was the FND user account associated with the third level approver was inactive. In our non-prod environments, we normally end-date the user who don't use the system as part of the clone process.
Solution : We enabled the FND user account associated with the third level approver and it started working. FND user accounts associated with the approvers need to be active for the approval hierarchy to be generated.
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