Managing Contra Items and Calculating Retained Earnings

Managing Contra Items and Calculating Retained Earnings

When transferring individual financial statement data using realtime update, a rollup or from an R/2 System, the system needs to manage contra items and calculate retained earnings (or annual net income when appropriation of retained income is shown in the balance sheet — only retained earnings will be referred to below).

Calculating retained earnings

In the FI accounting system, retained earnings is an amount which results from the balance of all balance sheet items or from the balance of all revenue and expense items and the appropriation of retained earnings. In the Consolidation system, however, you enter the value for retained earnings yourself. For further information, refer to Retained Earnings, Annual Net Income, and Appropriations.

When performing an integrated transfer of individual financial statement data from Financial Accounting, the system therefore needs to calculate retained earnings and post these to the retained earnings item. The way this calculation is made depends on the data transfer procedure used:

Periodic extract: The system calculates retained earnings when posting the extract.

Realtime update / rollup: You need to start the program for managing contra items and calculating retained earnings in the Consolidation system under Indiv.Fin.Stmts ® Contra item/Ret.earn. Accumulated values are calculated for retained earnings.

Retained earnings are saved to those items defined as selected items with the classification keys BG and ERG in the Consolidation system. You can make this definition in the Implementation Guide in the section Master Data ® Financial Statement Items.

If you transfer data for business area consolidation by means of realtime update into the Consolidation system, you also need to define a selected item with the classification key BAG for any balance sheet clearing which might be necessary. You make this definition in the Implementation Guide in the section Individual Financial Statement Data.

Managing contra items

Postings from FI can invert the balance of some balance sheet items (for example bank accounts) so that the value must appear on the other side of the balance sheet. This problem is solved in different ways, depending on the data transfer procedure used:

Periodic extract: The group financial statement version counteracts the problem of balance inversion. By looking at whether a journal entry in the central accounts is a debit or credit, the system determines whether it will be entered on the assets side or liabilities side of the balance sheet (via an item key). One item is required in Consolidation for each item key.

Realtime update and rollup: The problem of balance reversal is solved in Consolidation by means of contra items. You assign one corporate account, and therefore one consolidation item, to each FI clearing account. In the Consolidation system, you assign a contra account belonging to the other side of the balance sheet to the consolidation item in Item Maintenance.

After FI transactions have been posted, you need to start the program for managing contra items and calculating retained earnings in the Consolidation system. You do this under Indiv.Fin.Stmts ® Contra item/Ret.earn. In the case of balance inversion, item values are transferred to the assigned contra items, where these exist.

The following diagram illustrates how contra items are posted:

Running the program for managing contra items and calculating retained income

As selection parameters, you need to need to enter the subgroup, company, version, year and period. You can then start a test run of the program. This can be repeated as often as you want. The program generates no documents.

Status Management shows whether the program has already been run for each company. It must be run before data input can be blocked.