Consolidation  

Purpose

This scenario describes how the individual financial statements of companies in a corporate group are combined in order to create consolidated financial statements.

The consolidation process involves eliminating the effects of trading partner and financial relationships between group companies. You can perform consolidation for your group using the functions described below.

 

Process Flow

Master Data

  1. Before you start consolidation, you set up master data in your Consolidation application. Most importantly, you set up master data for your companies, subgroups, and the financial statement chart of accounts that you use.
    2.

    Data Entry
  2. You collect the individual financial statement data for consolidation in the system. This data can be transferred from a remote PC or system, or entered centrally.
    3.

    Currency Translation
  3. Group currency is always used for the consolidated financial statements. You therefore translate individual financial statement data from the local currency of each company into group currency.
    4.

    Standardizing Entries
  4. Before any consolidation entries are posted, you adjust data in the individual financial statements so that it meets the valuation requirements of the parent company. You do this by posting standardizing entries.
    5.

    Intercompany Eliminations
  5. You post consolidating entries in order to eliminate the payables and receivables and revenue and expense that originate from goods and service transactions between group companies.

    6. Before you post these entries, you can generate lists of balances in order to analyze any indescrepancies in the data.

    Elimination of Intercompany Profit and Loss
  6. You post consolidation entries in order to eliminate profit and loss resulting from goods and service transactions between group companies. You eliminate intercompany profit and loss in both transferred assets and inventory.
    7.

    Consolidation of Investments
  7. You post consolidating entries in order to eliminate the investment holdings of parent companies in your group against the proportional equity of subsidiaries and associated companies in the same group. The common methods of consolidating investments - that is the purchase method, pooling-of-interest method, proportional consolidation and the equity method - are all supported by the system.
    8.

    Standard Reports
  8. After you have completed your consolidation activities, you can run one of the standard reports provided on the consolidated data.

    9. User-Defined Reports
  9. In addition to running standard reports, you can define and run your own reports to meet your own specific requirements.