Consolidating Company Codes (Business Units)
By definition, a company is a legal entity that is required by trade laws to disclose individual financial statements. Accordingly, the company's individual financial statement is the basis for the consolidated financial statement. The consolidation of companies described in
Consolidation of Subsidiaries (Legal Consolidation) is used to generate the consolidated financial statements.Hence, you may wonder - what is the 'consolidation of company codes?' In a standard situation, a company as a legal entity is represented by exactly one company code in the SAP system. However, a company code can, by definition, also portray a business unit that is legally dependent. This is especially necessary if the plant resides in a different country and must adhere to its currency and tax regulations. If, in addition, all business units belonging to the company are being processed on an SAP system, you will have the ability to gather data in a more simple fashion to achieve a company financial statement. This has its advantage over using the consolidation of companies and assigning a (dependent) company to each company code, and to generate the company's individual financial statement by creating subgroups in Consolidation reporting.
However, this simplified method has a few restrictions, at present, the first being procedural:
Thus far, however, no elimination of payables and receivables or of any intercompany profit has occurred. Depending on company organization, business transactions between business units might be posted onto company code clearing accounts - instead of receivable and payable accounts - and, thus, achieve the elimination as a net balance. IC profits between business units can often be avoided or be removed from the consolidation processing ledger using manual, summarized adjustment entries. Concerning currency translation, however, you must ask whether the (spot date) exchange rates calculated during the transaction update are indeed correct; or whether a periodic revaluation would instead be applicable and necessary. This is supported in the currency translation program in Consolidation.
Please note, however, that this method does not meet all requirements for the individual financial statement in consolidation, but merely those for generating a balance sheet and an income statement. Numerous other requirements for the notes to financial statement remain a job for FI Reporting, which meets these requirements with its cross-company code reports. You can, of course, also use the FI Balance Sheet program to directly generate cross-company code and cross-currency financial statements. It has its limitations, however, when dealing with differentiating currency translation methods or eliminating entries, which, when needed, are easily accomplished with the tools in the consolidation system.