Execution of a Consolidation (SAP Library

Execution of a Consolidation

Purpose

The "Consolidation using SAP Consolidation" scenario can be applied to various consolidation types. The objective of a consolidation depends on the type of consolidation.

A statutory (or legal) consolidation (such as company consolidation and business area consolidation) requires that the reported data of the group's consolidation units be aggregated into consolidated financial statements. This requires that:

- the reported financial data be adjusted to meet the group's balance sheet valuations

- the reported financial data be translated into the currency of the consolidation group

- the data be purged of transactions arising from the delivery of goods and services between two consolidation units, as well as any investments in units of the same group

Internal or managerial consolidations (such as profit center consolidation) are used for controlling areas of corporate enterprises. The main focus of the consolidation tasks is on the elimination of the effects of the delivery of goods and services within such enterprise areas. Let's take the "elimination of interunit sales of merchandise" as an example.

Prerequisites

The consolidation units must report their financial data so that it can be collected in the Consolidation system. There are different methods for transferring financial data into the Consolidation totals database. The method you choose depends on the organization of your corporate group and the systems it uses. The data can be:

collected from SAP transaction-processing components using the integration feature

entered off-line (decentralized) and transferred to Consolidation as a data file

entered on-line directly in the Consolidation system

Note the following important prerequisites needed for error-free data collection.

Mapping

The financial data of the consolidation units is organized in operational organizational units and operational charts of accounts. When this data is transferred, these operational account assignments must be mapped to the account assignments used in the Consolidation system.

Subassignments

The Consolidation system needs account assignments, such as partner units, transaction types, transaction currencies and so on, in order to perform the consolidation tasks. For example, automated elimination of IU revenue and expense is only possible if the system knows which partner units caused the revenues and expenses.

You can define which subassignments each financial statement item needs in the item's master data. These subassignments must be included in the reported financial data.

Creating an Initial Data Set

When implementing SAP Consolidation, data concerning your consolidation units usually already exists.

In online and offline data entry, there is basically no difference between transferring historical data and the data of the current period. During data entry in SAP Consolidation, you enter the cumulative value for the historical data.

However, to transfer financial data using integration you first need to create an initial data set. This is because integrated data collection updates the consolidation processing ledger or the consolidation staging ledger with operational (transaction-system) data. Before one of these ledgers is initially updated, you need to create an initial data set in that ledger with the account assignments relevant to consolidation. If the relevant historical documents are still in the system, you can subsequently post these in a separate journal entry.

Note

Preparations for consolidation are needed to establish the requirements mentioned. For more information see the following chapters in the Implementation Guide for SAP Consolidation:

- Data Collection

- Integration: Preparation for Consolidation

Process Flow

A) Customizing

You use the Implementation Guide for Consolidation to customize the component to meet your individual requirements.

The standard SAP system includes default settings for most of the Customizing activities. Check each activity and decide whether you want to use the default settings. In particular, see if you can adopt the predefined dimensions and consolidation charts of accounts. Many Customizing settings rely on these objects. Thus, if you use your own dimensions or consolidation charts of accounts, you need to adjust all of the dependent settings accordingly. There are copy functions to assist you.

Note that master data for the organizational units can be maintained in the Implementation Guide as well as the application menu.

B) Collection and Standardization of Reported Financial Data

You execute the activities for collecting and standardizing the financial data reported by subsidiaries in the Data Monitor in the Consolidation application menu.

Basic Sequence of Activities in the Data Monitor:

Note

The tasks with gray backgrounds are additional tasks that are used in more complex consolidation processes.

1. You carry forward the prior year data into the current fiscal year.

This task is only needed if prior year data already exists in the totals database.

2. You transfer the reported financial data of the consolidation units.

The system writes the reported financial data in the consolidation totals database.

The system also requires additional financial data for the consolidation tasks "Elimination of Interunit Profit/Loss" and "Consolidation of Investments". Additional financial data contains information on:

a) group-internal deliveries and inventories of assets (needed for the elimination of interunit profit/loss)

b) investments in and equity of the consolidation units (needed for the consolidation of investments)

The system writes additional financial data in separate database tables – not in the totals database. You collect the additional financial data (as with reported financial data) using the data collection task. In some situations you also have the option to read the values from the execution of the consolidation of investments directly from the totals database.

In some cases, you may want to collect the additional financial data at a later point in time, namely shortly prior to executing the elimination of interunit profit/loss and/or the consolidation of investments. Although this is possible, you should keep in mind that if this done, the status management function resets the task for validating standardized financial data along with all subsequent tasks. Therefore, SAP recommends that you collect the additional financial data immediately after you collect the reported financial data.

3. You validate the reported financial data.

At this point it is not yet necessary to validate the reported financial data. The last task in the data monitor is the validation of standardized financial data in group currency. This last task is mandatory, meaning that the system ensures that this task is successfully executed prior to allowing tasks in the consolidation monitor to be executed (see below).

Nevertheless, it is useful to validate the reported data at this point if no consistency check has yet taken place in some other fashion.

4. If you used the integrated data transfer methods "realtime update" or "rollup" to collect reported data, you need to process the contra items and retained earnings.

a) If the balance of any items turned from a debit to a credit balance, or vice versa, this balance must be transferred to the assigned contra item.

b) Retained earnings (if the statement of retained earnings appears after the income statement) or annual net income (if retained earnings are stated in the balance sheet) must be calculated and posted to the selected items provided.

5. You post standardizing entries to the reported financial data, if needed. These entries can be posted manually or automatically (using "reclassifications").

Note

An alternative is to also execute this task after currency translation.

6. If the reported financial data is valued in different currencies, you translate the data into the currency of the consolidation group.

In company consolidation, this is usually the currency of the parent company.

Sometimes it is helpful to translate the reported financial data at an earlier point for pre-reconciliations and the like. For example, you may want to pre-maturely execute interunit elimination in test mode to clean up any mismatches between the disclosed receivables and payables, etc. before the consolidation tasks are executed. To do a test run, the financial data must be translated, even if the data of some of the consolidation units has not yet been collected. In this situation, a test run of currency translation is insufficient because a test run of interunit elimination needs the group currency values in the totals database.

To enable this requirement, status management in the data monitor allows the execution of currency translation prior to the completion of data collection or other preceding tasks. Note that the system views such a premature currency translation as a preliminary currency translation. This means that another currency translation must take at the correct task sequence.

7. You validate the standardized financial data.

This task must be executed successfully before running any tasks in the consolidation monitor.

Parallel Activities:

Parallel activities may be helpful or even required at various stages in the data collection process:

· If consolidation of investments processes consolidation group changes, for example, you can prepare the data for such activities using automatic postings.

Consolidation group changes result from acquisitions or divestitures of consolidation units. The automatic preparatory postings adjust the financial data as follows:

- The values of the balance sheet items of the acquired or divested consolidation units are broken down by subitems and transferred to the subitem "Acquisition to Consolidation Group" or "Divestiture from Consolidation Group".

- When dealing with acquisitions of consolidation units, the system takes the income statement items and transfers the portion for the periods prior to the acquisition to the item "Retained Earnings Prior to First Consolidation".

· You carry out a rollup to the consolidation groups, if needed.

To increase system performance, you may want to use the rollup feature to summarize consolidation unit data for the consolidation groups or consolidation group hierarchies. This can speed up reporting that uses the Report Writer. Rollups also speed up interunit eliminations.

At which point you do this depends on which data is accessed in the Report Writer reports. To speed up interunit eliminations, you need to do a rollup at the end of the data processing, for example, prior to the validation of the standardized financial data.

C) Consolidation of the Financial Data

You remaining activities are executed in the Consolidation Monitor.

Which tasks you run in the consolidation monitor depends on the type of consolidation involved and the resulting requirements (see also section "Purpose").

Example of the Activities in the Consolidation Monitor:

Note

The tasks with gray backgrounds are additional tasks that are used in more complex consolidation processes.

1. Interunit Elimination

This task eliminates group-internal receivables and payables, and group-internal revenues and expenses.

2. Elimination of Interunit Profit/Loss in Transferred Inventory

This task eliminates group-internal profit and loss. The elimination entries involved require additional financial data that provides information on group-internal goods deliveries and inventories. See section "B) Collection and Standardization of Reported Financial Data", Step 2.

3. Preparation for Consolidation Group Changes

If you run consolidation of investments that, for example, processes consolidation group changes, you prepare the consolidated data for such activities. See also section "B. Collection and Standardization of Reported Financial Data".

4. Consolidation of Investments

This task eliminates ownership relationships within the group. This task is needed particularly for the disclosure of consolidated financial statements that must meet statutory requirements.

The elimination entries involved require additional financial data that provides information on investments in and equities of consolidation units. See section "B) Collection and Standardization of Reported Financial Data", Step 2.

5. Reclassification

This task lets you reclassify data that has been consolidated.

Example

Frequently, consolidated financial statements of a corporate group need to state the retained earnings of the parent unit within the group. You can use reclassifications to reclassify the retained earnings of subsidiaries as appropriations.

6. Manual Postings (if needed)

In exceptional cases it may become necessary to post manual entries to adjust the consolidated financial data.

7. Validation of the Consolidated Financial Data

After executing the consolidation tasks, you validate the consolidated data.

8. Rollup to Consolidation Groups

See also section "B. Collection and Standardization of Reported Financial Data".

Result

You can generate reports on the consolidated data and transfer the data for further processing elsewhere. In the SAP System, you can forward the data to the Executive Information System (EC-EIS) using the integration feature.