Change of Accounting Technique (Method Change)

Use

When a consolidation unit changes its accounting technique at any time (for example, at midyear), you can use this function to adjust the related reported financial data, standardized financial data, and consolidated data. This data is adjusted so that only those financial results go into reporting, that was recorded for the time period in which the consolidation unit was fully consolidated.

Features

Selection

The cumulative values prior to the change of accounting technique need to be determined. If the change takes place in period n , the function makes the following selection:

Method Change	Selection
End of period n	Data of periods 0 through n
Beginning of period n	Data of periods 0 through ( n – 1)

Change of Accounting Technique and Posting Period

Preparatory entries are always posted in the last period of the consolidation interval (as in all other tasks). When the accounting technique changes, postings for a consolidation group change are triggered at the point the period of the change occurs in the consolidation interval and it belongs to the consolidation group.

Posting Level

For preparatory entries with posting level 02 or 12, the postings are triggered at the consolidation unit when the accounting technique changes.

For preparatory entries with posting level 12, the postings are triggered at the consolidation unit when the accounting technique changes if the partner is fully consolidated at the time of the change. Similarly, the postings are also triggered if the partner changes its accounting technique and the consolidation unit is fully consolidated at the time of the change.

Posting Logic

The system triggers postings for the preparation for acquisition or divestiture with dependent on the accounting technique:

Old Accounting Technique	New Accounting Technique	Posting Logic
Purchase method (full consolidation)	Equity method	Divestiture
Equity method	Purchase method	Acquisition

Here, the acquisition and divestiture logic is slightly modified: Instead of posting to the items Net Income Prior to First Consolidation and Clearing – Consolidation of Investments , the system posts to the item Net Income – Method Change .

Conflict Between Acquisition/Divestiture and the Change of Accounting Technique

Acquisition or divestiture posting is triggered when a consolidation unit is to be acquired or divested and the accounting technique is to be changed, and this occurs at the same date (at the beginning of period or the end of period). But the change of accounting technique itself is not taken into consideration – that is, the consolidation group change either already uses the new accounting technique or still uses the old accounting technique.

Two dates are considered the same only if they match with regards to the year, period, and the beginning of period/end of period option.

Example

Change from equity method to purchase method at beginning of period 002, posting level 00

		Database				Reporting
	PL	00			02	00			02	00+02
	Period	000	001	002	002	000	001	002	002	å
Item	Trans. Type
Cash	--	10	10	10	20	--	--	10	20	30
Property, Plant & Equipment	Open.bal.	100				--
	Acq.		10	10			--	10		10
	Acq. CG				110				110	110
Retained Earnings, Prior Years	Open.bal.	-110				--
	Acq. CG				-110				-110	-110
Retained Earnings, Current Year	Acq.		-20	-20			--	-20		-20
Net Income, Method Change	Acq. CG				-20				-20	-20
Profit/Loss	--		-20	-20			--	-20		-20
Transfer of Retained Earnings, Current Year	--		20	20			--	20		20

Change from purchase method to equity method at end of period 002, posting level 00

		Database				Reporting
	PL	00			02	00			02	00+02
	Period	000	001	002	002	000	001	002	002	å
Item	Trans. Type
Cash	--	10	10	10	-30	10	10	10	-30	0
Property, Plant & Equipment	Open.bal.	100				100				100
	Acq.		10	10			10	10		20
	Div. CG				-120				-120	-120
Retained Earnings, Prior Year	Open.bal.	-60				-60				-60
Retained Earnings, Current Year	Acq.		-20	-20			-20	-20		-40
Net Income, Method Change	Div. CG				* 50				120	120
Appropriated Retained Earnings		50	10	10	-70	50	10	10	-70	-70
Retained Earnings – Transfers toAppropr. Retained Earnings			-10	-10	70		-10	10	70	70
Profit/Loss	--		-20	-20			-20	-20		-40
Transfers to RetainedEarnings, Current Year	--		20	20			20	20		40

*) The corresponding items (in periods 000 through 002) are posted with a reversed debit/credit sign to the Clearing C/I item (see also: Preparation for Divestiture ).

60 + 20 + 20 – 50 – 10 – 10 + 10 + 10 = 50