In this type of appropriation the entire net profit for the year (group and minority interest) is transferred into the consolidated retained earnings using a general transfer calculation.

Listed below are the items in the FS chart of accounts that relate to the appropriation retained earnings. The item numbers delivered in the standard SAP system have been used. The "Key" column shows the classification keys for those items requiring specification as selected items for automatic posting. The asterisk * denotes totals items. These contain the corresponding item ranges in the "Totals" column.

The remarks listed below provide explanations to

• the items listed above

• the selected items required for stating the retained earnings.

• Stockholders’ equity (EK)
• Retained earnings/balance sheet (BG)
• Retained earnings/income statement (ERG)
• Annual net income, total (JUE)
• Net profit/loss carried forward (VTR/BIL)

The system does not support separate items for retained earnings and net loss. If necessary, you must manually reclassify the retained earnings item to the net loss item after doing the consolidation activities.

Any separate items for minority interest in retained earnings or net loss must also be posted manually.

Two different levels of detail can be used to disclose minority interest:

• Minority interest by equity item/investment item

• Default item

When applying the revaluation method, specify the FS item to be posted with minority shares in eliminated hidden reserves/FVA’s, in C/I Method Definition on the Minority Interests detail screen. Enter the item under classification key MIR.

Various levels of detail are available for disclosing income from investments. One or more items must be defined, depending on which level of detail is used.

The system does not support separate items for annual net profit and annual net loss.

The minority interest in the annual net income is stated as a "Thereof" portion of the total annual net income under the overall appropriation of retained earnings. The "thereof" clause is not needed for transferring the total annual net income to retained earnings.

Specify the item on the Minority Interest detail screen in the Consolidation of Investments Method Definition as a selected item with classification key MIG. You must also enter the offsetting item needed for posting the calculated minority share. It uses the classification MIS.

When a company is divested, the system determines the previous period values for the selected item MIG. These values, including any current period adjustments, make up the "Gain from minority divestitures".

This item is used for storing the portion of the annual net income for a mid-year-incurred first consolidation. This is the portion of the annual net income, which incurred up to the period of first consolidation. The revenues and expenses following first consolidation are disclosed on the income statement; the balance of the annual net income for the periods following first consolidation is disclosed on the "Annual net income" item.

The "Appropriation of retained earnings" totals item includes all items for transferring the annual net income over to retained earnings.

Specify the item on the Minority Interest detail screen in the Consolidation of Investments Method Definition as a selected item with classification key GVW. Consolidation of investments reads the "Changes in equity" table to determine the retained earnings, which is then reduced by the value in selected item GVW, the result being the annual net income. This amount is then used for calculating the annual net income for the minority interest.

You should create separate distribution items in the appropriation of retained earnings to increase clarity. When using a separate distribution item the unappropriated retained earnings of the previous year concurs with the carry-forward balance in the current fiscal year.

The unappropriated retained earnings for the year are carried forward to the Net profit/loss carried forward item. You can either create separate items for the net profit carried forward and the net loss carried forward, respectively, or a single item for both amounts.

To carry forward the balance enter the items as selected items with the classification key VTR in the Implementation Guide under Individual Financial Statement Data. Enter the specifying item "Retained earnings", and the selected item(s) "Retained earnings/Net loss carried forward".

As a prerequisite for processing currency translation, elimination of IC profit/loss in transferred assets, and consolidation of investments, enter the "Retained earnings/Net loss carried forward" item(s) as a selected item with classification key BIL in the respective section in the Implementation Guide. Bear in mind that the settings you make are global, that is, the selected item entered in the IMG section Currency Translation also applies to the elimination of IC profit/loss and the consolidation of investments, as well.

During first consolidation, the system determines the retained earnings for the previous years via the "Changes In Investee Equity" table, and clears this amount against the selected item BIL. Retained earnings are updated with the adjustments to net income.

If the previous years are to be posted cumulatively within the consolidation of investments, enter a selected item with classification key KKK. If the option Cumulative posting from first year is selected, all of the income statement adjustments of the previous years resulting from consolidation (for example, goodwill amortization) are cumulatively posted to the selected item in the current year. The item you choose should not be an income statement account. An appropriate item is "Net profit carried forward". Retained earnings are updated with the adjustments to net income.

An alternative is to directly reclassify the net income adjustments onto a balance sheet item (for example, an appropriations item) by specifying it as the selected item.

In internal financing, changes to stockholders’ equity on the balance sheet reappear in their corresponding appropriation items. The "Transfers to appropriated retained earnings" item, for example, shows the changes made to appropriated retained earnings on the balance sheet due to the retention of annual net income. Various levels of detail can be used for linking the stockholder equity items to the appropriated retained earnings items:

• For every stockholders’ equity item on the balance sheet you can create two corresponding items within the appropriations: one for deductions (credits) and one for transfers (debits).

• For every stockholders' equity item on the balance sheet you can create one corresponding item in the appropriations showing the changes made (debits and credits).

• You can create one item – or two for debits and credits – within appropriations that shows the changes to the stockholders' equity items if no detailed item exists.

Consolidation of investments is capable of automatically adjusting the appropriation according to the eliminating entries onto the respective stockholders' equity items. To do this, the No automatic adjustment option on the Differential screen in Consolidation of Investments may not be selected. Also, you must assign the appropriation items to be automatically adjusted to the stockholders' equity items on the Appropriation of Net Income for the Group screen in the Consolidation of Investments Method Definition. Enter both the stockholders' equity item and the appropriation item with classification key GVK.

Separate items are defined for minority interest in appropriation of retained earnings. They can be stated using different levels of detail:

• For each stockholders' equity item on the balance sheet you can create one item for transfers to minority interest and one for deductions from minority interest.

• For each stockholders' equity item you can create one item for showing the changes in minority interest (without distinguishing between debits and credits).

The items must be entered as selected items for consolidation of investments. Distinguish the following:

• For the changes to minority interest in retained earnings enter the "Transfers to minority interest item" (debits) and the "Deductions from minority interest item" (credits) on Minority Interest detail screen in the Consolidation of Investments Method Definition.

• If the No automatic adjustment indicator on the Differential screen in Consolidation of Investments Method Definition has not been selected (see text under Appropriations, corporate group), you must assign the transfer and deduction items to the remaining stockholders' equity items on the Appropriation of Retained Earnings for Minority Interests screen. Instead of making multiple assignments, you can specify one default item for the minority interest appropriation to be posted whenever a stockholders' equity item does not have its own appropriation item.

You may want FS items showing the appropriation of retained earnings to be automatically eliminated against the consolidation of investment entries posted to the corresponding equity items. For this you need to create a clearing item and specify it as a selected item with the classification key MIK. This is done in Consolidation of Investments Method Definition on the detail screen Differential.

The item is generally shown summarized together with the net profit/net loss carried forward.

How the transaction is processed depends on which type it is:

• Step acquisition

• Transfer

• Change in indirect investment

• Divestiture