In order to manage the differential, you need to do the following in the FI-LC module:

• define FS items for goodwill and negative goodwill

• assign FS items to the consolidation methods

• make functional specifications with regard to the treatment of capitalized goodwill

The contents of the detail screen for the differential varies depending on which treatment of the differential was chosen in the overview screen of the method definition. Goodwill elimination affecting net income requires additional default settings for its amortization. A proportional elimination requires additional specifications for the elimination item and the elimination duration.

• If still blank, define the FS items "Goodwill" and "Negative goodwill" in the Implementation Guide within FS Item Maintenance. It is recommended to set up a separate goodwill item for each method type. Set up a statistical item for the equity method according to book value. For the differential on the liabilities side, an FS item can be created in the area of appropriations. The equity method is an exception. Here a statistical FS item must be chosen for negative goodwill.

• In a second step, assign these defined FS items to the individual consolidation methods in the Differential detail screen.

• In the case of elimination affecting net income, make the following default settings:

• For the offsetting amortization entry, specify the amortization item in the income statement. For write-ups, conversely specify a revenue item of the income statement.
• You can also show the cumulative amortization of goodwill on a separate balance sheet item. If required, enter this special FS item as an accumulated depreciation item.
• Furthermore, specify the depreciable life of goodwill for each consolidation method in years and months.

• In the case of proportional elimination, the following default settings must be made:

• For goodwill, an elimination item must be specified as an offsetting item (usually in the area of stockholders’ equity).
• The duration of elimination must be specified.
• For the creation of an equity aging report, a transaction type can be defined for the elimination item.

• For goodwill, which is created by means of the activities ‘Step acquisition’, ‘Increase in capitalization’, ‘Transfer or Change in indirect investment’, the beginning of the amortization must be specified.