Make the settings below for disclosing the differential and continuing the processing of the investment book value during the subsequent consolidation.

The differential resulting from the equity method is updated depending on which consolidation variant you choose:

• In the book value method, the differential is stated on a statistical item either as goodwill or as negative goodwill. The offsetting entry is also posted to a statistical item.

• In the proportion-of-equity method, goodwill is disclosed on the balance sheet. The offsetting entry is made on the investment item.

• Negative goodwill is displayed on a statistical FS item. The offsetting entry is also posted to a statistical item.
• Negative goodwill is shown on the balance sheet. In this case, the offsetting entry is automatically posted to the investment item.

Define the goodwill and negative goodwill items, as well as the corresponding statistical offsetting items, on the Goodwill detail screen. The statistical offsetting items are stored under the classification key EQI.

In equity accounting, the values are directly entered in the 'Historical data table by means of the data entry function. The Historical data table contains three values for each entry:

• annual profit

• dividend/loss transfer (for the specified parent company)

• stockholders’ equity changes that do not affect net income

The book value of investments in the associated company is updated with these values. For this to occur, you need to enter the following items in the Display equity detail screen.

• Specify an income statement item for offsetting the earnings entry (for example Equity in Earnings of Affiliates). Furthermore, a transaction type is required to be used for updating the investment book value. These enable the creation of an asset history sheet.

• Likewise, an income statement item for the offsetting entry of the dividend payment is needed as well as a transaction type for updating the investment book value. They are stored under the key EQ2.

• The investment book value can be updated with changes to stockholders’ equity that do not affect net income. These can, for example, arise from currency translation differences not affecting net income, which are cleared using a stockholders’ equity item.