Historical data must be transferred if the FI-LC Consolidation system is implemented after the year of first consolidation. If this is the case, you will need to perform various activities in order to ensure that consolidation data is up-to-date.

The following provides a description of the steps which you need to work through for individual consolidation activities, if consolidation is taking place for the first time in a subsequent year.

When you first carry out intercompany (IC) eliminations, all existing payables/receivables and revenue/expenses between internal trading partners are eliminated. The system searches the database for balances with a posting level equal to or lower than 2. It does this for all items in elimination sets. Since no IC eliminations have yet been performed, no balances from eliminations exist with posting level 2. Payables and receivables are therefore eliminated to the full amount.

The elimination differences are posted to the differential items assigned to the elimination sets.

If elimination differences are handled with an effect on net income, then you will need to separate the differences. The elimination differences from group-internal relationships in the previous year must be distinguished from differences in the current year. Differences from the elimination of balances for earlier fiscal years must not influence the group profit for the current fiscal year. They must be posted without an effect on net income.

You need to carry out the following steps in order to handle elimination differences separately:

1. Make a cumulative entry of financial data for the previous year on the key date in the previous period
2. Define the rules for IC eliminations

Assign income statement items to the elimination sets as differential items.

3. Perform eliminations for the previous year

Differences are posted to the income statement differential items.

4. Carry forward balances

Carry forward balances to the current year using the posting level 2.

5. Perform eliminations in the current year

1. Enter the cumulated previous year’s data
2. Define IC elimination rules

Assigned the unappropriated retained earnings item to the elimination sets as a differential item.

3. Carry forward balances
4. Perform IC eliminations in period 001 of the current year

Post elimination differences (from the previous year) to the unappropriated retained earnings item with no effect on net income.



For intercompany eliminations to take place, the consolidation frequency assigned to the subgroup must contain period 001 as the closing period.

5. Changes in differential items

Assign income statement items as differential items.

6. Perform IC eliminations on the current closing date

When eliminating IC profit/loss in inventory for the first time, the absolute value of the IC profit/loss must be eliminated. The program for eliminating IC profit/loss in inventory functions as follows:

• The system reads the reporting table data for the previous and current period and calculates the IC profit/loss for the current period. It then eliminates this profit/loss.

• If the indicator Post P/L from previous period is selected in the Elimination of Intercompany Profit/Loss selection screen, the system also posts the portion for the previous period.

The offsetting entry is posted to items which are assigned to fixed asset items. You have the option of distinguishing between the profit/loss (P/L) for the current and previous period.

The elimination of IC profit/loss assigned to the previous period must not effect the group profit for the current year. You therefore need to choose offsetting items for P/L from the previous period which do not effect net income. If you want the elimination of IC profit/loss in the current period to effect net income, you should assign income statement items as offsetting items for the P/L from the current year.

You need to define an unique document type for posting P/L from the previous period. You should set the parameters so that deferred taxes are not automatically posted.

If you want eliminations of IC profit/loss to be generally posted without an effect on net income, follow this simplified procedure:

1. Enter cumulated financial data in the current period

You should not enter financial data for previous periods.

2. Assign the offsetting item for posting P/L for the current period to the fixed asset items

Balance sheet items are usually assigned as offsetting items where no effect on net income is desired.

3. Perform IC eliminations

For the elimination of IC profit/loss in transferred assets, asset transfers and any data updated by the receiving company are canceled. The valuation bases and update values which are correct from the group point-of-view are posted.

In order to preserve correct value changes, you need to subsequently carry out postings in previous years per period.

Perform the following steps:

1. Enter financial data for the previous years and the current year
2. Eliminate IC profit/loss in transferred assets for each key date in previous periods
3. Carry forward balances at the change of fiscal year
4. Eliminate IC profit/loss for the current year

When investments are consolidated for the first time, first consolidation entries and entries from subsequent consolidation related to the previous year must be subsequently posted.

The following options are available:

• You can consolidate investments for all closing key dates in previous periods from first consolidation onwards.

• You post transactions since first consolidation cumulatively in a single period. If consolidated financial statements are to be prepared for 1996, for example, you should post cumulative consolidation of investments entries in 1995 and carry forward the resulting balances to 1996. The advantage of this procedure is that only current-year transactions are posted in 1996..

• Investment and equity values in reporting tables must be manually maintained. They cannot be entered using the database indicator.
• The system cannot calculate minority interest in annual net income since it would need to access database values to do this.
• For the equity method of consolidation, the system cannot check whether the valuation base of investments falls below zero due to updates.
• When posting step acquisition entries using the revaluation method, the system has to read the item value in the database in order to transfer minority interest in hidden reserves (FVA’s). Since this is not possible with cumulative entries, postings will not be correct.

Depending on the option you choose, perform the following steps:

1. Enter investment and equity values in the appropriate reporting tables.
2. Either consolidate investments separately for each closing key date since first consolidation or cumulatively on the current key date, and also carry forward balances.