Explaining the Consolidation Process Steps

Step 1: Release Universal Journals

The data release process controls the data flow from accounting into group reporting.

Data release is therefore possible for companies using S/4HANA Accounting as their accounting system, i.e., for Integrated or S4 Companies. With data transfer to group reporting, company codes are converted into consolidation units and G/L accounts are converted into financial statement items.

When the Release Universal Journal task in the Data Monitor is executed, the data is copied from table ACDOCA to ACDOCU in the case of actual data and from table ACDOCP to ACDOCU in case of plan data. Date and time are recorded.

You can easily integrate transaction data of not integrated companies and if necessary, also for the correction of data of integrated companies by:

• File Upload or
• Manual data entry or file upload via SAP S/4HANA Finance for group reporting Data Collection or
• SAC integration of plan line items.

File Upload

You can use the Data Upload task in the Data Monitor to quickly and flexibly upload the reported financial data that is stored outside of the universal journal in your SAP S/4HANA system.

Using SAP S/4HANA Finance for group reporting Data Collection you can import financial data, non-financial data and comments for a business unit into SAP S/4HANA Finance for group reporting.

With the Define Data Mapping app, you can automate the mapping, transformation, and data load from SAP and any non-SAP systems into ACDOCU.

With the Manage Forms app, you can also enter data and comments manually in ACDOCU using pre-delivered forms, or by creating your own.

You can import reported financial data that is stored in a SAP Analytics Cloud planning model to SAP S/4HANA Cloud Public Edition – Group Reporting. To do so, you first have to set up the S1021 - Pull data from SAC task and assign it to the Data Monitor. Alternatively, you can execute this task using the Schedule Jobs for Consolidation Tasks app.

After the data release and data collection steps, the data is validated in accordance with the defined requirements, followed by manual journal entry postings, currency conversion into the group currency and finally intercompany matching and reconciliation.

Data Validation

For Line Item Validation of Reported Financial Data and Manual Postings no task has to be defined, assigned and executed in the data monitor since the validation is automatically done in the background when data is provisioned.

In general, all reported data (on posting level 00) are checked on data consistency while entering the system (e. g. file import, Group Reporting Data Collection data transfer, SAC data transfer, etc.

The consistency check mainly covers:

• Master Data Validity for all dimensions.
• Breakdown Category check.
• Line Validation check.

Data which don't comply with one of the checks are rejected during import and a corresponding error message is added to the data collection task log.

For Line Item Validation of Data of integrated companies before executing the Release Universal Journal task as well as after the execution of the Release Universal Journal task, first different Line Item Validation tasks have to be set up and assigned to the data monitor. Then they can be executed from the data monitor.

As Line Item Validation task after theRelease Universal Journal task was executed, the built-in Line Item Validation task LIV GR can be used in the Data Monitor.

The Line Item validation tasks check data in consolidation table ACDOCU according to delivered and custom-created validation rules. For example:

• Check missing or incorrect sub-assignments for FS items.
• Check if a partner unit is missing in the data set of an FS item used for an intercompany posting.

Reported Data Validation

You can run the Reported Data Validation task in the data monitor to validate the reported financial data in the local currency according to the validation method you assigned to your consolidation unit. The goal is to verify data correctness according to basic financial principles, such as the following:

• The net income calculated in the profit/loss (P&L) statement must equal the net income in the equity of the balance sheet.
• The total assets must equal the sum of the total liabilities plus the sum of total equity.
• The net accounting value of lands and buildings must be greater than or equal to 0.

Standardized Data Validation

You also run the Standardized Data Validation task in the data monitor. With this task you want to validate the financial data in group currency according to the validation method you assigned to your consolidation unit.

Standardized data is the local reported data adjusted to the perspective of group close, for example, with currency translation and manual standardizing postings.

Consolidated Data Validation

With the help of the Consolidated Data Validation task in the consolidation monitor you perform final validation checks on the consolidated data.

Manual Journal Entries

Group journal (or top-side) entries, are consolidation-specific journal entries you post to correct, standardize, or consolidate reported financial data to the requirements of the group. They are typically used to meet group accounting standards and only affect the consolidation data (table ACDOCU).

Group journal entries can be entered manually or imported from files. You can define substitution and validation rules to ensure their consistency.

In the example, the debit posting is on a balance sheet financial statement item and the credit posting is on an income financial statement item, so, the system automatically generates offsetting line items to balance the entry.

Currency Translation

The local close data from non-S4 companies which is delivered in local currency only has to be translated into the group currency so that their data can also be included in group consolidation.

Intercompany Matching & Reconciliation

Intercompany Matching and Reconciliation (ICMR) is used to speed up your intercompany reconciliation process from company close to corporate close. As a built-in solution in SAP S/4HANA Cloud, it matches transactions without any ETL (extract, transform, load) processes and reconciles your financial data in real time.

By defining flexible matching and reconciliation rules, you can achieve high degrees of automation and continuous accounting.

In addition, its in-app communication and workflow features eliminate the latencies very often seen in dealing with intercompany discrepancies, and, at the same time, improve visibility and transparency of your reconciliation process.

So the Intercompany Matching & Reconciliation (ICMR) functionality supports users by allowing early analysis in the closing process to avoid intercompany differences and reduces delays in closing the books.

After the data preparation step, the transactions between the consolidation units are eliminated, legal and management consolidated data is prepared simultaneously, and consolidation of investments is set up and executed.

Intercompany Elimination

Intercompany elimination utilizes as its source the reported data in group currency. Intercompany data reported by both entities (two-sided elimination) is used to trigger the elimination.

Intercompany elimination does not require specific intercompany accounts because the internal criteria used are based in part on the partner consolidation unit dimension.

The figure above shows an example of a two-sided elimination since there is a trading partner on both sides of the transaction. Both sides are matched up and the difference is charged to the offset FS item 21110D - Clearing account - Trade Rec/Pay, Current .

Matrix Consolidation

The term matrix consolidation refers to the concept of preparing legal and management consolidated data simultaneously. Doing so you will get one version of the truth for statutory and management consolidation.

The same financial data can be reported by consolidation unit, profit center, and segment by using multiple (alternative) hierarchies.

You can run reports with consolidation units or elimination entities for a consolidation view for example.

Elimination entities are dynamically determined via the first common parent in a hierarchy node. Three are available:

• Consolidation unit eliminated
• Profit center eliminated
• Segment eliminated.

First Common Parent Concept

Based on the hierarchies of consolidation units, profit centers, and segments, you can display the data for these organizational units eliminated and consolidated hierarchically.

In the hierarchy view, each enabled hierarchy has a virtual dimension member with the suffix Eliminated in the name at report runtime to provide elimination values. The virtual member is automatically generated directly under each hierarchy node.

This approach is called the first common parent concept.

When analyzing legal entity data, you can use either the consolidation unit dimension for a contribution view or the elimination consolidation unit dimension for a consolidation view.

When analyzing management entity data, you can use either the profit center dimension for a contribution view or the elimination profit center dimension for a consolidated view.

Also, segment and partner segment can be used for the evaluation of management consolidation data.

Consolidation of Investments

Your corporation has many subsidiaries and you need to produce consolidated financial statements. As the consolidation of investment process is complex, you want to automate this process as much as possible.

One of the first steps in the consolidation process is to define the structure of the group being consolidated, which includes the consolidation methods and ownership percentages.

Ownership percentages can be entered manually or uploaded.

In SAP S/4HANA for group reporting, the purchase method, and the at-equity method are both supported.

The Purchase Method is generally used for consolidation of investments if:

• Ownership is greater than 50%.
• It is used when the parent unit of a consolidation group exercises a dominating influence over an investee. The subsidiary’s trial balance is included in the group’s financial statements.

The Equity Method is generally used if:

• Ownership is less than 50% and higher than 20%.
• Financial data of an equity unit is not taken into account in the consolidated financial statements.
• Only changes in the equity of the company are taken into consideration; this affects the investment value stated in the consolidated balance sheet.

The consolidation system supports automatic posting for consolidation of investment activities such as:

• first consolidation, subsequent consolidation,
• step acquisition,
• change in capital,
• divestitures,
• transfers and
• mergers.

The following figure shows a sample report for the Purchase method and shows the results of the first consolidation: