Configuring First Consolidation for the Purchase Method

Reclassification methods consist of multiple rules that control the accounting adjustments.

You need the following rules to run first consolidation for the purchase method in our scenario:

• 010: Eliminate the investment for the owning consolidation unit.
• 011: Post the investment to the held consolidation unit.
• 040: Eliminate the capital.
• 041: Allocate the non-controlling interest for the capital.
• 060: Allocate the non-controlling interest for the prior year retained earnings.

As part of the purchase method, rule 010 eliminates the investment for the owning consolidation unit with an offset to Financial Statement (FS) item 1721OC.

Rule 010 generates the following entry for Belgium (BE00), the owning consolidation unit:

• Debit 1721OC Elimination of Investment for Owner Consolidation Units.
• Credit 172100 Investment in Subsidiaries.

In the following image, see how to eliminate the investment in rule 010 in reclassification method U00EP.

1. Post to triggering unit: The consolidation unit with the source (trigger) value receives the postings.
2. Include Parent / Subsidiary: This reclassification rule is applied to All (parent and subsidiary) consolidation units.
3. C/I Activity: By choosing the First Consolidation activity (10), this rule processes the consolidation units that have the same year and period for their first consolidation in the current consolidation group as the current task execution.

   Note: By specifying an activity for consolidation of investments, you determine the condition of the reclassification rule.

4. Accounting Technique: This rule eliminates the investment if the purchase accounting technique (technical key 1) in the method matches the group structure in the current consolidation group.
5. Activity / Cons. Accounting Partner Unit: By selecting this parameter, the system will use the accounting technique of the investee (FR## in this case). As a result, only investments in purchase subsidiaries will be eliminated.
   Note

   If Activity / Cons. Accounting Partner Unit is not selected, investments in the parent subsidiary are eliminated (not desired in this instance).

In the Trigger tab, the selection object determines the source data region. If there is a value for the trigger, then a posting is generated.

The trigger selection object Y-COI-INVESTMENTS selects source data for:

• Document types: 00 to 2Z.
• Consolidation COA: Y1.
• Financial Statement Item Selection Attribute Elimination: S-COI-INV.

Elimination Selection S-COI-INV is assigned to FS items that contain investment values.

The Src-dest tab is used for the account assignments:

• Source Item Role: A blank value generates a posting to the trigger FS item with the opposite sign as compared to the trigger value. In this example, the trigger FS item is 172100. Because 172100 contains a debit balance, a credit posting is created when the method is run.
• Destination Item Role: The destination item role creates a posting with the same sign as compared to the trigger value. Role S-INVEST-CLEAR-OWN is assigned to FS item 1721OC (Elimination of Investment for Owner Consolidation Units). When this method is run, FS item 1721OC is debited.

In the Selection tab, leave Selection of Percentages empty to post 100% of the trigger value. The default for an empty selection is 100%.

Rule 011 posts the investment to the held consolidation unit (France), the partner consolidation unit:

• Debit 316000 (Prior Year's Retained Earnings)
• Credit FS item 1721HC (Eliminate Investment for Held Consolidation Units)

In the Settings tab, select Post completely to partner unit (FR00).

The remaining tabs in rule 011 are configured as follows:

• The trigger selection object Y-COI-INVESTMENTS picks the investment of the owning consolidation unit (BE##).
• The Source Item Role, S-INVEST-CLEAR-HELD, is assigned to FS item 1721HC (the credit FS item).
• The subitem for the credit posting is 901 (incoming units).
• The Dest Item Role, S-RETAINED-EARNING is assigned to FS item 316000 (the debit FS item).
• The subitem for the debit posting is 901.
• The Selection of Percentages is blank. Therefore, 100% of the trigger value is used for the postings.

Rule 040 eliminates the issued capital for consolidation unit FR##.

• Debit FS item 311000 (Issued Capital)
• Credit FS item 316000 (Prior Year's Retained Earnings)

In the Settings tab:

• Post to Partner Unit: Post to triggering unit (the triggering unit is FR##, because the investee’s capital value is the trigger).
• Include Parent / Subsidiary: This rule only applies to subsidiary consolidation units (FR00 in this case).
• Activity / Cons. Accounting Partner Unit: By not selecting this parameter, the system uses the accounting technique of the consolidation unit with the triggering data (FR00 in this case).

The remaining tabs in rule 040 are configured as follows:

• The trigger selection object Y-COI-CAPITAL picks the issued capital (311000) of the subsidiary (FR##) consolidation unit.
• The Source Item Role is blank. Therefore, the 311000 Issued Capital FS item will receive the debit.
• The Dest Item Role, S-RETAINED-EARNING is assigned to 316000 (the credit FS item).
• The subitem for the credit posting is 901.
• The Selection of Percentages is blank. Therefore, 100% of the trigger value is used for the postings.

Rule 041 allocates the non-controlling interest for consolidation unit France’s (FR00) capital amount.

• Debit FS item 316000 (Prior Years Retained Earnings)
• Credit FS item 321100 (Non-Controlling Interest Prior Years Retained Earnings)

In the Settings tab:

• Post to Partner Unit: Post to triggering unit (default). The triggering unit is FR##, because the investee’s capital value is the trigger.
• Percentage Complementary: Use the ownership percentage subtracted from 100%. For example, because BE00 owns 75% of FR00, a percentage of 25% is applied (25% is the non-controlling share).

The remaining tabs in rule 041 are configured as follows:

• The trigger selection object Y-COI-CAPITAL selects the issued capital (FS item 311000) of the investee (FR##) consolidation unit.
• The Source Item Role, S-RETAINED-EARNING, debits FS item 316000 prior years retained earnings.
• The subitem for the debit posting is 901.
• The S-NCI-TARGET is the Target Attr for Dest and the Target Attrib Inherited from Src Item is selected. Because the source FS item is 316000 and its Non-Controlling Interest Target is 321100, FS item 321100 is credited.
• The subitem for the credit posting is 901.
• The Z-COI-PERCENTAGE selection object accesses the ownership percentage. In this case, 75% of the capital value is selected.

In the following image, the Non-Controlling Interest Target for FS item 316000 is displayed.

Access the ownership percentages with the Z-COI-PERCENTAGE selection object as follows:

• Base Unit of Measure: Select ownership percentages with a % or PRC unit of measure.
• Document Type: Select ownership percentages posted with document type 39.
  Note

  Document type 39 is assigned to posting level 30.
• The Financial Statement Item Selection Attribute.FS Item Role is S-PERCENTAGE-GS.

Ownership Percentage Selection Object

The S-PERCENTAGE-GS role is assigned to FS item S00001 (Group Shares).

Rule 060 allocates the non-controlling interest for consolidation unit FR##’s prior years retained earnings.

• Debit FS item 316000 (Prior Years Retained Earnings).
• Credit FS item 321100 (Non-Controlling Interest Prior Years Retained Earnings).

In the Settings tab:

• Post to Partner Unit: Post to triggering unit (default). The triggering unit is FR00, because the subsidiary’s retained earning value is the trigger.
• Percentage Complementary: Use the ownership percentage subtracted from 100%. For example, because BE## owns 75% of FR##, a percentage of 25% is applied.

The remaining tabs in rule 060 are configured as follows:

• The trigger selection object Y-COI-RET-EARN, selects the prior years retained earnings (316000) of the investee (FR00) consolidation unit.
• The Source Item Role is blank. Therefore, the 316000 FS item will receive the debit.
• The subitem for the debit posting is 901.
• The Target Attr for Dest is S-NCI-TARGET. FS item 321100 receives the credit because it is the S-NCI-TARGET value for the 316000 trigger FS item.
• The subitem for the credit posting is 901.
• The Z-COI-PERCENTAGE selection object accesses the ownership percentage (75% in this case).