Running Consolidation of Investments for First Consolidation of the Purchase Method

Objectives

After completing this lesson, you will be able to:

  • Run the investment / equity elimination task for first consolidation of the purchase method
  • Confirm the results in the log for first consolidation of the purchase method

The Investment / Equity Elimination Task

John just sent me an email with some information on how to run the investment / equity elimination task for first consolidation of the purchase method. Let’s get started.

At ABC Corporation, you need to run task 2100 for the World consolidation group. Before you run the task, select the World consolidation group in your global parameters. In the consolidation monitor, run task 2100.

Note

If you need to record investment eliminations for another consolidation group such as Europe, you need to run task 2100 again for Europe.

To run a task for multiple consolidation groups follow these steps:

  1. Remove the filter for consolidation group in your global parameters.
  2. Select task 2100 in the consolidation monitor.
  3. Go to Menu → Tasks → Execute → All ConsGrps → Update Run.

Note

When you run task 2100, the system posts data records that include consolidation group values for posting level 30. Posting levels such as 00, 10, and 20 don’t include consolidation group in the data records.

Log Results for First Consolidation of the Purchase Method

Validate the Log Results for Rule 010

In the log for Belgium (BE00), Sequence number 010 eliminates the parent’s Investment in Subsidiaries (172100) with an offset to Elimination of Investment for Owner Consolidation Units (1721OC).

Note

Rules in the reclassification method appear as sequences in the log results.
  • Debit 1721OC 150.000
  • Credit 172100 -150.000

The Triggering Amount in LC is the investment value (150,000) for BE00.

Validate the Log Results for Rule 011

In the log for France (FR00), Sequence number 011 records the Investment in Held Consolidation Units (1721HC) with an offset to Prior Years Retained Earnings (316000).

  • Debit 316000 150.000
  • Credit 1721HC -150.000

Note

The Triggering Amount in LC for sequence 011 appears in the log entry for BE00 because BE00 contains the trigger value.

Validate the Log Results for Rule 040

In the log for FR00, Sequence number 040 eliminates the Capital (311000) with an offset to Prior Years Retained Earnings (316000).

  • Debit 311000 68.090
  • Credit 316000 -68.090

The Triggering Amount in LC is the capital value (-68,000) for FR00.

Validate the Log Results for Rule 041

In the log for FR00, Sequence number 041 allocates the non-controlling interest for the capital amount. 25% of the capital amount (-68.090) is posted to Non-Controlling Interest Prior Years Retained Earnings (321100) with an offset to Prior Year Retained Earnings (316000).

Note

In the delivered content, the description for FS item 321100 is NCI – Reserves and Retained Earnings but is referred to Non-Controlling Interest Prior Year Retained Earnings.
  • Debit 316000 17.022,50
  • Credit 321100 -17.022,50

Validate the Log Results for Rule 060

In the log for FR00, Sequence number 060 allocates the non-controlling share of the prior years retained earnings. 25% of the retained earnings amount (-41.640) is posted to Non-Controlling Interest Prior Years Retained Earnings (321100) with an offset to Prior Years Retained Earnings (316000).

  • Debit 316000 10.410
  • Credit 321100 -10.410

The Triggering Amount in LC is the prior years retained earnings value (-41,640) for FR00.

Run the Purchase Method Elimination

Business Scenario

The purchase method is used to consolidate subsidiaries in consolidation groups when the ownership percentage is over 50%. You need to eliminate the investments in these entities. In addition, you need to eliminate the equity values, book the goodwill, and record the non-controlling interest (NCI).

In this exercise, you’ll run the Investment / Equity Elimination task and view the results in the log.

What skills will you develop in this practice exercise?

  • Run Investment / Equity Elimination task.
  • Create a log display layout.
  • Evaluate elimination log entries.
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