Summarizing the Responsibilities of an Intermediate Consolidation Consultant

Objectives

After completing this lesson, you will be able to:

  • Summarize an intermediate consolidation consultant's responsibility
  • Explain the business scenario

An Intermediate Consolidation Consultant's Responsibilities

Hi there! My name is Robert. Last month, I started a new job as an intermediate consolidation consultant. My new assignment is to implement consolidation of investments at ABC Corporation.

My new responsibilities involve:

  • Reviewing the investment structure and ownership data.
  • Configuring reclassification rules for both equity and purchase subsidiaries.
  • Configuring first and subsequent consolidation.
  • Carrying out the tasks to consolidate investments.
  • Analyzing the results.

I need foundational knowledge about how to perform these tasks using SAP software. Let's ask my manager for guidance on where to start.

Business Scenario

Hi there, Robert! Congratulations on your new assignment. Let's go through the business scenario.

So, ABC Corporation recently implemented group reporting. Currently, all subsidiaries are 100% owned. In the last month, ABC Corporation acquired two new subsidiaries. The new French subsidiary is 75% owned, and the new Canadian subsidiary is 35% owned.

Our first task is to automate the accounting entries for the first and subsequent consolidation.

Note
The accounting entries related to the initial acquisition are referred to as first consolidation. The accounting entries related to the investee’s net income after the acquisition are referred to as subsequent consolidation.

Introducing the Business Scenario

As a new intermediate consolidation consultant at ABC Corporation, Robert is diving into the company's recently implemented group reporting structure. With legal entities in Germany, Belgium, and the United States, as well as three consolidation groups for the World, Europe, and America, Robert is tasked with configuring group reporting to automate accounting entries for the acquisition of two new legal entities.

In the following video learn how to:

  • Describe the difference between the equity method and the purchase method of accounting for subsidiary consolidation.

  • Identify the appropriate consolidation method for subsidiaries based on their ownership percentage.

Select the play button below to learn how to identify the group structure of ABC Corporation.

Robert’s Summary

A new group reporting system has been implemented to automate accounting entries for ABC Corporation, which has legal entities in Germany, Belgium, and the United States, with three consolidation groups for the World, Europe, and America. The German entity is the corporate parent, and ABC Corporation owns 100% of all three legal entities.

ABC Corporation is acquiring two new legal entities, with the Belgium company buying 75% of the shares of the new French subsidiary and the United States company buying 75% of the new Canadian subsidiary. The Canadian subsidiary will be consolidated using the equity method of accounting due to the ownership percentage being less than 50%, while the French subsidiary will be consolidated using the purchase method of accounting. The group reporting system will generate accounting entries associated with the initial acquisition of all subsidiaries, with specific consolidation methods assigned to each subsidiary within the different consolidation groups.

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