Classifying Group Structure and Consolidation of Investment Methods

The accounting technique is a property of an investee unit in a specific consolidation group. Therefore, you specify it in the consolidation of investments method. Since the method assignment depends on the consolidation group, you can specify the desired accounting technique for the respective investee unit for each consolidation group.

SAP S/4HANA Finance for Group Reporting supports the following accounting techniques: 

• Purchase Method 
• Equity Method.

The individual financial statements of an investee unit consolidated using the purchase method are included in their entirety in the consolidated financial statements. The investment in the consolidation unit that has been consolidated using the purchase method or its equity is eliminated completely from the automatic consolidation of investments.

If an investee unit is consolidated using the equity method, then its individual financial statement data is not included in the consolidated financial statements. Changes in investee equity or equity holdings adjustments for the equity-method investee unit result in an adjustment of investment book values in the consolidation of investments. The equity units are not displayed in reporting.

A consolidation of investment (C/I) method is only valid for one accounting technique. If you want to include consolidation units based on different accounting techniques, you will require at least one method per technique. Furthermore, you need to define the method for the Parent Unit accounting technique.

Then, set up the treatment of positive and negative goodwill.  

The system supports the following treatment types for positive goodwill:  

• Direct Elimination  
• Extraordinary Amortization 

The system supports the following treatment types for negative goodwill:  

Direct Write-off.

Select Except to activate an exception for the method specification of posting items for positive and negative goodwill.

Carry Goodwill in Local Currencydeals with investee units to which the relevant C/I method is assigned to.

Post Goodwill at Investee Unitdeals with investee units to which the relevant C/I method is assigned to. 

For consolidation of investments, you need to define the group structure. Specify the following:  

• Consolidation groups  
• Consolidation units including the following:
• • Start and end of the assignment. 
  • Fiscal year/period for the first consolidation and the divestiture.  
  • Consolidation method.

The video below describes the test group structure of ABC Corporation in consolidation version A00 including the investment amounts of the investors DE00, USA00 and SW00 in their investees.

In the video, we look at the test group structure of ABC Corporation in consolidation version A00, and the investment amounts of the investors in their investees.  

Germany has ownerships in the United States and Switzerland. The United States company has shares in Canada, while the Swiss company has shares in Denmark. Canada is consolidated into the consolidation groups America and World using the equity method. Denmark is consolidated into the consolidation groups Europe and World using the purchase method. This structure gives us a clear picture of the investment structure within ABC Corporation. 

To determine which unit of a consolidation group to consolidate for the first time, specify a year and period of first consolidation for each consolidation unit in the group structure definition.

When you run consolidation of investments (C/I), the system reads the date of the first consolidation for each unit to determine whether to include it. 

You can specify whether to run C/I based on direct or group shares. Configure this setting in the C/I method. The C/I method assigned to the consolidation units determines how consolidation entries are posted.

The accounting technique is the property of an investee unit in a specific consolidation group. Specify this in the consolidation of investments method.   

Since the method assignment depends on the consolidation group, you can specify the desired accounting technique for the respective investee unit for each consolidation group.