The Group Structure of Consolidation Group America
In this lesson, we will focus on our Equity Method scenario on extraordinary amortization of positive goodwill as well as the calculation of goodwill in local currency for consolidation unit CAN00 - Canada which is consolidated into consolidation group America in this lesson.
After that, an impairment posting is executed for investee CAN00 – Canada in consolidation group America and the posting results are explained.
Using Consolidation of Investment Method 23 - Equity Method (Equity, GWLC, direct shares)
When you use a consolidation of investment method with the setting Extraordinary Amortization for positive goodwill and additionally select Carry Goodwill in Local Currency you can make it possible to manage goodwill in local currency as required by IFRS.
In the delivered consolidation content, use Method 22 (Equity GWLC direct share) to manage goodwill in local currency.
Note
In our exercise scenario, we use self-created consolidation version 23, which is assigned to equity consolidation unit CAN00 in the consolidation structure of consolidation group America.Note
When using the equity method, and selecting the settings Extraordinary amortization and Carry Goodwill in Local Currency, you cannot select Post Goodwill at Investee Unit. This makes sense since with the Equity method all elimination data sets written are automatically posted on the investor of the equity company, in our scenario on consolidation unit USA00.In consolidation method 23, Except is selected for positive goodwill. Consequently, the Goodwill FS item settings in the Define Global Goodwill Items customizing transaction are overwritten by the FS items settings that appear after selecting the FS Items button configuration of consolidation method 23.
Using the Positive Goodwill Settings 23 - Equity Method (Equity, GWLC, direct shares)
The figure below describes which asset FS item is used as a goodwill FS item in the first consolidation and which FS items are derived in an impairment posting.
Amortization of goodwill - Acquisition item:Role ID: S-A-INV-AT-EQUITY. The role is assigned to the 171000 - Investments accounted for using equity method asset FS item. This item receives the Goodwill value calculated during the First Consolidation.
Accum. amortization item and Amortization exp. item:Role ID: S-A-INV-AT-EQUITY. The role is assigned to the 171000 - Investments accounted for using equity method asset FS item. To this FS item the reduction of goodwill is automatically posted after an impairment posting,
Note
In the Define Global Goodwill Items transaction, the role S-A-GOODWILL-IMP with the 163190 - Goodwill, Imp. FS item is assigned to the Accum. Amortization item. Since in the definition for consolidation method 23 - Equity Method (Equity, GWLC, direct shares)Except is selected for positive goodwill, role S-A-INV-AT-EQUITY which refers to the 171000 – Invest. at Equ. FS item overrules the Define Global Goodwill item.Note
In the Define Global Goodwill Items transaction, the role S-P-GOODWILL-IMP, which refers to the 572000 - GW Imp. FS item, is assigned to the Amortization exp. Item. Since in the definition for consolidation method 23 - Equity Method (Equity, GWLC, direct shares)Except is selected for positive goodwill, role S-P-SHARE-EMwhich refers to the711000 – Share of EM FS item overrules the Define Global Goodwill Item.
Data Reference for C/I Results
Local Close Data of the United States (USA00) in Group Currency EUR
The figure above shows the local close data for consolidation unit USA00 in group currency EUR, to easily follow the calculation of the elimination results.
For the following calculation, note the investment of EUR 270 of the investor USA00 - United States, posted on the 172100 - Investments in subs JV and associates GV FS item.
Local Close Data of Canada (CAN00) in Group Currency EUR
For the calculation, note equity FS items of the investee CAN00 - Canada, i.e., 311000 - Issued Capital and316000 - Retained Earnings (prior year), the 317000 - Net Income FS item (the Retained Earnings Current Year) FS item and the 799000 - Net Income/Loss P&L FS item.
Calculating Goodwill in the Local Currency of Investee CAN00
Step 1: Calculating the Investment Amount in the Investee's Local Currency
The figure below refers to the consolidation group America, with investor USA00 - United States and investee CAN00 - Canada. See how it explains the conversion of the investment of investor USA00 of EUR 270 (global currency) into the local currency CAD of the investee CAN00.
Note
The conversion occurs with the help of the historic exchange rate, which was the exchange rate on the day of the purchase of consolidation unit CAN00 - Canada.When calculating this value, CAD 337.50 in our scenario, the value is stored in the ACDOCU table.
Step 2: Posting the Investment Amount in Local Currency on the Investee
Using the Post Group Journal Entries app, you can enter the posting of the investment value in local currency of the investee on statistical FS item $INV_LC, with investee CAN00 - Canada as the consolidation unit and USA00 - United States as the partner unit. Select Activity 01 - First Consolidation. As the offset FS item, use the $000000OFF statistical FS item.
Consolidation Group AMER
Executing of the 2101 COI Task - Task Log Overview
When executing the 2101 Cons. of Investments (Act.-Based) task in the consolidation monitor, a currency translation of goodwill occurs next to the first and subsequent consolidation.
First Consolidation
This video explains the derivation of the elimination postings for the first consolidation of consolidation unit CAN00 - Canada in group America.
Summary: In this video, we covered how to calculate goodwill, the currency translation of goodwill in local currency, and how the elimination postings are calculated from a business point of view.
In the consolidation method, we use the Extraordinary Amortization setting. By selecting this setting, the system automatically posts the positive goodwill to the asset FS item 171000 - Invest at Equity.
You can also see that the elimination posting occurs on investor USA00 - United States.
First Consolidation Task Log
In the Document section of the task log, you can check the elimination postings set up for the first consolidation from a debit-to-credit perspective.
Step 3A: Translating the Currency of Goodwill into the Local Currency of the Investee
The currency translation of Goodwill according to Step 3A and the calculation of the currency translation difference according to the following step 3B are both executed when the 2101 – Cons. Of Invest. (Act.-Based) task is run in the Consolidation Monitor.
When the 2101 – Cons. Of Invest. (Act.-Based) task is run in the Consolidation Monitor, the system translates the Goodwill into Local Currency automatically and stores it on investee CAN00 - Canada and on statistical FS item $000000OFF. This calculated goodwill in local currency is thus kept as a fixed value for further calculation.
Step 3B: Calculating the Currency Translation Difference
With monthly consolidation cycles, the system executes a currency translation (from this fix goodwill in local currency into goodwill in group currency) each time the 2101 - Cons. Of Invest. (Act.-Based) task runs. The currency translation difference posts on the 314800 - CTA Reserve Before Tax FS item.
If you compare the exchange rates in the scenario, the historical exchange rate was higher than the specific exchange rate.
Consequently, the exchange rate decreased, which decreases the Goodwill value and results in a credit posting on the 171000 - Invest at Equity asset FS item. However, it is not a real loss, but a currency fluctuation, so the offsetting entry does not post to a P&L FS item but debits to OCI Balance Sheet FS item 314800 - CTA Reserve Before Tax.
The system stores the currency translation difference on the $000000OFF FS item and consolidation unit CAN00 - Canada. This data set triggers the actual posting on investor consolidation unit USA00 and the 314800 - CTA Reserve Before Tax FS item.
Subsequent Consolidation
Consolidation unit CAN00 - Canada was purchased on the first of December 2025. This purchase generates profit for December. This profit generation occurs due to not selecting First Consolidation at the End of Period in the Group Structure settings.
The internal part of the317000 Retained Earnings Current Year FS item which contains the profit of CAN00 - Canada, belongs to consolidation group America and triggers the Closing P&L & Earnings Effect in the Balance Sheet.
According to the equity method, the data set related to the subsequent consolidation is written to the investor consolidation unit USA00.
Subsequent Consolidation & Task Log
The task log of the subsequent consolidation shows the postings related to the subsequent consolidation from a debit-to-credit perspective.
Impairment Posting
After running an impairment test to check whether the goodwill still contains value, the impairment posting executes for investee CAN00 - Canada in consolidation group America. The impairment posting reduces the goodwill.
Note
In this Extraordinary Amortization approach with Carry Goodwill in Local Currency selected, an impairment posting has to be executed for amounts in local currency, not for amounts in group currency.
The reduction of the goodwill manually posts on document type 36, activity type 03 - Amortization of Goodwill, statistical FS item $GW_IMP, and as the offsetting FS item, statistical FS item $000000OFF. The$GW_IMP FS item posting triggers a debit posting on the 711000 - Share of EM P&L FS item. The expense posting triggers the Closing P&L & Earnings Effect in the Balance Sheet.
After saving the impairment posting, execute the2101 - Cons. Of Invest (Act.-Based) task again.
Amortization of Goodwill - Task Log Overview
After re-executing the 2101 - Cons. of Invest (Act.-Based) task, the protocol contains the results of the first and subsequent consolidation, as shown in the first lesson of this unit. In addition, the task log contains the section Amortization of goodwill.
Amortization of Goodwill - Posting Logic & Task Log
Beside the stored impairment posting data sets in table ACDOCU, the figure above explains how the system translates the manually posted impairment value from local currency CAD into group currency EUR.
The system internally posts the translated impairment amount of EUR 7 on the$000000OFF FS item and the investor consolidation unit USA00. This data set triggers the P&L Expense Posting/Reduction of Goodwill Posting and the resulting Closing P&L and Earnings Effect.
The figure above also shows the Amortization of Goodwill postings from a debit-to-credit perspective in the task log. Additionally, the data set development of the Amortization of Goodwill appears in the ACDOCU table.