Comprehending Consolidation of Investment Postings for Consolidation Group Europe and Executing an Impairment Posting

This lesson focuses on the Purchase method scenario with extraordinary amortization of positive goodwill as well as calculation of goodwill in local currency. We will explain the elimination postings and the currency translation of goodwill for consolidation unit DM00 - Denmark, which is consolidated into consolidation group Europe in this lesson.

After that, an impairment posting is executed for investee DM00 – Denmark in consolidation group EUR and the posting results are explained.

You can manage goodwill in local currency as required by the IFRS by using a consolidation of investment method with the setting Extraordinary Amortization for positive goodwill and selecting Carry Goodwill in Local Currency.  

In the delivered consolidation content, method 12 (Purchase GWLC direct share) makes it possible to manage goodwill in local currency.

Local Close Data of Switzerland (SW00) in Group Currency EUR  

The figure above shows the local close data in group currency EUR, to easily follow the calculation of the elimination results.  

For the following calculation, note the investment of EUR 1650 of the investor SW00 - Switzerland, posted on the 172100 - Investments in subs JV FS item and associates GV FS item. 

For the calculation, note both equity FS items of investee DM00 - Denmark: 311000 - Issued Capital and 316000 - Retained Earnings (prior year) as well as the317000 - Net Income (Retained Earnings Current Year) FS item , and the 799000 - Net Income/Loss P&L FS item.  

Executing task 2101 Cons. of Investments (Act.-Based) you will see in the consolidation monitor that next to the first and fist subsequent consolidation a currency translation of goodwill occurs. 

Consolidation Group EUR: DM00  

The video below explains the derivation of the elimination postings for the first consolidation for consolidation unit DM00 - Denmark in consolidation group Europe.  

Summary: In this video, we covered how to calculate goodwill, 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 in group currency EUR to the asset FS item 163100 - Goodwill. Due to the historical exchange rate, the system also calculates the goodwill in the local currency (DKK) of the investee DM00 - Denmark.  

First Consolidation Task Log  

The figure above gives insight into the first consolidation protocol and shows the goodwill in group and local currency.  

Executing the 2101 Cons. of Invest (Act.-Based) task also triggers the execution of the currency translation of goodwill (Step 3A). 

Executing the 2101 Cons. of Invest (Act.-Based) task also triggers the calculation of the currency translation difference of goodwill, as shown in the figure above.    

On the first of December 2025, an investor bought the Consolidation unit DM00. Consequently, the consolidation unit generates profit since we did not select First Consolidation at the End of Period in the Group Structure settings. 

As a consequence, FS item317000 - Retained Earnings Current Year contains a profit of EUR 60. This profit runs into the first subsequent consolidation in period 12 of 2025 and triggers the calculation and posting of minorities. Since this is a P&L-relevant activity, the earnings effect automatically executes.  

After running an impairment test to check whether the goodwill still contains value, the impairment posting executes for investee DM00 - Denmark in consolidation group Europe. The impairment posting reduces the goodwill.

An expense automatically posts into the P&L statement. The expense posting triggers the Closing P&L & Earnings Effect in the Balance Sheet.  

To trigger the automatic expense posting, 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.  

After saving the impairment posting, execute the 2101 - Cons. Of Invest (Act.-Based) task again.  

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 and Task Log  

The figure below explains which postings are triggered by the statistical FS item $GW_IMP after executing the 2101 - Cons. of Invest (Act.-Based) task.

The reduction of goodwill triggers an expense in the P&L statement, which triggers the earnings effect. The system calculates these postings in group currency and the local currency DKK of the investee DM00 - Denmark.

The figure above shows the Amortization of Goodwill postings from a debit-to-credit perspective and the relevant Document section in the task log. The data set development of the Amortization of Goodwill in the ACDOCU table is also visible.