Consolidation
After the data preparation step, the transactions between the consolidation units are eliminated, legal and management consolidated data is prepared simultaneously, and consolidation of investments is set up and executed.
Intercompany Elimination
Intercompany elimination utilizes as its source data the reported data in group currency. Intercompany data reported by both entities (two-sided elimination) is used to trigger the elimination.
Intercompany elimination does not require specific intercompany accounts because the internal criteria used are based in part on the partner consolidation unit dimension.
The figure above shows an example of a two-sided elimination since there is a trading partner on both sides of the transaction. Both sides are matched up and the difference is charged to the offset FS item 21110D.
Matrix Consolidation
The term matrix consolidation refers to the concept of preparing legal and management consolidated data simultaneously. Doing so you will get one version of the truth for statutory and management consolidation.
The same financial data can be reported by consolidation unit, profit center, and segment by using multiple (alternative) hierarchies.
You can run reports with consolidation units or elimination entities for a consolidation view for example.
Elimination entities are dynamically determined via the first common parent in a hierarchy node. Three are available:
- Consolidation unit eliminated
- Profit center eliminated
- Segment eliminated.
First Common Parent Concept
Based on the hierarchies of consolidation units, profit centers, and segments, you can display the data for these organizational units eliminated and consolidated hierarchically.
In the hierarchy view, each enabled hierarchy has a virtual dimension member with the suffix Eliminated in the name at report runtime to provide elimination values. The virtual member is automatically generated directly under each hierarchy node.
This approach is called the first common parent concept.
When analyzing legal entity data, you can use either the consolidation unit dimension for a contribution view or the elimination consolidation unit dimension for a consolidation view.
When analyzing management entity data, you can use either the profit center dimension for a contribution view or the elimination profit center dimension for a consolidated view.
Also, segment and partner segment can be used for the evaluation of management consolidation data.
Consolidation of Investments
Your corporation has many subsidiaries and you need to produce consolidated financial statements. As the consolidation of investment process is complex, you want to automate this process as much as possible.
One of the first steps in the consolidation process is to define the structure of the group being consolidated, which includes the consolidation methods and ownership percentages.
Ownership percentages can be entered manually or uploaded.
In SAP S/4HANA for group reporting, the purchase method, and the at-equity method are both supported.
The Purchase Method is generally used for consolidation of investments if:
- Ownership is greater than 50%.
- It is used when the parent unit of a consolidation group exercises a dominating influence over an investee. The subsidiary’s trial balance is included in the group’s financial statements.
The Equity Method is generally used if:
- Ownership is less than 50% and higher than 20%.
- Financial data of an equity unit is not taken into account in the consolidated financial statements.
- Only changes in the equity of the company are taken into consideration; this affects the investment value stated in the consolidated balance sheet.
The consolidation system supports automatic posting for consolidation of investment activities such as:
- first consolidation, subsequent consolidation,
- step acquisition,
- change in capital,
- divestitures,
- transfers and
- mergers.
The following figure shows a sample report for the Purchase method and shows the results of the first consolidation: