Explaining the Consolidation Process Steps

Objectives

After completing this lesson, you will be able to:
  • Explain the group reporting processes per period
  • Outline consolidation of investments
  • Describe intercompany eliminations
  • Explain matrix consolidation

Consolidation Process Steps

SAP S/4HANA Finance for group reporting consists of several process steps.

Note

The last two steps of the following figure will be explained in the next two units!

The figure shows the process steps through consolidation.

Universal Journal Data Release

Step 1: Release Universal Journals

The data release process controls the data flow from accounting into group reporting.

Data release is therefore possible for companies using S/4HANA Accounting as their accounting system, i.e., for Integrated or S4 Companies. With data transfer to group reporting, company codes are converted to consolidation units and G/L accounts are converted to financial statement items.

When the Release Universal Journal task in the Data Monitor is executed, the data is copied from table ACDOCA to ACDOCU and date and time are recorded. You can also preview the data and drill down before the data release. Data release can also be scheduled.

The figure illustrates the data release which copies data of integrated SAP S/4HANA companies from Table ACDOCA into table ACDOCU.

Collection of External Data

Collection of External Data

You can easily integrate transaction data of not integrated companies by:

  • File Upload or
  • Manual data entry or file upload via SAP S/4HANA Finance for group reporting Data Collection.
This figure of the process steps through Group Reporting focuses on Data Collection and gives a high-level overview of the possible data sources.

File Upload

You can use the Data Upload task in the Data Monitor to quickly and flexibly upload the reported financial data that is stored outside of the universal journal in your SAP S/4HANA system.

This figure focuses on the data import of external companies done via flat file interface within SAP S/4HANA Finance for group reporting.
This figure gives an overview of the apps available for SAP S/4HANA Finance for group reporting Data Collection in order to upload data or to manually enter data, which will then be saved into the ACDOCU table.

Using SAP S/4HANA Finance for group reporting Data Collection you can import financial data, non-financial data and comments for a business unit into SAP S/4HANA Finance for group reporting.

This figure gives an example of an Input Form with the help of which manual data entry is possible that will be stored into table ACDOCU. Additionally, the Data Mapping feature and Running Data Mapping are used to also write data back into the ACDOCU table.

With the Define Data Mapping app, you can automate the mapping, transformation, and data load from SAP and any non-SAP systems into ACDOCU.

With the Manage Forms app, you can also enter data and comments manually in ACDOCU using pre-delivered forms, or by creating your own.

Data Preparation

After both data collection steps, the data is validated in accordance with the defined requirements, followed by manual journal entry postings, intercompany matching and reconciliation, and finally, currency conversion into the group currency.

This figure of the process steps through Group Reporting focuses on Data Preparation and lists the Data preparation steps like Validation, Manual Journal Entries, Currency Translation and Intercompany Reconciliation.

Data Validation

The Data validation tasks check data in the consolidation table ACDOCU according to predefined validation rules. There are several pre-defined data validation rules you can use, for example:

  • Check if assets equal liabilities plus owners’ equity or
  • Check if annual net income is equal to current year retained earnings.

The screenshot shows a manual journal posting. Since the credit posting is on a profit and loss FS item, an automatic offsetting entry is posted for balancing reasons, too.

Manual Journal Entries

Group journal (or top-side) entries, are consolidation-specific journal entries you post to correct, standardize, or consolidate reported financial data to the requirements of the group. They are typically used to meet group accounting standards and only affect the consolidation data (table ACDOCU).

Group journal entries can be entered manually or imported from files. You can define substitution and validation rules to ensure their consistency.

In the example, the debit posting is on a balance sheet financial statement item and the credit posting is on an income financial statement item, so, the system automatically generates offsetting line items to balance the entry.

The screenshot shows a report which contains the balance sheet FS items and profit and loss FS items for Canada and the United States in local and group currency.

Currency Translation

The currency of financial statements from the local currency is translated into the group currency so that the financial statements from local companies can be included in group consolidation.

The figure shows the process steps when using the Intercompany Matching and Reconciliation tool for SAP S/4HANA Finance for Group Reporting. Next to this, an intercompany status report is shown for the consolidation units and their partner units.

Intercompany Matching & Reconciliation

The Intercompany Matching & Reconciliation (ICMR) functionality supports users by allowing early analysis in the closing process to avoid intercompany differences and reduces delays in closing the books.

Consolidation

Consolidation

This figure of the process steps through Group Reporting focuses on Consolidation. It contains IC Elimination, Consolidation of Investments and Matrix 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.

This screenshot shows the results of a two-sided elimination with FS item 21110D as the Offset FS item carrying the intercompany difference.

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.

These screenshots show a Legal Consolidation report and a report for Management Consolidation.

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.

This figure illustrates the idea of the Common Parent Concept.

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.

This figure allows analyzing Legal Consolidation data according to the Contribution View and the Consolidation View.

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.

This figure allows analyzing Management Consolidation data according to the Contribution View and the 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.

This figure shows refers to our group structure example and shows the relevant ownership percentages from the reporting perspective.

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.

This figure explains which Consolidation of Investment activities are possible in SAP S/4HANA Finance for group reporting.

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:

This screenshot shows the results of executing the Consolidation of Investments task in the Consolidation Monitor. The resuls are shown in posting level 30.

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