Consolidating business units

25-Dec-2017 06:43

These are used in defining the consolidation set that specifies the elimination and minority interest sets to apply.Based on defined rules and scopes, the Consolidations background process generates consolidating journals and calculation log entries from source ledger data.In the case of the following intercompany receivable and payable relationship, you require only one elimination set if you use the Affiliate Chart Field: In consolidating the books of a subsidiary with those of the parent company, you credit the parent with the portion of the subsidiary that it actually owns and exclude what outside investors own.The value of minority interests is reported in terms of the aggregate net assets (equity) rather than in terms of a fractional equity in each of the assets and liabilities of the subsidiary.Consolidated Manufacturing also owns several buildings used by subsidiaries that record the payment of rent to corporate headquarters through intercompany accounts.While these companies are separate legal entities, they represent one unified economic entity.While there may be situations that require you to report gross consolidations (combining business unit ledger balances without eliminations), in most cases, you want to eliminate or cancel out the effect of intercompany transactions.

Rules determine which ledger entries are identified and eliminated by defining elimination and minority interest sets.These Due From and Due To rows in the ledger are candidates for elimination when you run the Consolidations process.The following example shows such a transaction when company B0002 buys software for company B0001: When the transactions are exclusively within the organization, you can eliminate the whole transaction when you set up your Consolidations process.This table provides an example of intercompany payables and receivables among three business units that each use the Affiliate Chart Field: Another method of tracking activity between business units is to use different Chart Field values—typically different accounts—for intercompany transactions.

Instead of using the Affiliate Chart Field, you could use the following accounts to identify the same transactions that were shown in the previous exhibit: An elimination set represents a related group of intercompany accounts that record both sides of each transaction between units.Consolidated entity D is further consolidated with an additional operating business unit not directly related to business unit 3 and 4 to consolidated business entity C.Finally, the consolidated business entities B and C are combined in the overall consolidation business entity A.To reflect minority interest, General Ledger generates an adjustments entry that debits the investment of the parent in the subsidiary account and credits a minority interest account.