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SAP BUSINESSOBJECTS FINANCIAL

CONSOLIDATION 10.0, STARTER KIT FOR IFRS


Operating Guide

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2011-03-01

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Contents
Chapter 1

Introduction ........................................................................................................................ 10
Presentation ......................................................................................................................... 10
Organization ................................................................................................................ 10
Other Documentation................................................................................................... 10
Database Structure .............................................................................................................. 10
Flow-Based Consolidation ................................................................................................... 11
List of Accounting Flows .............................................................................................. 12
Entering Data in Flows................................................................................................. 14
Balancing Flows ........................................................................................................... 15

Chapter 2

Initializing the Consolidation ............................................................................................ 16


Section Objectives ....................................................................................................... 16
Key Points .................................................................................................................... 16
Suggested Approach ................................................................................................... 16
Documents to be kept .................................................................................................. 16
Updating Reporting Units ..................................................................................................... 16
Key Concepts .............................................................................................................. 16
Structure of the Reporting Unit Table .......................................................................... 17
Procedure .................................................................................................................... 17
Breakdown by Division ................................................................................................ 18
Creating Packages............................................................................................................... 18
Creating a Reporting ID ............................................................................................... 19
Creating Reporting Sets .............................................................................................. 20
Sending Opening Packages ........................................................................................ 20
Entering and Updating Conversion Rates ........................................................................... 20
Conversion Rate Tables .............................................................................................. 20
Conversion Rate Types ............................................................................................... 21
Entering Conversion Rates .......................................................................................... 21

Chapter 3

Collecting Data ................................................................................................................... 23


Section Objectives ....................................................................................................... 23
Key Points .................................................................................................................... 23
Suggested Approach ................................................................................................... 23
Entering Data at Data Entry Site .......................................................................................... 23
Receiving Packages .................................................................................................... 23
Loading Data into Packages ........................................................................................ 24
Publishing Packages ................................................................................................... 24
Receiving, Checking and Integrating Packages .................................................................. 24

Contents

Receiving Packages .................................................................................................... 24


Running Package Controls .......................................................................................... 24
Integrating Packages ................................................................................................... 24
Sending a Given Package Several Times ................................................................... 24
Chapter 4

Consolidation Scope ......................................................................................................... 26


Section Objectives ....................................................................................................... 26
Key Points .................................................................................................................... 26
Suggested Approach ................................................................................................... 26
Documents to be kept .................................................................................................. 26
Concepts and Definitions ..................................................................................................... 26
Definitions .................................................................................................................... 26
Defining Scopes ........................................................................................................... 28
Portfolios .............................................................................................................................. 29
Creating Portfolios and Portfolio Occurrences ............................................................ 29
Copying a Portfolio Occurrence ................................................................................... 30
Controls and Corrections ............................................................................................. 30
Printing a Portfolio Occurrence .................................................................................... 31
Scopes ................................................................................................................................. 32
Statutory and Reporting Scopes .................................................................................. 32
Creating a Scope ......................................................................................................... 32
Making Changes to a Statutory Scope Manually ........................................................ 32
Specific Cases ............................................................................................................. 33
Hierarchical Scope ....................................................................................................... 33
Printing a Scope .......................................................................................................... 33

Chapter 5

Processing the Data: Key concepts ................................................................................. 34


Section Objectives ....................................................................................................... 34
Key Points .................................................................................................................... 34
Suggested Approach ................................................................................................... 34
Introduction .......................................................................................................................... 35
Manual Journal Entries ........................................................................................................ 37
Procedure .................................................................................................................... 37
Defining a Journal Entry Header ................................................................................. 37
Audit IDs ...................................................................................................................... 38
Converting Data ................................................................................................................... 40
Main Principles ............................................................................................................ 40
YTD and Periodic Conversion ..................................................................................... 41
Consolidation Processing .................................................................................................... 42
Defining a Consolidation .............................................................................................. 42
Running a Consolidation Processing........................................................................... 42

Contents

Retrieving and Checking Data ............................................................................................. 43


Data Retrieval Reports ................................................................................................ 43
Checking Consolidated Data ....................................................................................... 43
Chapter 6

Making adjustments to individual accounts ................................................................... 46


Section Objectives ....................................................................................................... 46
Key Points .................................................................................................................... 46
Correcting Package Data ..................................................................................................... 46
Correcting Differences for Net Income N-1 ................................................................. 46
Recommended Solution: Package Processing ........................................................... 46
Other Package Corrections ......................................................................................... 50
Making Adjustments to Packages........................................................................................ 51
Making Fair Value Adjustments ................................................................................... 51
Other Adjustments ....................................................................................................... 53
Making IFRS Adjustments ................................................................................................... 53

Chapter 7

Intercompany Transactions .............................................................................................. 56


Section Objectives ....................................................................................................... 56
Key Points .................................................................................................................... 56
Suggested Approach ................................................................................................... 56
Checking Intercompany Declarations .................................................................................. 56
Running Intercompany Reconciliations ....................................................................... 56
Correcting Differences ................................................................................................. 59
Elimination of Internal Transactions ..................................................................................... 61
Elimination of Reciprocal Transactions ....................................................................... 61
Dividends ..................................................................................................................... 64
Provisions .................................................................................................................... 67
Gains or Losses on Internal Transfer of Assets .......................................................... 70

Chapter 8

Deferred Taxation .............................................................................................................. 75


Section Objectives ....................................................................................................... 75
Key Points .................................................................................................................... 75
Overview .............................................................................................................................. 75
Identifying the Bases of Deferred Tax ......................................................................... 75
Booking Deferred Tax .................................................................................................. 75
Accounting for Deferred Tax ........................................................................................ 76

Chapter 9

Consolidation Entries ........................................................................................................ 77


Section objectives ........................................................................................................ 77
Calculation of Non-controlling Interests ............................................................................... 78
Principles ..................................................................................................................... 78

Contents

Elimination of Investments ................................................................................................... 80


Principles ..................................................................................................................... 80
Converting Consolidated Shareholders' Equity and Investments in Subsidiaries ............... 85
Principles ..................................................................................................................... 85
Manual Journal Entries ................................................................................................ 85
Analysing the changes in the foreign currency exchange reserve for the Group ....... 89
Optional Conversion Process on Investment and Capital/Share Premium ................. 90
Equity Method ...................................................................................................................... 92
Principles ..................................................................................................................... 92
Booking of Goodwill ............................................................................................................. 96
Full and Proportionate Consolidation Methods ........................................................... 96
Goodwill for EM Entities .............................................................................................. 98
Chapter 10

Scope Changes .................................................................................................................. 99


Section Objectives ....................................................................................................... 99
Key Points .................................................................................................................... 99
Overview of the Scope Changes ......................................................................................... 99
Typology of Scope Changes ....................................................................................... 99
Scope Changes: Using the Right Flow ...................................................................... 100
Events Covered in this Documentation ..................................................................... 101
Incoming Entities ................................................................................................................ 101
Preparing the Reporting Cycle .................................................................................. 101
Automatic Processing ................................................................................................ 102
Manual Processing .................................................................................................... 103
Outgoing Entities ................................................................................................................ 104
Preparing the Reporting Cycle .................................................................................. 104
Automatic Processing ................................................................................................ 106
Manual Processing .................................................................................................... 107

Chapter 11

Completing the Consolidation ........................................................................................ 108


Section Objectives ..................................................................................................... 108
Key Points .................................................................................................................. 108
Checking the Statement of Comprehensive Income ......................................................... 108
Overview of the Statement of Comprehensive Income Reports ............................... 108
Calculation matrix ...................................................................................................... 109
Manual Journal Entries .............................................................................................. 110
Path between the Statement of Comprehensive Income and the Statement of
Changes in Equity...................................................................................................... 110
Checking the Statement of Changes in Equity .................................................................. 111
Checks Specific to Certain Accounts ......................................................................... 111
Checking Variation Flows .......................................................................................... 111

Contents

Performing Detailed Checks for Reporting Units ....................................................... 113


Calculation matrix ...................................................................................................... 114
Checking the Statement of Cash Flows ............................................................................. 114
Overview of the Statement of Cash Flows Reports ................................................... 114
Analyzing Differences ................................................................................................ 115
Manual Journal Entries .............................................................................................. 117
Checking IFRS adoption .................................................................................................... 119

Introduction

Introduction
Presentation
Organization
The operating guide is organized according to the steps performed in a consolidation processing.

Preparing the reporting cycle: This step describes how the consolidation is initialized (see
Initializing the Consolidation on page 16), how package data is collected (see Collecting Data on
page 23) and how the Group structure is defined (see Consolidation Scope on page 26).

Processing the data: This step describes the main concepts (see Processing the Data: Key concepts
on page 34), how intercompany transactions are eliminated (see Intercompany Transactions on
page 53), how deferred taxes are computed (see Deferred Taxation on page 75) and how
technical consolidated journal entries are posted (see Consolidation Entries on page 77).

Completing the consolidation: in this step the entire consolidation is validated on the basis of the
Statement of Changes in Equity and the Cash Flow Statement (see Completing the Consolidation
on page 108).

Each section presents:

Key points

A detailed approach with references to other sections for more information.

Other Documentation
The following documentation is available:

Product Documentation: This document, available in the application, describes functions and
procedures.

Configuration Design Documentation: This document offers in-depth knowledge about


customizing the database structure.

You should refer to this documentation to get detailed information about:

using the application for operations and customization purposes.

making changes to the setup of the Starter kit.

Database Structure
All of the information in the database is identified by a set of elements required for storing, processing and
retrieving data. These elements are called dimensions.
The following dimensions are used in the configuration:

Required dimensions
All of the data stored in the database must be identified by these dimensions.

10

CATEGORY
The configuration provides one category scenario, called A-Actual, to be used for statutory
consolidations.

DATA ENTRY PERIOD: The date on which the information is entered for all of the defined
periods using the following format: YYYY.MM

PERIOD: The same value as the data entry period in a statutory consolidation.

Introduction

REPORTING UNIT: The company or Business Unit whose data is being entered.

CURRENCY: The currency in which the data is stored.

ACCOUNT: The balance sheet and income statement accounts as well as technical accounts
for consolidation purposes, for example suspense accounts.

FLOW (see Flow-Based Consolidation).

AUDIT ID: The ID that identifies the origin of the data for packages, local adjustments,
manual journal entries, and automatic journal entries.

Analysis dimensions

PARTNER: The reporting unit involved in an intercompany transaction.

MANAGEMENT UNIT: In-built dimension not used in the starter kit

PARTNER MANAGEMENT UNIT: In-built dimension not used in the starter kit.

SHARE: The held company in the investment portfolios.

COUNTRY: The breakdown of external sales by geographical area.

ANALYSIS
Used to build the Statements of Cash Flows, Changes in equity, Comprehensive income. Also
used for data entry on a daily basis for flows F20/F40 on Investment, F40 on Issued
capital/Share premium and F06 on Dividends.

Note: These dimensions do not always contain values.


Dimensions specific to consolidation processing

SCOPE, VARIANT and CONSOLIDATION CURRENCY: These dimensions are used to identify
a consolidation definition.

Technical dimensions

JOURNAL ENTRY NUMBER

LEDGER

ORIGINAL REPORTING UNIT

TECHNICAL ORIGIN

GEOGRAPHICAL ORIGIN

Note: Data for these dimensions is automatically loaded by the application.


Example
Reporting unit RU1 has 5 000 in cash at the end of the 2009 fiscal year.
This information, which originates from the data entry package, is stored as follows in the database:
Category

Data Entry
Period

Period

Reporting
unit

Currency

Account

Flow

Audit ID

Amount

2009.12

2009.12

RU1

EUR

A2610-Cash
on hand

F99Closing

PACK01Package Data

5 000

For more information on the database structure, see the functional design documentation.

Flow-Based Consolidation
The flow dimension is used to identify and analyze the changes between the opening and closing balances.
The accuracy of automatic processing depends on whether data has been correctly entered in flows. Flows
differ according to the account being analyzed.

11

Introduction

List of Accounting Flows


Types of Flow
Opening and closing balances correspond respectively to flows F00 and F99. Variation flows can be
organized into the following categories:
Flows for Current Transactions
Income statement
Transactions for the income statement are posted in flow Y99.
Debt management
Movements in debt management items, made up of current assets and liabilities (excluding provisions) and
the cash flow are posted in variation flow F15.
Example
You want to enter an amount of 100 excluding VAT from the sale of goods.
In company accounts:
Account
Sale of goods
Accounts receivables

Debit

Credit
100

100

In the application:
Account
P1100 Revenues
A2210 Trade receivables, Gross

Flow
Y99
F15

Debit

Credit
100

100

Depreciation, impairment and provisions


The balance sheet movements due to depreciation, impairment and provisions are posted using the
following flows:

F25 - Increase in depreciation

F35 - Decrease in depreciation

Example
You want to enter a gross amount of 100 as allowances for provisions on shares.
In the accounting system:
Account
Depreciation on investment
Allowance/depreciation of investments

Debit

Credit
100

100

In the application:
Account
A1812 Investments in subsidiaries, JV and
associates, Impair.
P2210 Allowances for provisions on shares

Flow
F25

Debit

Y99

100

Credit
100

Equity
In equity accounts, shareholders' equity is processed separately from the other items.

12

Introduction

Movements in shareholders' equity usually originate from:

The distribution of dividends (posted in flow F06)

The income of the current fiscal year (recorded in F10)

The increase or decrease in capital (posted in F40)

Movements that come under Other comprehensive income, for example, flow F55 on fair value
reserve

Other specific operations, like acquisition (flow F20) and disposal (flow F30) of treasury shares

Note: In the Equity section of the Balance sheet, there is no specific account for the Net profit of the period.
This net profit must be included in account E1610-Retained earnings.
Non-current assets and liabilities
For the non-current assets and liabilities:

Increases are posted in F20.

Decreases are posted in F30.

Investments in subsidiaries and capital subscription (increase, decrease or creation of capital)


are posted in F40.

Example
You invest in the creation of Company F by subscribing 1 000 to its capital. During the year, you buy an
associates share for 250. This investment is financed by a bank loan.
In the accounting system:
Account
Investments in subsidiaries
Bank loans

Debit
1 250

Credit
1 250

In the application:
Account
A1810 Investments in subsidiaries, JV and associates
A1810 Investments in subsidiaries, JV and associates
L1510 Borrowings, Non current

Flow
F40
F20
F20

Debit
1 000
250

Credit

1 250

Transfers between items


Transfers between balance sheet accounts are recorded in F50-Reclassification.
Adjustment to IFRS standards
Variations in fair value for financial assets and liabilities are posted in F55-Fair value.
Flows for Specific Transactions
The flows used for specific transactions are as follows:

Changes in accounting policies: The impact on balance sheet items is posted in F09-Change in
accounting policies, which must balance (Total Assets = Total Liabilities) .

Contribution to capital and merger transactions: The impact on balance sheet items, including
issue of shares for capital contribution, is posted in F70-Internal mergers. Any impact on the net
income for the period is recorded in account P1620-Merger result.

13

Introduction

Flows Specific to Consolidated Accounts


The flows specific to consolidated accounts are generated automatically by the application and are as
follows:

Effect of foreign exchange rate variations: F80

Effect of variations in scope:


F01: Incoming units
F02: Change in consolidation method (old). This flow is used as the reverse opening flow
for reporting units that change their consolidation method, for example from the equity
method to a full or proportionate consolidation or vice versa.
F03: Change in consolidation method (new). This flow is used as the incoming flow of the
new consolidation method.
F04: Change in consolidation rate. This flow records the impact of change in consolidation
rate for subsidiaries consolidated using the proportionate or equity method.
F92: Change in interest rate. This flow corresponds to the impact of change in Group
financial interest on the equity.
F98: Outgoing units

Entering Data in Flows


In Data Entry Packages
In the consolidation package, you must enter the closing balance in F99. Flow F15-Net variation is then
automatically calculated by subtracting the sum of the opening flow and other movement flows from the
closing flow (F99).
Flow F15 is used as a control flow that should be analyzed using the relevant variation flows, for all the
balance sheet items except:

Cash accounts

Current assets/liabilities accounts, excluding depreciation, impairment and provisions, for which no
detailed analysis by flow, like increase/decrease, is required to build the Statement of cash flows.

Example
Company A has assets of up to 100 at closing, as compared to 50 at opening. After entering or importing
data, the assets variation table should be as follows:
ACCOUNTS

CODE

Assets

A11xx

F00
50

F99

F20
F30
F50
Increase Decrease Reclass.

Other

100

Control
(F15)
50

Movements during the fiscal year correspond to an investment of 80 and a sale of 30. Data should
therefore be entered in the schedule as follows:
ACCOUNTS

CODE

Assets

A11xx

F00
50

F99
100

F20
F30
F50
Increase Decrease Reclass.
80

-30

Other

Control
(F15)
0

In Journal Entries
Regardless of whether they are automatic or manual journal entries, they are automatically saved in a
movement flow that carries over data to the closing balance of the balance sheet.

14

Introduction

Balancing Flows
Certain flows must be balanced for assets and liabilities/equity. Others must ensure that assets - liabilities =
income.
Flow
F00 Opening
F01 Incoming units
F03 Change in consolidation method (new)
F09 Change in accounting policies
F50 Reclassification
F70 Internal mergers
F80 Currency translation adjustment
F99 Closing

Assets Liabilities =
Equity
X
X
X
X
X

Assets - Liabilities = Income


(income statement accounts)

X (P1620)
X
X

If these principles are not respected in manual journal entries, then cash flow statements may
not be balanced. Data retrieval reports are used to ensure that flows are balanced.

15

Initializing the Consolidation

Initializing the Consolidation


Section Objectives
To present all of the tasks required to run a new consolidation processing.

Key Points
To initialize a new consolidation processing, you should:

Update the list of companies and data entry sites

Create packages for the data entry period or send opening packages to the subsidiaries

Enter the conversion rate for the period

Before creating packages or sending packages to subsidiaries, you should add all of the Group's
incoming companies to the list of companies. You can manage the list of companies in the Dimension
Builder module of the Setup domain.
You can manage the opening packages to be sent to subsidiaries and opening balances, if required, in the
Reporting Organizer and RU Organizer modules of the Operation domain.
Conversion rates for the period can be entered before or after you send the packages to the subsidiaries.
For the list of companies, however, you must update it first in order to determine exactly which
currencies will be required for the consolidation.

Suggested Approach
1. Update the list of companies in the group and the list of data entry sites.
2. Create packages or send opening packages to subsidiaries.
3. Enter conversion rates for the period.

Documents to be kept
Printout of the conversion rate tables

Updating Reporting Units


The Reporting Unit is the elementary component of the Groups structure. Each Reporting Unit populates a
package.
In a statutory consolidation, a Reporting Unit is usually a legal entity, but it can also be a sub-group, a
branch, a business unit, or a department.

Key Concepts
The reporting unit table contains all of the reporting units for which the Group has defined a code,
regardless of whether or not they will be consolidated.
You can assign a code to companies that are not linked by their capital to the Group. You usually do so
in the following cases:

16

When the Group is included in the consolidated accounts of another Group, even though it
consolidates data at its own level. By specifying a code for sister or parent companies, you
can manage all of the data required for the top level consolidation process (for example,
investments and intercompany transactions).

Initializing the Consolidation

When the Group wants to perform breakdowns by partner (customers/suppliers) using consolidated
data.
The code TP-999-Third parties corresponds to all of the reporting units that do not have a
code. You should never delete it.

Structure of the Reporting Unit Table


A certain amount of information for each Reporting Unit is stored in the database. This information includes
characteristics or sub-characteristics. This information is required because it enables the Reporting Unit to
be correctly included in the consolidation processing.

Currency
This identifies the currency in which data is collected.

Country
This indicates the country in which the Reporting Unit's headquarters are located. This characteristic is
used to produce geographical area analysis.

Company
This is the legal entity to which the Reporting Unit belongs. A Reporting Unit may be its own legal entity.
This information is required when the consolidation scope is being defined.
Several business units (BUs) may correspond to the split of one legal entity. In that case, all these BUs will
have the same Company (corresponding to the Head BU).

Purpose
This characteristic is used to distinguish between Legal entity, Business unit, Sub-consolidation, Archived,
and Technical Reporting Units.

Division
When your consolidation definition is based on a hierarchical scope, the Division characteristic is used to
eliminate intercompany transactions by distinguishing between inter/intra segment transactions
during a consolidation processing.

Branch
This sub-characteristic identifies the branch for each Division. It is used to create a Reporting Unit hierarchy
that can be used in the Scope Builder module.
The Division characteristic and Branch sub-characteristic share the same reference table.

Procedure
To add a Reporting Unit (Dimension Builder module, Setup domain)

1. Expand the tree structure to display Data sources > Amounts > RU-Reporting unit. Check that
the Load data mode is enabled.

17

Initializing the Consolidation

2. Select File > New.


In the General tab, enter the code, short description and long description you want to assign to
the new reporting unit.
In the Properties tab, enter the characteristics and properties for the new reporting unit.
3. Translate the descriptions in the Translate tab.
If you do not translate the descriptions into other languages, then when subsidiaries
open the application in a language other than English, they will not be able to see
the descriptions of their partners when entering intercompany data.

4. Select File > Save.


5. Select File > Close.

Breakdown by Division
To ensure a correct breakdown by Division/Branch, you should:

Create new members in the Division/Branch list.

Select the Branch sub-characteristic for each of the divisions.

Select the Division characteristic in the Reporting unit table for each of the reporting units.
Note: The breakdown by division as proposed in the IFRS Starter kit is based on the following
principle: 1 reporting unit = 1 division = 1 branch.
If your Group holds companies corresponding to multiple divisions, you have to split the legal entity
or entities into several mono-division reporting units.

To create a new Division or Branch


1. In the Dimension Builder module of the Setup domain, expand the tree structure to display
Reference tables > EN-DIVISION and check that the Load data mode is enabled.
2. Select File New.
In the General tab, enter the code, short description and long description you want to assign to the
new activity or branch.
3. For a new Division, enter the Branch sub-characteristic in the Properties tab.
4. Select File > Save.
5. Select File > Close.

Creating Packages
You create packages in three stages:

18

Create a reporting ID in the Reporting Organizer module of the Operation domain.

Define the list of reporting units included in the reporting ID in the RU Organizer module of the
Operation domain and adapt these settings for some of the reporting units, if needed.

Generate the packages on the current site or send packages to another data entry site in the
RU Organizer module of the Operation domain.

Initializing the Consolidation

Creating a Reporting ID
A Reporting ID consists of:

A category, like a type of data to be processed. For example category A for statutory consolidations.

A data entry period, for example 2009.12 for the yearly consolidation on 31 December 2009.

A Reporting ID contains properties that are applied by default to all of the packages included
in it, except for changes made individually to the properties of certain Reporting sets (RU Organizer module).
In the IFRS Starter kit, the following options must be considered when creating a Reporting ID:

Category Scenario
The Starter Kit comes with one category scenario: A-Actual, version C-Current.

Data Entry Folders


In the IFRS Starter kit, two package formats are available:

P-A - Package for Actual


This package is used when entering data for entities consolidated using the Full or Proportionate
consolidation method.

P-E - Package for EM companies


This is a package dedicated to entities consolidated using the Equity method. The list of accounts to
enter is much smaller, including only Equity accounts, Net Income for the period and Dividends paid.
In case an EM entity holds subsidiaries, it should be included in the groups consolidated financial
statements based on its own sub-consolidated accounts, according to IAS 28. For this reason, some
consolidation flows are available in the P-E package schedules.

Note: The same folders are available for data entry via both the Windows and Web interfaces.

Sets of Controls
Two sets of controls have been defined in the starter kit, and correspond to the package formats available
for data entry.
Depending on which data entry folder you choose, you have to specify the corresponding set of controls (PA or P-E).

Control Level
Two control levels can be applied to packages:

LEV1 Balance Analysis is used to group together basic accounting controls, such as Assets
Liabilities = Equity. The controls checking the breakdown of Investments and Equity by flows also
come under LEV1.

LEV2 Flow Analysis is used to check that flow analyses are complete.

Origin of Opening Balances


We recommend that you use data from consolidated tables rather than preconsolidated tables (see
Processing the Data: Key concepts on page 34) so that the data used for package opening balances is
consistent with data from the consolidated opening balances.
When several consolidations have been run using different variants, you can choose any variant for the
package opening balances, as long as the package data and corrections are identical for all variants.
When initializing a consolidation for the first time, the "Opening balance data" option should be disabled.

19

Initializing the Consolidation

Restrictions

Read-only flows: When the opening flow (F00) is selected, data in opening flows cannot be
changed in the package. Enable the "Read-only flows only if there is an opening balance" option in
order to let incoming reporting units enter their opening balances.

Read-only periods: This option is not used in the Starter Kit because category A-Actual has only
one period for entering data, identical to the Reporting ID's data entry period.

Data entry restrictions: The Starter Kit comes with one default data entry restriction, PACKSTD (Package Standard), that limits the available members for the following dimensions:

AC-Account: All the accounts are allowed except archived and consolidation-specific accounts.

ANALYSIS (multi-purpose dimension): The reference members available are the dates, used
for optional currency translation process.

Note: If you decide to apply a Monthly or Quarterly conversion (see YTD and Periodic Conversion
on page 41), you may need to use a different data entry restriction. For example, PACK-Q2 when
you process the quarterly consolidation for June.

Creating Reporting Sets


When you create a Reporting ID in the Reporting Organizer module of the Operation domain, you also
define the general environment for all Reporting Units. Once this is done, you should:

Create a reporting set for each reporting unit required to enter data in a package.

Validate or update the reporting properties for each reporting unit if required. Besides the
properties from the Reporting ID defined in the Reporting Organizer module, the reporting set
presents additional properties in the Roadmap tab which are used to define the data entry site,
currency and users authorized to access the package in data entry.

Sending Opening Packages


Two possibilities are offered to enter data in the packages:

Entering data at decentralized data entry sites in the Windows interface


Note: If you want to use this option, you must first send opening packages by creating a new send task
and including the transferable object Opening package.

Entering data in packages at central site

When data is entered in the package at central site, you do not need to create a send task.
You can make the package available directly in the RU Organizer module by right-clicking the reporting set
and selecting "Generate Package at Current Site".
Note: Detailed information on sending opening packages is available in the application help.

Entering and Updating Conversion Rates


Conversion Rate Tables
Conversion rates are identified by:

20

a rate version

a period

Initializing the Consolidation

The rate versions enable you to specify different conversion rates for the same period and therefore
simulate different consolidations. You usually use this functionality:

To produce temporary accounts when the currency exchange rate is not yet known, for example
when publishing data in advance for intercompany transactions.

To run simulations using different currency scenarios.

In the Starter Kit, two conversion options are available, depending on whether you apply YTD or periodic
(Monthly or Quarterly) exchange rates (this will be dealt with in detail in chapter YTD and Periodic
Conversion on page 41). As a result, two rate versions are available by default: A-YTD and A-PER.
You can also create new conversion rate versions.

Conversion Rate Types


For a given rate version and period, the following conversion rate types are available:

ARPP - Average exchange rate, prior period

OR - Opening exchange rate, current period

AR - Average exchange rate, current period

CR - Closing exchange rate, current period

Daily-specific rates

The ARPP rate type is used only if you apply Monthly or Quarterly conversion (see YTD and Periodic
Conversion on page 41).
Daily-specific rates were created to enable the conversion of paid dividend (F06) at the rate of distribution.
Paid dividends are entered by beneficiary and date in the package and converted by default to the average
rate or at the rate of the day when entered (see Dividends page 64).
Daily rates also enable the conversion of F20/F40 on Investment and Issued capital/Share premium, based
on daily rates rather than the average rate for the period (see Optional Conversion Process on Investment
and Capital/Share Premium page 90).
A report checks the consistency between the analysis by date entered in the package and daily rates
entered in the conversion rate table.
The conversion rates entered are based on the base currency selected by users for each conversion rate
table. This currency has a conversion rate equal to one for all rate types.
The choice of this base currency is not related to the currency in which the consolidation is run.

Entering Conversion Rates


You can enter conversion rates in one of the following ways:

Enter the different rate types in the conversion rate table.

Import data from a file (see the product documentation).

Calculation Methods
Conversion rates can be expressed as follows:

Divide: The amounts entered are divided by the conversion rate for the "Certain for uncertain"
calculation method.

Multiply: The amounts entered are multiplied by the conversion rate for the "Uncertain for certain"
calculation method.

21

Initializing the Consolidation

Example
The base currency is USD. Exchange rate for USD and EUR are entered as follows, depending on the
calculation method you choose:
Currency
USD
EUR

Divide
1
0.67253

Multiply
1
1.48692

Conversion Rates Specific to Certain Reporting Units


You can enter a conversion rate specific to one reporting unit. You use this option for incoming and
outgoing companies, for example the opening rate for an incoming reporting unit is the rate applicable at
the time it was included in the scope and not the rate applicable on the first day of the data entry period.
This is explained in chapter Incoming Entities on page 101.

Daily Rates
To enter daily-specific rates for a given currency you should add columns in the right part of the conversion
rate table. The list of additional rate types corresponds to the days of the year.
th

For example, if a particular consolidation event occurred on Sept 14 , first add the 09.14-September 14
rate type in the list of available columns, then enter the exchange rate for the relevant currencies at this
date.
The exchange rate for the pivot currency must always be populated (with a value of 1) for any of the
date-specific rate types to ensure a correct conversion process.
Besides, if the consolidation currency differs from the pivot currency, you must also populate the
exchange rates of the consolidation currency for any of the date-specific rate types.

In case you apply periodic conversion, enter daily-specific rates only for the dates included in the period
(month or quarter).
For example, if you use quarterly conversion, the conversion rate table for Q3 should only include rates for
st
th
dates from Jul 1 to Sept 30 . Indeed, if a consolidation event occurred in Q2 and you entered specific
exchange rates for the corresponding date in Q2 conversion rate table, the conversion for F20 or F40 has
already been done in the consolidation for Q2 and should not be re-processed in Q3.

22

Collecting Data

Collecting Data
Section Objectives
To describe how package data is collected.

Key Points
At local data entry sites, data is loaded manually into consolidation packages by entering data , or
automatically by interfacing with the accounting system or by importing data tables.
After the data is entered or imported, controls must be run on packages, which are then published and sent
to the consolidation department (in the case where data entry is decentralized).
In order for the package data to be included in the consolidation, packages must be integrated into the
database.

Suggested Approach
At data entry site:
1. Receive the opening package sent by the consolidation department (if applicable).
2. Enter or import data to the package.
3. Run controls on the package.
4. Publish the package so that its data is made available to the consolidation department.
At the consolidation department:
1. Receive the packages (if applicable).
2. If there are no send conditions, check that the package sent has reached the control level required.
If this is not the case, then run controls and correct the errors.
3. Integrate package data into the database.

Entering Data at Data Entry Site


Receiving Packages
To receive packages, perform the following actions:

Define an inspection task so that it can detect the objects to be received. If objects are detected by
this task, then a new reception task RYYMMDD.000x will be automatically created.

Run the reception task.


This procedure only applies to the Windows client when the packages are filled out on a decentralized data
entry site. In any other case, the packages are directly available on the current site without performing any
additional action.

23

Collecting Data

Loading Data into Packages


The procedure to enter or import data into a package and to run package controls is described in detail in
the Package Data Entry Guide.

Publishing Packages
After a package has been filled out, it must be published so that it will be available at the central level when
the consolidation is processed.
When the data entry is done on a different site from the consolidation site, the publication of a package
creates a Send objects task with the package.
There are several publication options. To learn more about them, refer to the application help.

Receiving, Checking and Integrating Packages


Receiving Packages
Just like at data entry sites, to receive packages, perform the following actions (see Receiving Packages on
page 23):

Define an inspection task so that it can detect the objects to be received. If objects are detected by
this task, then a new reception task RYYMMDD.000x will be automatically created.

Run the reception task.

Running Package Controls


If the "Blocking" option was checked when the packages were created or sent to the subsidiaries, then the
control level set must be reached before the subsidiaries can publish or send their packages back to you.
However, the send condition is not always required for a reporting process that is carried out for the
first time or for incoming entities. For these two cases, you will, however, need to know the control level
reached by the package before integrating it. If the package does not comply with the control level set, you will
also need to rerun controls in order to obtain details on the errors.

Integrating Packages
This step is used to integrate packages automatically in the preconsolidated table that will be used when
the consolidation is processed. This step is mandatory for running the consolidation processing and must
be performed:

Once you have received the package and checked that its data is correct.

When changes are made to a package which is then published again, if you want these changes to
be included in the consolidated accounts.

Sending a Given Package Several Times


A subsidiary may need to send its package several times to central site if it incrementally corrected or
completed its package data.

24

Collecting Data

If the consolidation department wants to find out which changes were made to the accounting data as
compared to the previous version, it can display/print the following schedule for the relevant Reporting Unit:
Folder

Book

Schedule

C4

C41

C41-05 Compare local/pre-consolidated data

An overall control report (not detailed by elementary accounts) can also be run for all the packages related
to one Reporting ID:
Folder

Book

Schedule

C4

C41

C41-10 Check integration by Reporting Unit

You should consult these schedules before integrating the new version of package data.

25

Consolidation Scope

Consolidation Scope
Section Objectives
To define the consolidation scope.

Key Points
The configuration proposes three ways to define your scope:

An automatic mode, where you first enter data in packages, and then generate the portfolio and the
scope automatically.

A semi-automatic mode, where you first enter data in the portfolio manually, and then generate the
scope automatically.

A manual mode, where you enter data in the scope manually or copy an existing scope.

Before creating the consolidation scope, you should first have updated the list of companies in the Group
(see Initializing the Consolidation on page 16). This is done in the Scope Builder module of the Operation
domain.
The Starter Kit offers segment reporting capabilities, based on hierarchical scopes.

Suggested Approach
1. Create a portfolio.
2. Load data in the portfolio in one of the following ways:

Initialize it using the data collected in the packages. (mode 1)

Enter data manually or copy an existing portfolio. (mode 2)

3. Create a scope.
4. Load data in the scope in one of the following ways:

Initialize it using the portfolio. (mode 1 and 2)

Enter data manually or copy an existing scope. (mode 3)

5. Define the hierarchy to be applied for Reporting Unit Rollup calculations

Documents to be kept

Printout of the portfolio

Printout of the scope

Concepts and Definitions


Definitions
Portfolios
A portfolio consists of information about the direct legal investments between companies in the same
corporation. It:

26

stores the number of shares and voting rights owned by companies.

stores the number of shares and voting rights held by one company in another.

Consolidation Scope

uses shares and voting rights to calculate the direct investment, financial interest and ownership
interest of one company in another (see Rates Used).

Consolidation Scope
The scope shows the following for all of the companies included in it:

The consolidation method, like Not consolidated (NC), Full (FC), Proportionate consolidation (PC)
and Equity method (EM).

The financial interest, ownership interest and consolidation rate.

Besides this data displayed at period closing, the application also displays the data from the previous
period. This enables you to identify scope changes:

Incoming entities (I)

Outgoing entities (O)

No variation (N)

Segment Analyses
The segment reporting, especially the Revenue by segment, relies on the Reporting Unit Rollup
functionality. It automatically calculates the inter-intra segment eliminations using the hierarchical scope
entered in the consolidation definition. Therefore, it is mandatory to define the unit hierarchy to be applied
in the Hierarchical scope step; otherwise, the reports dedicated to segment analyses will not retrieve
consistent data.

Rates Used
Direct Shareholding, Financial Interest and Ownership Interest
The portfolio refers to three types of rate:

Direct shareholding: This represents the percentage of shares a parent company holds in the held
company.

Financial interest: This represents the percentage of capital that a parent company holds directly or
indirectly in the held company.

Ownership interest:

When one company holds another company directly, the ownership interest is the same as the
shareholding percentage.

When one company holds another one via intermediate companies, the ownership interest is
calculated by adding together the direct shareholding percentages held by the companies in
which there is an interest greater than 50% (because the default control threshold is 50%).

Example 1
M
60%
F1

Subsidiary

Parent
company

Direct
shareholding

Financial
interest

Ownership
interest

F1

60%

60%

60%

F2

50%

M
F1

50%
50%

(1)

80%
50%

100% (2)
50%

50%
F2

(1)
(2)

Percentage of financial interest of M in F2 = 50% (direct) + 60% x 50% (indirect via F1) = 80%
Percentage of ownership interest of M in F2 = 50% (direct) + 50% (indirect via F1, as more
than 50% of F1 is held)

27

Consolidation Scope

Example 2
M

Subsidiary

Parent
company

Direct
shareholding

Financial
interest

Ownership
interest

F1

20%

20%

20%

20%
F1

F2

50%

M
F1

50%
(1)

F2

(2)

50%
50%

(1)

50% (2)
50%

60%
50%

Percentage of financial interest of M in F2 = 50% (direct) + 20% x 50% (indirect via F1) = 60%
The percentage of F1 in F2 is not taken into account because M's interest in F1 is less than
the threshold.

Consolidation Rate
Besides the financial and ownership interests, scopes also display the consolidation rate. This rate
depends on the consolidation method:

For a fully consolidated company, it is 100%.

For a proportionate consolidation, it represents the share of assets and liabilities


(or expenses and income) included in the Group balance sheet (or income statement ). It is equal
to the sum of all direct shareholdings in the subsidiary held by companies in the scope, after the
consolidation rates for the latter have been applied accordingly.

For a company consolidated using the equity method, it represents the Group share used to
calculate the consolidated value of the investments in associated undertakings. It is calculated in the
same way as in a proportionate consolidation.

Example
M

Company

Ownership
interest

Consolidation
method

Financial
interest

F1

80%

Full

80%

100%

F2

20%

Equity method

16%

20%

80%
F1

Consolidation
rate
(1)
(2)

20%
(1)

F2

(2)

F1 fully consolidated so consolidation rate = 100%


Consolidation rate for F2 = direct rate via F1 (20%) x F1 consolidation rate (100%) = 20%

Initial Values/Revised Values


The number of shares as well as the rates displayed in portfolios and scopes have two different values:

Initial value: This is the value calculated by the application using source data when initializing the
following automatically:

Portfolios (source data = preconsolidated data)

Scopes (source data = portfolio)

Revised value: You can enter this value manually in a scope or portfolio. If this value exists,
then it will take priority over the initial value when applying rates in consolidation processing.

Defining Scopes
The configuration proposes three ways to define consolidation scopes in order to select which entities are
to be consolidated, the consolidation method and rates to be used.
You must define the unit hierarchy to be applied, whichever way for defining scopes you choose.
Otherwise, consolidations using a set of rules that includes a Reporting Unit Rollup rule cannot be
processed.

28

Consolidation Scope

Automatically
Portfolio is automatically generated by loading data entered in consolidation packages:

By the subsidiaries in schedule PA2600: This schedule outlines the distribution of capital in number
of securities per shareholder (group and third party) after having entered the total amount of capital
(account E1110) and the total number of shares (account XE1110).

By the shareholder in schedule PA2400: This schedule analyzes the variation in investment
securities held, by number (account XA1810).

The direct shareholding rate is derived from the total number of capital shares declared by the subsidiary
and the number of shares held declared by the parent company or companies. The scope is then
generated automatically using the portfolio.
This is the surest method because you can check that shares declared by subsidiaries and parent
companies correspond, and because the rates for direct shareholding, financial interest, ownership interest
and consolidation are calculated automatically.

Semi-Automatically
In this method, you enter the portfolio manually and then generate the consolidation scope automatically.
This method is often used when the consolidation department wants to build the scope before having
received all the packages, assuming that legal data is available and up-to-date in the central database.

Manually
This method consists of loading data in the scope either by entering it manuall y, or by copying an
existing scope. This method is adopted when defining pro forma accounts, or when performing simulations.
It does not, however, enable you to check the consistency of the data entered.

Portfolios
Creating Portfolios and Portfolio Occurrences
You manage portfolios in the Scope Builder module of the Operation domain. You enter data
in a portfolio in two stages:

Create a portfolio with a code and description, and specify a number of settings for loading and
calculating rates. This is only mandatory when performing the reporting cycle for the first time.

Create a portfolio occurrence in order to enter data for a given data entry period.

Properties Tab
Voting rights are proportionate to shares Option
If you select the "Voting rights are proportionate to shares" option, then the number of shares that you enter
are applied automatically to the number of voting rights, which are then used for calculating ownership
interest.
Moreover, the fields displaying the number of voting rights are grayed out. You can only change this value
by changing the value for the number of shares.
Therefore, this option is:

to be deactivated when you initialize the portfolio with data entered in packages, which is the
recommended method,

only advisable when portfolio is entered manually, in order to avoid a double keying.

29

Consolidation Scope

Other Parameters
The table below indicates the manner in which you should enter the other Properties tabs parameters
when defining either a Portfolio or a Portfolio occurrence. These parameters are required only if you want to
initialize the portfolio using the data collected in the packages.
Only available for a
portfolio occurrence

Parameter

Value

Reporting ID (Category)

A Actual

Reporting ID (Data entry


period)

[Data entry period of the


consolidation]

Period

[Same value as Data entry period]

Flow

F99 Closing position

Non-group reporting unit

TP-999 Third parties

Audit ID filter

AU1-S-R Level S and R, i.e.


package origin

Initialization Tab
If you want to initialize the Portfolio occurrence using the information collected in the packages, the
Initialization tab should be filled out as follows:

For declaring
capital stock

For declaring
portfolio

Parameter

Value

Parent company

SH - Share

Subsidiary

RU Reporting unit

Shares

AC1-001 Issued capital Number of stocks

Voting rights

AC1-001 Issued capital Number of stocks

Parent company

RU Reporting unit

Subsidiary

SH - Share

Shares

AC1-002 Investment in subsidiaries, JV,


associates Number of shares

Voting rights

AC1-002 Investment in subsidiaries, JV,


associates Number of shares

Copying a Portfolio Occurrence


In the application, you can copy a list of investments from one portfolio occurrence to another, regardless of
the other initialization settings.

Controls and Corrections


Controls of the Investment
Control reports are available in the software to check the consistency of portfolio data. The Control reports
available are the following:

30

Consolidation Scope

Investments Greater than 100%


This report displays errors coming from stockholdings greater than 100%, for instance, when the total
number of shares held is bigger than the share capital declared by the subsidiary or when the sum of direct
and indirect stockholding is greater than 100%. We recommend that you print this report using revised
data, which is used to generate consolidation scope from portfolio.
Missing Capital Stock
This report shows the list of reporting units that have not entered the number of shares included in their
capital, on the account used for the initialization of the investment.
Revised Data/Declarations
This report shows the discrepancies between a holding and its subsidiary on revised values. The subsidiary
enters in its data package the number of shares by shareholders. The holding enters the number of shares
it holds. This report reconciles these two declarations.
Note: The Control for declarations report also shows the reconciliation, but on initial values. We
recommend that you check the revised values, given that they are used for the initialization of the
consolidation scope.
Initial Data/Declarations Control
The discrepancies displayed in this report between the initial value of the shares and the declared shares
indicate that the pre-consolidated data (integrated data packages and manual journal entries) has been
modified since the last initialization of the investment.
This report should be used only if the portfolio was initialized using the data collected in the packages.

Correcting Errors
Use one of the following methods to correct errors:

Direct correction of the package data


It is the easiest way for correcting, but the following steps must strictly be performed:
1. Enter the corrections in the data package.
2. Control and save the data package.
3. Publish and integrate the package.
4. Re-initialize the investment in the portfolio occurrence. This step is critical.
When the dialog box Do you want to save your changes appears, click Yes if you want to
keep any manual modification you might have made within to the portfolio occurrence.

Manual correction of the investment

The major drawback of this solution is the fact that the corrections recorded in the investment will not be
carried forward on the opening balance of the following year.

Printing a Portfolio Occurrence


You can customize the display of portfolio occurrence investments on screen or paper by adding, removing
and sorting the columns displaying rates, number of shares and voting rights.

31

Consolidation Scope

Scopes
Statutory and Reporting Scopes
In the application, you can create two types of scope:

Statutory scopes: These scopes must be generated using a portfolio. They cannot be changed
without first changing the capital and investment rows in the portfolio.

Reporting scopes: These scopes can be created with or without a portfolio and all of their
data can be changed directly.
The consistency between the basic information (the number of shares and voting rights) and the rates in
the scope can only be guaranteed by using statutory scopes.

Creating a Scope
There are two ways of populating a scope, depending on whether or not you want to use a portfolio.

Setting up a Scope using a Portfolio


This can be done with a Statutory scope or a Reporting scope.
You can specify the settings for the opening scope. The application uses this information to identify the
incoming and outgoing reporting units and the rate variations to be used in consolidation processing.
When using the built-in unit Rollup functionality, you must define the hierarchy of the Reporting Units in the
hierarchical scope step.
Note: All reporting units belonging to the scope at opening and closing must be included in the hierarchy so
that the Rollup calculations can be performed.

Setting up a Scope without a Portfolio


This can only be done with a Reporting scope.
For each Reporting Unit, all the parameters (consolidation method, rates, and so on) can be
entered/modified.
You must define the Reporting Unit hierarchy if you want to retrieve consistent segment analyses.
If needed, an opening scope can be specified.

Making Changes to a Statutory Scope Manually


Adding and Deleting Companies
It is possible to add a company to the scope. To do this, the modification must be done in the Investments
step of the scope. Then, in the Scope step, check the consolidation method and change it if needed.
The same method applies when you want to delete a company from the scope. In the Scope step, you
need to make sure the consolidation method is Not consolidated (NC).

Changing the Consolidation Method


Consolidation methods are automatically assigned according to the ownership interest threshold defined in
the Initialize using a portfolio step in the scope editor.
If you select the Full Consolidation method, the consolidation rate will automatically be 100%. In the other
cases, for example for proportionate or equity methods, however, you must change the consolidation rate
manually to ensure that the consolidated accounts are valid.

32

Consolidation Scope

Financial Interest and Ownership Interest


In statutory scopes, you cannot change the financial and ownership interests directly. You should therefore
change the number of shares and voting rights in the Investments step.

Specific Cases
Incoming Companies
By default, the processing applied to incoming companies uses the financial interest and consolidation rate
(1)
at closing. You can specify intermediate rates in order to process the incoming transaction in the incoming
flow and one subsequent operation (purchase or partial disposal) in a variation flow.

Outgoing Companies
In the application, you can manage Reporting Units:

leaving the scope at the start of the period

leaving the scope during the period

acquired, merged, at the start of the period

acquired, merged during the period

By default, an outgoing company is considered as leaving the consolidation at the beginning of the period.
To manage the other three cases, select the Incoming/Outgoing tab, and enter the following parameters:

If the company is merged with another Reporting Unit in the Group, enter the code of this
reporting unit.

If the company is outgoing, merged, during the period, you can consolidate its income and
expenses until the effective outgoing date. To do this, enter the data entry period corresponding to
the package whose data you want to integrate.

Opening rates are applied by default to companies outgoing or acquired during the period. If you want to
use different rates to calculate the non-controlling interests in the net income for the period, check the
"Intermediate rate" option and enter these rates.

Hierarchical Scope
As mentioned before (see Segment Analyses on page 27), some of the segment analyses provided by the
IFRS Starter Kit are based on Reporting Unit Rollup rules. Consequently, defining a hierarchical scope is
required in order to retrieve consistent segment analysis data. The secondary hierarchy tab is not used in
the starter kit.

Printing a Scope
The procedure is identical to the one described for printing a portfolio occurrence (see above).

(1)

In the current version of Financial Consolidation, you cannot manage intermediate consolidation rates for companies
consolidated using the proportionate method. Therefore, you should enter an intermediate consolidation rate that is equal to the
consolidation rate at closing.

33

Processing the Data: Key concepts

Processing the Data: Key concepts


Section Objectives
This chapter is the first section that describes how data is processed. It will provide a general overview of
the transition made by package data as it is processed to produce the Group's consolidated accounts.

Key Points
The steps involved in processing package data in order to produce consolidated accounts are:

Integrate data from consolidation packages.

Enter manual journal entries.

Run the consolidation processing to:

Integrate package data according to the consolidation method and consolidation rate.

Convert amounts in foreign subsidiary accounts.

Generate automatic processing.

Each type of data is assigned with a different audit ID to facilitate the analysis of the transition from local to
consolidated figures. An audit ID is used to:

Provide an audit trail for the amount:

Data entered in packages is associated with audit ID PACK01 or local adjustment audit IDs

Data from automatic processing or manual journal entries is associated with other audit IDs

Indicate (in its long description) the purpose of non-package entries, for example PRO20-Elimination
of internal provisions - Auto.

Besides the audit ID, each data is identified by its technical origin, which is used, for example, to distinguish
between automatic processing, manual journal entries, opening balance data.
The following sections will present in greater detail how package data is processed automatically and
manually:

Adjustments to company accounts (see Making adjustments to individual accounts on page 46)

Checking and eliminating intercompany transactions (see Intercompany Transactions on page 53)

Posting consolidation journal entries (see Consolidation Entries on page 77)

Suggested Approach
Our approach for checking and analyzing data is closely linked to the methods used by the consolidation
department.
Regardless of the methods used, we recommend that you use reports available in the application (see
Checking Consolidated Data on page 43) to check that the consolidated accounts are generated correctly
before ensuring that the data meets accounting requirements.

34

Processing the Data: Key concepts

Introduction
Before running a consolidation processing, there are two data sources available:

Package data, which corresponds to data entered in packages only, regardless of whether it was
entered in data entry schedules or posted by manual journal entry by the subsidiary.
Unlike consolidation data, package data is not identified by scope, variant or consolidation currency. To
consult this data in the Report Navigator module, you should therefore run data retrieval reports
without specifying any variable for the scope, variant and consolidation currency fields.

Preconsolidated data, which corresponds to:

Package data that is integrated in the central site's database. When you integrate package data,
preconsolidated data is generated.

Data from manual journal entries posted in the Manual Journal Entries module.

Data from automatic journal entries produced by running preconsolidation rules, if these rules have
been set up as an enhancement to the current configuration.

After running a consolidation processing, there are three levels of consolidated data for each consolidation:

Package amounts in the original data entry currency, corresponding to:

The previously defined preconsolidated amounts limited to the companies in the scope used in
the consolidation definition and to the manual journal entries posted using an audit ID taken into
account at the original currency level.

Certain automatic journal entries generated by running consolidation rules that are triggered at
the original currency level.
Automatic journal entries are generated by running a consolidation processing. Depending on
the purpose of the automatic journal entry, it may be generated at the local, converted or
consolidated level.

Converted amounts:

This includes all of the package amounts in the original data entry currency that are converted
using the consolidation currency
The currency conversion is performed during the consolidation processing.
The concepts underlying the currency conversion are described in chapter Converting Data on
page 40.

Additionally, this amount level includes the manual journal entries posted using an audit ID
taken into account at the converted level and automatic journal entries generated at
converted level.

Consolidated amounts:

This includes all of the data at the converted level after the consolidation rates are applied.
The consolidation rates are applied during consolidation processing.

This also includes the manual journal entries posted using an audit ID taken into account at
consolidated level and automatic journal entries generated at consolidated level.

35

Processing the Data: Key concepts

Each of the amount levels described above is stored in a separate data table. The relationship between the
different amount levels is seen in the following diagram:

Enter data
in consolidation
packages

PACKAGE
AMOUNTS

Integrate packages

Enter manual journal


entries in the Manual
Journal Entries
module

PRECONSOLIDATED
AMOUNTS

Run consolidation processing 2


(scope S2, variant 1)

Run consolidation processing 1


(scope S1, variant 1)
PACKAGE AMOUNTS
(Original Currency)

Convert to
consolidation
currency

CONVERTED
AMOUNTS

Apply
consolidation
rates

CONSOLIDATED
AMOUNTS

PACKAGE AMOUNTS
(Original Currency)
CONVERTED
AMOUNTS
CONSOLIDATED
AMOUNTS

Example:
Company A is held by the Group at 50% and consolidated using the proportionate method (consolidation
rate = 50%) in scope P1 and fully consolidated in scope P2. Company A enters 100 CUR for Revenues
(account: P1100). The average conversion rate for CUR is 0.08 for 1 EUR.
Retrieval of the data without scope/variant
Account

Flow

Package

Preconsolidated

P1100

Y99

100

100

Retrieval of the data with scope/variant

36

Scope

Variant

Account

Flow

Original
Currency

Converted

Consolidated

S1

P1100

Y99

100

1 250 (=100/0.08)

625 (= 1 250 x 50%)

S2

P1100

Y99

100

1 250 (=100/0.08)

1 250 (= 1 250 x 100%)

Processing the Data: Key concepts

Manual Journal Entries


Procedure
You manage manual journal entries in the Manual Journal Entries module of the Operation domain.
Manual journal entries are organized:

by reporting ID
A reporting ID corresponds to a category and data entry period pair. In the configuration, the
category is A.

by ledger within the reporting ID


Ledgers are created by the accountant depending on requirements and on the method used
to organize manual journal entries. You can, for example, have one ledger per type of journal
entry, (for example journal entries with the same audit ID, such as goodwill impairment, or
correction of package data), or one ledger per reporting unit. You can also use one ledger
only to group together all of the journal entries in the consolidation.
You define a ledger for:

A given environment (package and/or central manual journal entries)


A set of audit IDs
One or more categories

A journal entry can only be posted for one Reporting Unit and one audit ID.

Defining a Journal Entry Header


When you create a journal entry, the header fields should be filled out as follows
Compulsory fields:

Reporting Unit: Entity for which the journal entry is posted.

Audit ID.

Period: The default value is the current data entry period.

Journal entry currency: Currency in which the journal entry is posted. The default value is the
data entry currency. It can be changed except for certain audit IDs whose journal entries
must be in the data entry currency.

Note: The Reporting currency field is grayed out and its value is the data entry currency, as
defined in the reporting unit table or as specified later in the reporting set.
Restrict values to be included:

Scope: This is used to restrict the journal entry to the specified scope. If there is no value in
this field, then the journal entry is taken into account for all scopes in which the company is
consolidated.

Variant: This is used to restrict the journal entry to the selected variant.

Consolidation currency: This is used to restrict the journal entry to consolidations using a
specific currency. When you select certain audit IDs that only accept the consolidation
currency, then the value here is identical to the value of the journal entry currency.

Parent reporting unit: In this configuration, you should not select a value for this field.

37

Processing the Data: Key concepts

The controls run on manual journal entries are as follows:

Controls to check the global debit/credit balance when the journal entry is posted for
balance sheet or income statement accounts.

Controls to check the debit/credit balance for flows F00-Opening, F01-Incoming units
and F50-Reclassification.

Moreover, only valid account/flow pairs are authorized. This is checked when you post a journal entry.

Using journal entry templates


You can create a new manual journal entry by applying a selected journal entry template. The new
manual journal entry will then be generated using the elements defined in the selected template, for
instance Audit ID, Currency, reference rows and breakdown rows.

Audit IDs
Audit IDs are used to identify each item of data in the database. They are used to provide an audit trail for
the consolidation cycle by identifying the functional origin of the data.

Data entered in the consolidation package

Manual journal entries or automatic journal entries generated by the consolidation processing

Audit IDs are organized by set. There are 5 existing sets:

Local IFRS data: This corresponds to package data (PACK01) and local adjustments to ensure
compliance with Group accounting policies (PACK11) or IFRS (PACKIFRS11 and PACKIFRS12). It
also includes central corrections of package data (PACK91) or central adjustment to IFRS
(PACKIFRS91).

Adjustments: Other adjustments made to company accounts using the Manual Journal Entries
module.

Elimination of reciprocal operations: Elimination of intercompany transactions (such as


receivables/payables, income/expenses) which do not have any effect on the consolidated net income,
as opposed to the other eliminations described below.

Elimination of internal profit: Elimination of the Groups internal profits and losses, such as
dividends or gains or losses on disposal of assets.

Consolidation entries: Journal entries dedicated to consolidated accounts, like calculation of Noncontrolling interests or elimination of shares.

Technical Audit-IDs: Entries used to declare Goodwill or post adjustments on the Statement of cash
flows.

Specific Audit IDs are available to post Manual journal entries. This enables to distinguish theses Audit IDs
from those used by automatic processing when an automated journal entry has been set up.
The table below presents all of the audit IDs that you can use to post a central manual journal entry.
Note: Their names end with a 1 and sometimes a 2, for example DIV11-Elimination of internal dividends.

38

The Amount level indicates at which level of the consolidated data table the booked amounts are
loaded.

The Apply Consolidation rate column indicates whether or not the consolidation rate is applied to
the booked amounts.

Processing the Data: Key concepts

Apply
consolidation
rate

Amount
level *

Package data - Central correction

PK

Package data - IFRS central correction

PK

ADJ91

Other adjustment - Central - Man.

PK

ADJIFRS91

IFRS adjustment - Central - Man.

PK

Fair value for incoming entities (central) - Man.

PK

Name

Description

Local IFRS data


PACK91
PACKIFRS91
Adjustments

FVA11

Elimination of reciprocal operations


ELIM11

Elimination of intercompany accounts - Man.

CONV

Elimination of internal profit


DIS11

Elim. of internal gain/loss on disposal of assets - Correction of dep Man.

DIV11

Elimination of internal dividends - Man.

CONV

DIV21

Currency translation adjust. on dividends - Man.

CONV

PRO11

Elimination of internal impairment on investment - Man.

PK

PRO21

Elimination of internal provisions - Man.

PK

CONV

Consolidation entries
CONS01

Consolidation entry not splittable

CONS

CTA01

Currency translation adjustments - Equity - Man.

CONV

GW11

Booking of goodwill and bargain purchase - Man.

CONS

GW21

Currency translation adjust. on goodwill - Man.

CONS

INV11

Elimination of investments - Man.

CONS

INV21

Currency translation adjust. on investments - Man.

CONS

INV31

Adj. on gain/loss on disposal of a subsidiary, JV or associate (Local


currency)

PK

INV32

Adj. on gain/loss on disposal of a subsidiary, JV or associate


(Consolidation currency)

CONV

NCI11

Calculation of non controlling interests - Correction

CONS

Technical Audit-IDs
GW01

Disclosure of goodwill (gross value & impair.) and bargain purchase Man.

CFS01

Consolidated financial statements correction - Man..

PK
CONS

* PK : Package data (original currency). Using the Reporting currency of the entity is mandatory
CONV : Converted amount
CONS : Consolidated amount

A journal entry posted on an Audit ID that is loaded at the CONV or CONS amount level must be posted in
the consolidation currency. Otherwise, it is not taken into account.

39

Processing the Data: Key concepts

Converting Data
Main Principles
Foreign subsidiary accounts are converted using the closing rate method:

The closing balances of balance sheet accounts are converted using the closing rate, except for
equity and consolidated investments kept at their historical value (see Converting Consolidated
Shareholders' Equity and Investments in Subsidiaries on page 85).

The income statement is converted using the average rate for the period

The cash flow statement is based on balance sheet variations which are converted at the average
rate for the period

The conversion is performed using the consolidation currency as specified in the consolidation definition.

The choice of the consolidation currency is not related to the base currency in the conversion rate
tables. The base currency is the currency with a value of 1 (see Entering and Updating Conversion
Rates on page 20).

For a given set of data and using the same conversion rate table, you can produce consolidated
accounts in different currencies by changing the consolidation currency in the consolidation definition.

The conversion difference is calculated automatically and assigned to the Currency translation adjustment
flow (F80). This flow corresponds firstly, to the difference between the opening and closing flows for the
opening data and secondly, to the difference between the average and closing rates for the periods
transactions.
Example
Extract from the conversion rate table (certain for uncertain 1EUR = x CUR):
Currency

Closing rate

Average rate,
current period

Average rate,
prior period

Opening
rate

EUR

CUR

0.20

0.25

0.286

0.333

Transition from package data to consolidated data (full consolidation method; consolidation in EUR):
Account

Amount level

Currency

F00
Opening
position

F20
Increase/
Purchase

F80
Curr. transl.
adjustment

F99
Closing
position

A1110 Lands and


buildings

Package

CUR

100

10

110

A1110 Lands and


buildings

Converted

EUR

300
(100/0.333)

40
(10/0.25)

210
(difference)

550
(110/0.20)

A1110 Lands and


buildings

Consolidated

EUR

300

40

210

550

F80 can also be calculated as follows:


Difference between opening and closing
rates at opening:

(100/0.20) (100/0.333) =

Difference between closing and average rates


for increase during the period:
(10/0.20) (10/0.25)
Total:

40

200
10
210

Processing the Data: Key concepts

YTD and Periodic Conversion


Two conversion approaches are available in the Starter Kit. The difference lies in the method used to
process the movement flows that are converted at average rate.

YTD: A unique exchange rate is used for the period running from the beginning of the fiscal year to
the closing period.

Periodic: A different exchange rate is used for each period, that is, each month or quarter, which
enables to convert each periodic movement at the corresponding exchange rate.
Regardless of which conversion method you choose, the data entry in the package is still
made on a year-to-date basis.

The table below shows how to populate the exchange rate table, and highlights the difference between
year-to-date and periodic exchange rates. As explained before (see Entering and Updating Conversion
Rates on page 20), two rate versions (A-YTD and A-PER) are available in the Starter Kit.
st

Data entry period: September 2010 (the fiscal period starts on Jan 1 )
Consolidation frequency: Quarter
Rate version
Rate type
A-YTD (Year-to-date)

A-PER (Periodic)

ARPP - Average exch. rate, prior


period

[Not used]

Average rate April 1


th
to June 30

OR - Opening exch. rate, current


period

Rate at Jan 1

AR - Average exch. rate, current


period

Average rate Jan 1 to


th
Sept 30

CR - Closing exch. rate, current period

Rate at Sept 30

st

Rate at Jan 1

st

st

st

Average rate July 1


th
to Sept 30

th

Rate at Sept 30

st

th

Different sets of rules have been defined to handle the conversion options (YTD, Monthly or
Quarterly). You must always ensure that the Rate table and the Set of rules are you use are
consistent (see Defining a Consolidation on page 42)
When you decide to apply periodic conversion, the consolidations must be run in the correct
order. For instance, when you consolidate on a quarterly basis, you have to run the March 2010
consolidation before running the June 2010 consolidation, otherwise the data for June would not
be consistent.

Other conversion-related topics:

Conversion of equity and investments, including optional conversion process for F20/F40 using a
daily rate (see Consolidation Entries on page 77),

Conversion of the dividends paid (see Dividends on page 64).

41

Processing the Data: Key concepts

Consolidation Processing
Defining a Consolidation
When creating a consolidation definition, some parameters are specific to the Starter Kit.

Properties Tab
The set of rules and the conversion rate version should be defined accordingly. The table below shows the
different options:
Conversion method

Set of rules

Conversion rate version

Year-to-date

A-YTD

A-YTD

Monthly

A-MCT

A-PER

Quarterly

A-QCT

A-PER

Note: if you opt for a periodic conversion method, the rate table for version A-PER must be populated in a
particular manner, that is, as defined before. Additionally, the way to enter periodic exchange rate is not the
same depending on your consolidation frequency.

Opening Balances Tab


The Starter Kit is configured to allow consolidation with opening balances. The opening balances are
automatically loaded at the beginning on the consolidation process.
You must define which consolidation should be used as Opening balances, the consolidation for the
previous fiscal year.
The source period should be equal to the data entry period of the consolidation to be used for the opening
balance data.
The three sets of rules defined above can be used both for consolidation with and without
opening balances.

Periods
Because the A-Actual category is mono-period, no specific parameter should be defined in this tab.

Filters
When creating a local GAAP consolidation definition, the audit ID filter AU2-IFRS - All except adjustment
to IFRS should be selected in order to consolidate only the data stored on the audit IDs included in the
filter (all except data stored on IFRS adjustments audit IDs).

Running a Consolidation Processing


There are two types of consolidation processing:

Full

Incremental: This includes only modifications made to packages and manual journal entries, and the
packages that were not yet integrated at this time.
An incremental processing does not take into account changes made to scopes, conversion
rates or tax rates, deletions of packages and changes to the configuration. To include all of these
modifications in the consolidation, you should run a full processing.

42

Processing the Data: Key concepts

Retrieving and Checking Data


Data Retrieval Reports
The configuration offers a wide range of retrieval reports in the Report Navigator module which you can use
to check, analyze and publish the consolidated data.
These reports are organized into five folders:

C1 Annual report
Publishable financial statements and segment information

C2 Analysis
Reports for drilling down from the key financial statements

C3 Accounting reports
Balances, general ledgers and ledgers.

C4 Control reports
Reports for checking consolidated data and explaining the transition from package to consolidated
data.

C5 IFRS Adoption
Reports for comparing local gaap and IFRS.

You can check and publish the data as follows:

Check the data using the reports in folders C3, C4.

Produce and analyze publishable reports using reports in folders C1 and C2.

Checking Consolidated Data


This paragraph describes the reports you can use to check that the consolidated data is consistent.
These reports are grouped together in folder C4-Control reports and can be divided into three main
categories:

Consolidation control dashboard (book C-42)

Main balances (book C-42)

Conversion at spot rate (book C-43)

Controls on packages: opening balances, data integration, split by business units (book C-41)
We recommend that you systematically run the consolidation control dashboard reports
after each consolidation processing.

In general, errors can originate from:

Incorrect or incomplete data entry in packages. In this case, running the package controls in the
Package Manager module will enable you to detect and correct the error.

Incorrect data entry in the conversion rate table, such as an inconsistency between the opening rate
entered for data entry period N and the closing rate of the rate table used for the opening balance
data.

Manual journal entries that do not comply with the conventions in this configuration. For example,
unbalanced flows as described in Balancing Flows on page 15 (except for F00, F01 and F50 which
are checked by automatic controls).

43

Processing the Data: Key concepts

Consolidation Control Dashboard


This report is a dashboard used to validate the consolidation by checking, for the entire Group:

That the assets equal the liabilities and equity on the balance sheet

That the flow analysis is consistent, e.g. the closing flow is equal to the sum of the opening flow and
variation flows, the balance sheet net income (flow F10) is equal to the income figure on the Income
statement, the cash flow statement is balanced.

That the clearing accounts for balancing consolidation entries are equal to zero or cancel each other
out at Group level.

You can use either the summarized version (C42-05) or the detailed version (C42-10).
If you detect an error, the link in the cell enables you to access the relevant report analyzed by reporting unit or
audit ID. These reports are described below.

Checking the Main Balances


These reports check that:

Assets are equal to liabilities in the balance sheet.

The net income on the balance sheet is equal to the net income on the income statement.

The balance conventions for certain flows are followed.

Assets are Equal to Liabilities


Run the following report:
Folder

Book

Schedule

C4

C42

C42-15 Assets = liabilities by Audit ID

This report is used to check that Assets equal Liabilities + Equity at opening and closing, and for the
aggregate movements of the fiscal year. It also enables you to check that the sum of the opening and
variation flows is equal to the closing flow.
This must be the case for every audit ID. If this is not the case, then run the report for the relevant audit IDs
by linking from C42-15:
Folder

Book

Schedule

C4

C42

C42-20 Assets = liabilities by Reporting Unit

The report identifies the relevant reporting units.


If the error originates from an audit ID other than PACK01 (package data entry), then link to the following
report:
Folder

Book

Schedule

C3

C33

C33-05 Debit Credit Ledger for 1 Reporting Unit and 1 Audit ID

The report identifies the journal entry numbers that contain errors.
You can also run the following report for the relevant Audit ID and Reporting Unit:
Folder

Book

Schedule

C3

C33

C33-10 Journal Entries for 1 Reporting Unit and 1 Audit ID

44

Processing the Data: Key concepts

BS Net Income is Equal to P&L Net Income


The following report ensures that the net income of the balance sheet (stored on dedicated flow F10) is
equal to the net income of the income statement for every Audit ID:
Folder

Book

Schedule

C4

C42

C42-25 Balance Sheet income = P&L income by Audit ID

If there are differences, run the following report to identify the relevant Reporting Unit:
Folder

Book

Schedule

C4

C42

C42-30 Balance Sheet income = P&L income by Reporting Unit

Balancing Flows
Run the following report to ensure that the balance conventions have been followed for the flows (see
Balancing Flows on page 15):
Folder

Book

Schedule

C4

C42

C42-35 Flow balance by Audit ID

Flow should balance for every audit ID. In case of errors, run the following report by linking to it:
Folder

Book

Schedule

C4

C42

C42-40 Flow balance by Reporting Unit

This report highlights the reporting units for which flows do not balance.
Then link to the following report for these reporting units:
Folder

Book

Schedule

C3

C33

C33-05 Debit Credit Ledger for 1 Reporting Unit and 1 Audit ID

45

Making adjustments to individual accounts

Making adjustments to individual


accounts
Section Objectives
This section outlines:

Corrections made to packages

Adjustments booked at central site

Key Points
The manual adjustments described below are based on the following examples:

Processing differences for net income N-1

Correcting package data

Making fair value adjustments

Correcting Package Data


Correcting Differences for Net Income N-1
After company accounts have been sent to the Group and used for the consolidation, corrections may need
to be performed. As a result, there may be differences between the data sent and the modified data. You
can manage these differences in two ways during the next accounting period.
The recommended solution consists of taking these differences into account in the consolidation package.
The second solution consists of posting these differences in manual journal entries at central site. However,
this solution means that there should be no send condition set when sending the package. This is because
if the N-1 difference is not processed, this generates a variation flow F15 in net equity and this will
prevent the package from being validated. For this reason, the second solution is not recommended and
should be reserved for exceptional cases.
Regardless of the solution, local and consolidated data will balance only during period N+1. At the closing
of N, even if the amount of retained earnings is the same, the calculation of the net income (flow F10) will
differ between company and consolidated accounts.

Recommended Solution: Package Processing


Existing differences in N-1 net income can be processed as follows in the package:

The first solution consists of integrating the difference between the provisional N-1 net income and
the final N-1 net income in the net income for the period. In this way, the consolidation department
does not need to post any manual journal entry. However, it creates a discrepancy between local
data and the consolidation package on net income (flow F10).

The second solution consists of posting this difference in transfer flow F50 in order to impact
both reserves asset and liability items affected by the last journal entries of period N-1. In this
way, local data and the consolidation package will both balance at closing. However, this solution
requires the consolidation department to book this difference by manual journal entry.

These solutions are illustrated below:

46

After the package was sent, a correction was made to Sales.

The data entered in the package on 31/12/N-1 and the final data are shown below:

Making adjustments to individual accounts

Package 31/12/N-1

Final accounts

Difference

(1)

(2)

(2) (1)

1 000

1 100

+ 100

E1610 Retained earnings / F10

600

660

+ 60

L2410 Current income tax


liabilities

400

440

+ 40

P1110 Revenues

1 000

1 100

+ 100

P5010 Income tax expense

- 400

- 440

- 40

Accounts
ASSETS
A2210 Trade receivables, Gross
LIABILITIES

INCOME STATEMENT

At period N closing, we assume that:

No income has been entered during the period.

All of the net income for N-1 was allocated to retained earnings (scenario 1) or distributed (scenario 2).

All receivables and debts have been settled.

Booking the Difference in Net Income (Solution 1)


Data entry in package 31/12/N (scenario 1 no distribution)

The package for period N must contain the net income from N-1 that is not taken into account in Group
income.
The closing balance entered in the package in book P-A10 is shown below:
Accounts

Local 31/12/N

Package 31/12/N

660

660

660

660

P1110 Revenues

100

P5010 Income tax expense

- 40

ASSETS
A2610 Cash on hand

= receivables (1100) debts (440)

LIABILITIES
E1610 Retained earnings
INCOME STATEMENT

Enter data in PA2500 to show variations in net equity:


ACCOUNTS

CODE

Retained earnings

E1610

Net equity

F00

F99

F06

F10

600

660

60

600

660

60

F20

F30

F40

F50

F55

Spec.

Control

47

Making adjustments to individual accounts

Data entry in package 31/12/N (scenario 2 distribution of net income)

The closing balance entered in the package in book P-A10 is shown below:
Accounts

Local 31/12/N

Package 31/12/N

P1110 Revenues

100

P5010 Income tax expense

- 40

LIABILITIES
E1610 Retained earnings
INCOME STATEMENT

Enter data in PA2500 to show variations in net equity:


ACCOUNTS

CODE

Retained earnings

E1610

Net equity

F00

F99

F06

F10

600

-660

60

600

-660

60

F20

F30

F40

F50

F55

Spec.

Control

Further remarks

When the difference between final net income and local income is spread over small sums in a large
number of accounts in the income statement, the Group may authorize its subsidiaries to enter the
difference in other operating income/expense account.
Processing the Difference in Reclassification Flow F50 (Solution 2)
Data entry in package 31/12/N (scenario 1 no distribution)

The closing balance shows the company accounts. The impact from the last journal entries for period N-1 is
booked in flow F50.
Enter data in PA2500 to show variations in net equity:
ACCOUNTS

CODE

Retained earnings

E1610

Net equity

F00

F99

F06

F10

F20

F30

F40

F50

600

660

60

600

660

60

F55

Spec.

Control

F55

Spec.

Control

Enter data in flow F50 in PA3900 to show the impact of specific operations:
ACCOUNTS

CODE

Trade receivables, Gross

A2210

Cash on hand

A2610

F09

F70

F50
100

Assets
Retained earnings

100
E1610

60

Current income tax liabilities L2410

40

Equity and liabilities

100

Data entry in package 31/12/N (scenario 2 distribution of net income)

Enter data in PA2500 to show variations in net equity:


ACCOUNTS

CODE

Retained earnings

E1610

Net equity

F00

F99

F06

F10

F20

F30

F40

F50

600

-660

60

600

-660

60

Enter data in flow F50 in PA3900 to show the impact of specific operations:

48

Making adjustments to individual accounts

ACCOUNTS

CODE

Trade receivables, Gross

A2210

Cash on hand

A2610

F09

F70

F50
100

Assets

100

Retained earnings

E1610

60

Current income tax liabilities L2410

40

Equity and liabilities

100

Journal entry to be posted at central site

The subsidiary should provide the consolidation department with information on the difference between the
provisional net income and final net income. Once the consolidation department has the breakdown by
item, they can then post the following journal entry:
Audit ID

Account

Flow

Debit

Credit

ADJ91

P1110 Revenues

Y99

A2210 Trade receivables, Gross

F15

100

P5010 Income tax expense

Y99

40

L2410 Current income tax liabilities

F15

40

A2210 Trade receivables, Gross

F50

100

L2410 Current income tax liabilities

F50

40

E1610 Retained earnings

F50

60

100

If this is not the case, then the journal entry should be posted in an other operating income or expense
account:
Audit ID

Account

Flow

Debit

Credit

ADJ91

P1210 Other income

Y99

A2210 Trade receivables, Gross

F15

A2210 Trade receivables, Gross

F50

100

L2410 Current income tax liabilities

F15

40

L2410 Current income tax liabilities

F50

40

E1610 Retained earnings

F50

60

60
100

Alternative Solution: Manual Journal Entry Posted at Central Site


If the difference between the provisional net income and final net income is not processed in the package,
this results in the following data (example in scenario 1):
Closing balance
Accounts

Package 31/12/N

ASSETS
A2610 Cash and cash equivalents

660

LIABILITIES
E1610 Retained earnings

660

49

Making adjustments to individual accounts

Enter data in PA2500 to show variations in net equity:


ACCOUNTS

CODE

Retained earnings

E1510

F00

Net Equity

F99

F06

F10

F20

F30

F40

F50

F55

Spec.

Control

600

660

60

600

660

60

The package will not be able to reach control level LEV1 because the variation in net equity is not analyzed
completely.
At central site, the manual journal entry to be posted is as follows:
Audit ID

Account

Flow

Debit

ADJ91

P1110 Revenues

Y99

P5010 Income tax expense

Y99

40

E1610 Retained earnings

F15

60

Credit
100

If you do not know the breakdown by item for this difference, then the journal entry should be booked in
another operating income or expense account:
Audit ID

Account

Flow

ADJ91

P1210 Other income

Y99

E1610 Retained earnings

F15

Debit

Credit
60

60

Other Package Corrections


Corrections in packages can be divided into several categories:

Corrections that should be taken into account in the package opening balance for the next period
and which include the following:

Errors in packages that do not affect local account, for example Partner errors in intercompany
declarations

Errors in local accounts that will be taken into account in the final financial statements

Errors in adjustments to Group accounting standards

Corrections that should not be sent in opening balances to packages for the next period

Correction journal entry that affects Group level only, for example Processing of certain
intercompany differences (see Intercompany Transactions on page 53)

Errors in local accounts that will only be taken into account in the N+1 financial statements

Corrections to be taken into Account in Package Opening Balances


The corrections to be made can be entered directly in the relevant reporting unit's package, using one of
the following Audit IDs, depending on what the error is due to:

PACK01 Package data

PACK11 Local adjustment to Group accounting policies

The package should then be validated by controls, published and reintegrated in the database.
It is also possible to post at the central level a journal entry that will impact the packages opening balance
for the next period. The Audit ID to use is PACK91-Package data - Central correction. It will be transferred
automatically to Audit ID PACK01 in the opening balances of next years package.

50

Making adjustments to individual accounts

Other Package Corrections


Principles
If the corrections do not affect the package opening balances for the next period, then they should be
posted by manual journal entry using Audit ID ADJ91.
Examples
Corrections having an impact on net income for the period
The company has forgotten to book the sum of 100 from an invoice for the purchase of goods. This
expense which is tax deductible is posted in company accounts in period N+1.
The journal entry to be posted is as follows:
Audit ID

Account

Flow

Debit

ADJ91

P1120 Cost of sales

Y99

100

L2310 Trade payables

F15

L1410 Deferred income tax liability

F15

P5020 Deferred tax expense

Y99

Credit

Partner

Debit

Credit

100
100

100

40
40

Partner analysis:

By default, when you post a manual journal entry, transactions are concluded with
Third-parties (code TP-999). Transactions between companies within the Group should
be declared and the non-Group amount is then calculated automatically with the
difference.

Transfers between items


If you need to transfer an item between two accounts in the Income statement or in the Balance sheet, the
journal entry to post is as follows:
Audit ID

Account

Flow

ADJ91

Pxxxx Income/expense account

Y99

Pxxxx Income/expense account

Y99

A/L/Exxx Balance sheet account

F50

A/L/Exxx Balance sheet account

F50

Debit

Credit

Partner

Debit

Credit

X
X

X
X

Making Adjustments to Packages


Making Fair Value Adjustments
Principles
A fair value adjustment occurs when there is a difference between the accounting value of an incoming entity's
assets and their fair value.
The fair value adjustments are posted by manual journal entries, based on informati on that is
managed separately from the consolidation package.

51

Making adjustments to individual accounts

Example
Scenario

When company Z was acquired, a building was valued at 1 000 whereas its net accounting value was 100.
The fair value adjustment was allocated to construction (+900). Construction items are amortized over a
period of 30 years according to Group accounting standards i.e. using a yearly allowance of 30 for the
revalued share.
Manual Journal Entries
Fair value adjustment at acquisition date (01/01/N):
Audit ID

Account

Flow

Debit

FVA11

A1110 Lands and buildings

F01

900

E1610 Retained earnings

F01

Credit

900

Deferred income tax liability in fair value adjustment = 900 x 40% = 360:
Audit ID

Account

Flow

Debit

FVA11

E1610 Retained earnings

F01

360

L1410 Deferred income tax liability

F01

Credit

360

Fair value adjustment: Period depreciation:


Audit ID

Account

Flow

FVA11

A1111 Lands and buildings, Dep.

F25

P1510 Other expenses *

Y99

Debit

Credit
30

30

* The choice of the P&L account depends on the destination of the depreciation expense.
Deferred tax in depreciation of fair value adjustment = 30 x 40% = 12:
Audit ID

Account

Flow

FVA11

P5020 Deferred tax expense

Y99

L1410 Deferred income tax liability

F15

Debit

Credit
12

12

Presentation by flow
Account

Flow
Audit ID

Code

Description

F01

A1110

Lands and buildings

FVA11

A1111

Lands and buildings, Dep.

FVA11

E1610

Retained earnings

FVA11

900

F10

900

Deferred income tax liability

FVA11

<360>

52

<30>

<30>
<360>

12

Manual journal entry for booking fair value adjustments


Manual journal entry for booking depreciation
Manual journal entries for booking deferred taxes

900
<30>

360

F99
900

<30>

FVA11
L1410

F25

FVA11
FVA11

F15

12
<12>

348

Making adjustments to individual accounts

Other Adjustments
Principles
The other adjustments include various journal entries that must be posted when the company's accounting
methods do not comply with Group policies.
These journal entries are booked using Audit ID ADJ91.
Example
To standardize the period of depreciation for software, journal entries, including deferred tax, should be as
follows:
Audit ID

Account

Flow

ADJ91

A1441 Computer software, Amort.

F20

P1510 Other expenses

Y99

A1710 Deferred tax assets

F15

P5020 Deferred tax expense

Y99

Debit

Credit

Making IFRS Adjustments


Managing IFRS adoption in Financial Consolidation implies being able to move from the local GAAP to
IFRS at one date.
The starter kit for IFRS proposes a unified reporting model with a unique data entry package in which to
enter data according to local GAAP and IFRS and executing multiple consolidations (cf. IFRS Adoption in
Consolidated Statements Using SAP BusinessObjects Financial Consolidation 7.5, starter kit for IFRS)
Regarding transition period, local accounts are established on the basis of national accounting standards,
the entity has to make adjustments in order to ensure compliance with IFRS for the comparative data.
In that case, the standard audit ID PACK01 should be used in packages to enter data according to local
GAAP.
The starter kit provides specific audit IDs to track IFRS adjustments and to allow a full reconciliation
between local GAAP and IFRS. These adjustments can be entered at local level in the package or at
corporate level by manual journal entries.
Two options should be distinguished depending on the way data will be managed after the transition period:
-

Once the transition period has ended, the end-user decides that IFRS adjustment tracking is no
longer needed (IFRS becomes the local standard). In that case, amounts stored in IFRS
adjustment audit IDs should be carried forward into PACK01 audit ID, the following year.
If the end-user wants to keep tracking the changes between Local GAAP and IFRS after transition
is over, the IFRS adjustment audit ID should still be used.

At local level, two audit IDs can be used depending on the option chosen:
-

PACKIFRS11 Local adjustment to IFRS


Amounts collected on this audit ID during the year (Y), will be carried forward into audit ID
PACKIFRS11 the year after (Y+1)

PACKIFRS12 Local adjustment to IFRS Package data (Y+1)


Amounts collected on this audit ID during the year (Y) will be carried forward into audit ID
PACK01 the year after (Y+1).

53

Making adjustments to individual accounts

Similarly, two audit IDs can be used at corporate level depending on the option chosen:
-

PACKIFRS91 Package data IFRS central correction


Amounts collected in this audit ID during the year (Y), will be carried forward into audit ID
PACK01 the year after (Y+1)

ADJIFRS91 IFRS adjustment Central


Amounts collected on this audit ID during the year (Y) will be carried forward into audit ID
ADJIFRS91 the year after (Y+1)
Manual journal entries posted on IFRS adjustment audit IDs will not be taken into
account in the local Gaap consolidated data thanks to the audit ID filter initialized in the
consolidation definition.
It is also possible to book IFRS adjustment at corporate level on standard audit IDs
(ADJ91, CTA01,) and to restrict manual journal entries to IFRS consolidated data by
selecting a variant restriction in the manual journal entries.

To know more about the IFRS adoption operating process, see IFRS Adoption in Consolidated
Statements on BusinessObjects / Financialconsolidation / 7.5 / Master Guides on http://help.sap.com/

Example Revaluation model for property, plant and equipment


Scenario

Company C uses the cost model for property, plant and equipment in its local accounts.
Period N+1, the company adopt IFRS and decides to use the revaluation model for property, plant and
equipment as permitted by IAS 16.
At opening, lands and buildings are revalued for 600 and during the period for 100.
IFRS adjustment at opening should be entered on flow F09 Change in accounting
policies to ensure a correct translation of the numbers (opening exchange rate apply to
flow F09).
For current year IFRS adjustements, the appropriate movement flow should be used
(F15, F20, F55).

A tax rate of 30% applies for deferred tax.


In this example, IFRS adoption is managed at corporate level and IFRS adjustment tracking is no longer
needed at the end of the transition period.

Manual Journal Entries


Revaluation of lands and buildings at the beginning of the period N+1
Audit ID

Account

PACKIFRS91 A1110 Lands and buildings

54

Flow

Debit

F09

600

E1510 Retained earnings

F09

E1511 Income tax on revaluation surplus

F09

L1410 Deferred income tax liability

F09

Credit

600
180
180

Making adjustments to individual accounts

Revaluation of land and buildings during the period N+1


Audit ID

Account

PACKIFRS91 A1110 Lands and buildings

Flow

Debit

F55

100

E1510 Retained earnings

F55

E1511 Income tax on revaluation surplus

F55

L1410 Deferred income tax liability

F55

Credit

100
30
30

55

Intercompany Transactions

Intercompany Transactions
Section Objectives
This section outlines:

how intercompany declarations can be checked

the automatic processing for eliminating intercompany transactions

manual journal entries that may be required

Key Points
Intercompany transactions may be classified as follows:

Current acquisition/disposal and borrowing/lending transactions that do not have an impact on


Group income. These will be called reciprocal transactions.

Transactions that generate internal income such as disposal of assets or payment of dividends.

The following are eliminated automatically:

reciprocal transactions

dividends

provisions

internal disposal of assets or investments

Suggested Approach
1. Run an intercompany reconciliation.
2. Analyze first the balances then the flows for the intercompany reconciliation.
3. Check that internal transactions are eliminated correctly.

Checking Intercompany Declarations


Running Intercompany Reconciliations
You can reconcile intercompany data using the data entered in packages that may be corrected by manual
journal entry and then converted to the consolidation currency.

56

Intercompany Transactions

Reconciliations
Balance Sheet
GROUP OF ACCOUNTS
Non-current receivables/payables

ASSETS

LIABILITIES

A1620 Receivables on disposal of PPE,


NC, Gross

L1310 Debts on purchase of PPE, NC


L1311 Debts on purchase of intangible
assets, NC

A1621 Receivables on disposal of


intangible assets, NC, Gross

L1312 Debts on purchase of inv. in


subsidiaries, NC

A1622 Receivables on disposal of inv. in


subsidiaries, NC, Gross

L1313 Debts on purchase of inv. in


other entities, NC

A1623 Receivables on disposal of inv. in


other entities, NC, Gross

L1314 Debts on purchase of inv. in


other assets, NC

A1624 Receivables on disposal of inv. in


other assets, NC, Gross

L1320 Other payables, NC

A1630 Other receivables, NC, Gross


Non-current financial assets and
liabilities

A1610 Loans and cash advances, Non


current, Gross

L1550 Other financial liabilities, Non


current

Trade receivables / payables

A2210 Trade receivables, Gross

L2310 Trade payables

Current receivables/payables on
disposal of assets

A2220 Receivables on disposal of PPE,


Current, Gross

L2320 Debts on purchase of property,


plant and equipment, Current

A2221 Receivables on disp. of intangible


assets, Current, Gross

L2321 Debts on purchase of intangible


assets, Current

A2222 Receivables on disp. of inv. in


subsidiaries, Current, Gross

L2322 Debts on purchase of


investment in subsidiaries, Current

A2223 Receivables on disp. of inv. in


other entit., Current, Gross

L2323 Debts on purchase of


investment in other entities, Current

A2224 Receivables on disp. of inv. in


other assets, Current, Gross

L2324 Debts on purchase of


investment in other assets, Current

Dividends receivable/payable

A2230 Dividends receivable

L2330 Dividends payable

Other receivables/payables

A2240 Other receivables, Current, Gross

L2340 Other payables, Current

Accrue interests receivables/payables A2250 Accrued interests on receivables

L2350 Accrued interests on financial


liabilities and payables

Current financial assets and liabilities

L2570 Other financial liabilities,


Current

A2440 Loans and cash advances,


Current, Gross

Net Income (Excluding Dividends and Internal Transfer of Assets)


GROUP OF ACCOUNTS

INCOME

EXPENSES

Sales / Cost of sales

P1110 Revenues

P1120 Cost of sales

Other operating income and


expenses

P1210 Other income

P1310 Distribution costs


P1410 Administrative expenses
P1510 Other expenses

Financial income and expenses

P2120 Interest income

P2220 Interest expenses

P2150 Other financial income

P2230 Other financial expenses

57

Intercompany Transactions

Internal Transfer of Assets


GROUP OF ACCOUNTS
Property, plant and equipment

RELEVANT ASSET ACCOUNTS


A1110 Lands and buildings
A1120 Tangible exploration and evaluation assets
A1130 Fixtures and fittings
A1150 Office equipment
A1160 Vehicles
A1170 Machinery
A1180 Other property, plant and equipment

Investment property

A1210 Investment property

Intangible assets

A1410 Brand names


A1420 Intangible exploration and evaluation assets
A1430 Mastheads and publishing titles
A1440 Computer software
A1450 Licences and franchises
A1460 Patents, trademarks and other rights
A1470 Recipes, formulae, models, designs and prototypes
A1490 Other intangible assets

Biological assets

A1510 Biological assets

Investments

A1810 Investments in subsidiaries, JV and associates

Non-current financial assets

A1820 Available-for-sale financial assets, Non current


A1840 Financial assets at fair value through profit or loss, NC
A1850 Other financial assets, Non current

Current financial assets

A2410 Available-for-sale financial assets, Current


A2430 Financial assets at FV through profit or loss, Current
A2450 Other financial assets, Current

Dividends
GROUP OF ACCOUNTS
Dividends received/paid

BENEFICIARY
P2140 Dividends

DISTRIBUTOR
XE1610 Dividends paid

Prior to Running Intercompany Reconciliations


You can run an intercompany reconciliation once you have integrated the consolidation packages and
converted the package data from foreign subsidiaries to the consolidation currency. In order to do this, first
run a consolidation processing.
You can run a consolidation processing:

for the Group as described earlier (see Defining a Consolidation on page 42)

just to convert the data, which requires a shorter processing time

To run this simplified processing, create a new consolidation definition (using a specific variant) and select
no set of rules in the consolidation definition.

58

Intercompany Transactions

Displaying Intercompany Reconciliation Reports


Intercompany reconciliation reports are grouped together in book C44:
Reciprocal
transactions

Balance sheet

C44-10 Balance Sheet reconciliations at


closing: Buyer/Seller
C44-15 Balance Sheet reconciliations
by flow: Buyer/Seller

Income
statement

C44-20 Profit & Loss reconciliations


(threshold > 1)
C44-25 Profit & Loss reconciliations:
Buyer/Seller

Internal income Dividends


Disposal of
assets
Sales of
investments

C44-05 Balance Sheet and


Profit & Loss reconciliations at
closing

C44-30 Reconciliation of
internal gains & losses &
dividends (threshold > 1)
C44-35 Reconciliation of
C44-40 Reconciliation of internal gains internal gains & losses &
& losses on sale of investment in
dividends: Buyer/Seller
subsidiaries

When you initialize a reconciliation report for a buyer/seller pair (for instance, C44-25)
you will find two initialization blocks, with both the Buyer and Seller dimensions in each.
This is because in a pair of reporting units, each unit may be both the buyer for one
intercompany transactions and the seller for another one.
To retrieve all the intercompany reconciliation data for pair (RU1, RU2) in the report,
you should initialize the two blocks as follows:
Block 1 : Buyer = RU1, Seller = RU2
Block 2 : Buyer = RU2, Seller = RU1

Correcting Differences
Principles
There are two types of differences arising from intercompany transactions:

Differences due to errors made when declaring data in packages. These may or may not affect
company accounts.

Differences that are justified, like non mature discounted notes and conversion differences.

If there is an error in the package, you can correct it in different ways depending on the type of error:

A simple declaration error, for example you declare a receivable with partner U1 whereas it should
be with partner U2.

A declaration error due to an accounting error, for example you forget to book an invoice issued by partner
U1, which will be corrected in the final version of the company accounts.

An accounting error which will be corrected in the company accounts only in fiscal period N+1.

In the first two cases, the correction to be made must be taken into account in the package opening
balances for period N+1. It must be performed manually in the package for fiscal period N.
If you make corrections directly in the package, it must be validated and then integrated so that the
correction can be taken into account (see Integrating Packages on page 24 ).
H

In the last case, the correction will not have any impact on the package opening balances and so should be
booked by manual journal entry using audit ID ADJ91.

59

Intercompany Transactions

Justified differences (discounted notes, conversion differences, etc.) should be booked by manual journal
entry using audit ID ADJ91.
Examples
Invoice that was not Booked
Running the reconciliation report

The reconciliation of intercompany transactions declared by reporting units U1 and U2 is shown below:
Reconciliation
rule

Buyer

Reciprocal
trade
receivables
and payables

U2

Seller

Flow

Account

Audit ID

Buyer
amount
local
currency

F00

L2310

PACK01

800

F00

A2210

PACK01

F15

L2310

PACK01

F15

A2210

PACK01

U2

Buyer
amount
converted
currency

Seller
amount
converted
currency

Difference

800
800

800

U1

TOTAL
Reciprocal
gross profit
accounts

Seller
amount
local
currency

1 000
3 000
1 800

Y99

P1120

PACK01

Y99

P1110

PACK01

1 000

3 800

10 000

3 000
1 800

3 800

2 000

10 000

U1
TOTAL

12 000
10 000

12 000

12 000
10 000

12 000

2 000

After investigating this report, you see that these differences are due to U2's omission in booking an invoice
issued by U1 for the sum of 2 000. This error is not considered as being significant and will be corrected in
U2's company accounts only in fiscal period N+1.
Manual journal entries to be posted by U2

The invoice issued by U1 for U2 must be booked in the consolidated accounts:


Audit ID Account

Flow

Debit

ADJ91

P1120 Cost of Sales

Y99

2 000

L2310 Trade payables

F15

Credit

2 000

Partner breakdown
Code

Debit

U1

2 000

U1

Credit

2 000

This additional expense posted in U2's accounts should lead to the booking of a deferred tax asset
(hypothetical tax rate of 40%):
Audit ID

Account

Flow

Debit

ADJ91

A1710 Deferred tax assets

F15

800

P5020 Deferred tax expense

Y99

60

Credit

800

Intercompany Transactions

Discounted Notes not yet Matured


Running the reconciliation report

The reconciliation of intercompany transactions declared by reporting units U1 and U2 is shown below:
Reconciliation
rule

Buyer

Seller

U2

U1

Reciprocal
trade
receivables
and payables
Reciprocal
gross profit
accounts

Flow

Account

Audit ID

Buyer
amount
local
currency

F15

L2310

PACK01

1 000

F15

A2210

PACK01

TOTAL
U2

P1120

PACK01

Y99

P1110

PACK01

Buyer
amount
converted
currency

Seller
amount
converted
currency

Difference

1 000
0

1 000

Y99

Seller
amount
local
currency

1 000

12 000

-1 000

12 000

U1
TOTAL

12 000
12 000

12 000

12 000

12 000

12 000

The difference seen in the reconciliation of receivables and debts is due to the fact that U1 has discounted
receivables from U2.
Manual Journal Entries

To balance intercompany declarations, you should post a journal entry for U1:
Audit ID Account

Flow

Debit

ADJ91

A2210 Trade receivables, Gross

F15

1 000

L2510 Borrowings, Current

F15

Credit

Partner breakdown
Code

Debit

U2

1 000

Credit

1 000

Elimination of Internal Transactions


Elimination of Reciprocal Transactions
Principles
Definition
Reciprocal transactions are transactions between companies in the Group (acquisition/disposal or
borrowings/lendings) whose elimination will have no impact on the income of the consolidated companies.
Summary
Relevant companies
Amount level
Audit IDs taken into account
Generated audit IDs
Manual audit ID for corrections

Full and proportionate consolidation


Converted
All audit IDs at converted level except ELIM10 and ELIM11
ELIM10
ELIM11

Description of the Processing


Reciprocal accounts and adjustment accounts are eliminated against a link account for partners that are
fully or proportionately consolidated. When the transaction involves:

a fully consolidated company and another consolidated using the proportionate method, elimination
is based on the latter's consolidation rate.

two companies consolidated using the proportionate method, elimination is based on the lowest
consolidation rate.

61

Intercompany Transactions

The link accounts are as follows:


RELEVANT ELIMINATIONS
Receivables and payables,
Non current

GROUP OF RECONCILED ACCOUNTS


A1620 Receivables on disposal of PPE, Non Current, Gross

ELIMINATION
ACCOUNTS
L13CL

A1621 Receivables on disposal of intangible assets, NC, Gross


A1622 Receivables on disposal of inv. in subsidiaries, NC, Gross
A1623 Receivables on disposal of inv. in other entities, NC, Gross
A1624 Receivables on disposal of inv. in other assets, NC, Gross
A1630 Other receivables, Non current, Gross
L1310

Debts on purchase of PPE, Non current

L1311

Debts on purchase of intangible assets, Non current

L1312

Debts on purchase of inv. in subsidiaries, Non current

L1313

Debts on purchase of inv. in other entities, Non current

L1314

Debts on purchase of inv. in other assets, Non current

L1320

Other payables, Non current

Financial assets and liabilities,


Non current

A1610 Loans and cash advances, Non current, Gross

Receivables and payables

A2210 Trade receivables, Gross

L1550

L15CL

Other financial liabilities, Non current


L23CL

A2220 Receivables on disposal of PPE, Current, Gross


A2221 Receivables on disp. of intangible assets, Current, Gross
A2222 Receivables on disp. of inv. in subsidiaries, Current, Gross
A2223 Receivables on disp. of inv. in other entit., Current, Gross
A2224 Receivables on disp. of inv. in other assets, Current, Gross
A2230 Dividends receivable
A2240 Other receivables, Current, Gross
A2250 Accrued interests on receivables
L2310

Trade payables

L2320

Debts on purchase of property, plant and equipment, Current

L2321

Debts on purchase of intangible assets, Current

L2322

Debts on purchase of investment in subsidiaries, Current

L2323

Debts on purchase of investment in other entities, Current

L2324

Debts on purchase of investment in other assets, Current

L2330

Dividends payable

L2340

Other payables, Current

L2350

Accrued interests on financial liabilities and payables

Financial assets and liabilities,


Current

A2440 Loans and cash advances, Current, Gross

Gross profit

P1110 Revenues

L2570

L25CL

Other financial liabilities, Current


P11CL

P1120 Cost of sales


Operating profit

P1210 Other income

P15CL

P1310 Distribution costs


P1410 Administrative expenses
P1510 Other expenses
Financial result

P2120 Interest income


P2150 Other financial income
P2220 Interest expenses
P2230 Other financial expenses

62

P22CL

Intercompany Transactions

Example
Source data

Package for U1 schedule PA4110 (in EUR)


ACCOUNTS

PARTNERS

Revenues

N-1

P1110
RU U2

500

Non-Group TP-999

2500

Total Revenues

3 000

Package for U2 schedule PA4110 (in EUR)


ACCOUNTS

PARTNERS

Cost of Sales

N-1

P1120
RU U1

- 500

Non-Group TP-999

-300

Total Cost of Sales

-800

Automatic journal entries generated


U1 P1110 Revenues
Audit ID

Part.

PACK01

U2

ELIM10

U2

U2 P1120 Cost of Sales

500
500

U1 P11CL - Intercompany eliminations


(Cost of Sales)
Audit ID

Part.

ELIM10

U2

500

Balance

500

Audit ID

Part.

PACK01

U1

ELIM10

U1

500
500

U2 P11CL - Intercompany eliminations


(Cost of Sales)

Audit ID

Part.

ELIM10

U1

500

500

Intercompany elimination for U1


Intercompany elimination for U2

Performing Checks
Run the following reports to check that the link accounts are balanced for the Group:
Folder

Book

Schedule

C4

C42

C42-10 Consolidation control dashboard (detail)

If this is not the case, then run one of the following reports to identify the relevant reporting units:
Folder

Book

Schedule

C4

C42

C42-45 Check clearing accounts for intercompany elimination


C42-50 Check clearing accounts for intercompany elimination: buyer/seller

63

Intercompany Transactions

Dividends
Presentation of the Automatic Processing
Introduction
The automatic processing consists of eliminating the beneficiary's financial income against consolidation
reserves.
Use the following audit ID:
Processing

Automatic Audit IDs

Manual Audit IDs

Elimination of inter-company dividends

DIV10

DIV11

Currency translation adjustment on dividends

DIV20

DIV21

The following options apply:

Dividends paid (flow F06) are converted using the daily exchange rate type corresponding at the
date of distribution entered in the package (see Dividends on page 58).

Dividends are calculated for non-controlling interests based on the opening rate.

Collecting Data in the Package


Dividends paid:
Dividends paid out from net equity are entered in schedule PA2500-Equity statement, using technical
account XE1610.
Dividends paid are analyzed in greater detail in schedule PA4320-Dividends paid. This schedule presents
the dividends paid per beneficiary, including the share paid out to non-Group shareholders.
By default, dividends paid are converted using the average rate of the period. In order to convert them
using the spot rate at the distribution date, the paying company should entered data in schedule PA4330
Dividends paid by beneficiary /date. At central site, daily rate for the dates of distribution should be entered
in the conversion rates table.
Dividends received:
Dividends received are booked in account P2140-Dividends. They are analyzed by partner in schedule
PA4310-Dividends Received.
Conversion Principles
Flow F06-Dividends is converted by default at average rate of the period. If analysis of dividend paid by
beneficiary and by date is entered in the package and the corresponding daily rate is populated in the rates
table used for the consolidation, then the paid dividend will be converted using the rate at the distribution
date.
The dividends received (account: P2140) are converted using the average rate for the period like any other
item of the Income statement.

64

Intercompany Transactions

Journal Entries
The automated elimination of the internal dividends is processed in two stages:

The dividends is eliminated from the Parents accounts, based on the declaration made by the
subsidiary on account XE1610, using Audit ID DIV10:
Journal entry generated
Source data
Subsidiary (distributor):
XE1610 Dividends paid - Flow F06

Debit

Credit

P2140 Dividends
Y99

E1610 Retained
earnings F06

Then the difference between the dividend received and the dividend paid, for each
distributor/beneficiary pair, is eliminated against the Retained earnings, using Audit ID DIV20:
Journal entry generated
Source data
Parent (beneficiary):
P2140 Dividends Y99

Debit

Credit

P2140 Dividends
Y99

E1610 Retained
earnings F80 *

* This amount will be transferred later to the Foreign currency translation reserve by the currency
translation adjustment automatic processing.

To explain in detail the purpose of this second automated journal entry, we can distinguish several cases
depending on the distributor and beneficiarys currency:
Reporting currencies *
Analysis
Distributor (D)

Beneficiary (B)
There should not be any conversion difference (provided that the reciprocal
declaration match).

CCUR

Dividend received should be booked in Bs accounts using exactly the same


rate used to convert flow F06 in Ds accounts.
FCUR1

CCUR

A conversion difference may originate from converting dividend received at


the average rate, while dividend paid is converted at the exact exchange rate.
It is transferred to the retained earnings by an automatic journal entry posted
on Audit ID DIV20.

FCUR1

FCUR1

If there is a difference, it should be cancelled against the financial result


(P2150 Other financial income) by a manual journal entry posted in Bs
accounts.

FCUR2

In this scenario, which combines the two scenarios above, the process should
be as follows:
1. Check that the dividend received by B (in FCUR2) corresponds to the
dividend paid by D (in FCUR1), converted using the spot rate on F06.
2. The remaining difference will be transferred to the retained earnings by
an automatic journal entry posted on Audit ID DIV20.

* CCUR : Consolidation currency


FCUR : Foreign currency

65

Intercompany Transactions

Example
Scenario

The group holds 100% of F1 and F2, which are foreign subsidiaries located in the same country. The
conversion rates for F1 and F2's currency, expressed as certain for uncertain, are as follows:
OR

AR

CR

Opening
rate

Average
rate

Closing
rate

June 30th

0.250

0.270

0.200

0.286*

Daily rate

* Spot rate at the date the dividend was decided by the general meeting

Data entered by F2 in schedule PA4320-Dividends paid


F06
XE1610 Dividends paid

100

To be broken down
Parent

F1

100

TOTAL

100

Data entered by F2 in schedule PA4330-Dividends paid by beneficiary /date


F06
Owner company F1

100

XE1610 Dividend paid To be


broken down
Transactrion date

June 30th

100

TOTAL

100

Data entered by F1 in schedule PA4310-Dividends received


N-1
P2140 Dividends

N
100

To be broken down
Subsidiary

F2

100

TOTAL

100

Automatic journal entries generated for F1


P2140 Dividends
PACK01

370 (=100 /0.270)

DIV10

350

DIV20

20

E1610 Retained earnings


DIV10

350

DIV20

20 *

Elimination of the dividend received based on the declaration made by F2 (100 CUR / 0.286)
Processing the conversion difference between dividends received (100 CUR / 0.270) and dividends paid (100 CUR / 0.286 = 350)
*

This amount is transferred later to the Foreign currency translation reserve.

Performing Checks
Checking Consistency between conversion rate table and analysis by date of paid dividend
You can check that daily rates corresponding to analysis by date entered in the packages have been
populated by running the following report:
Folder

Book

Schedule

C4

C43

C43-05 Checking consistency between analysis by date Daily exchange rate

66

Intercompany Transactions

The C43-10 report enables you to check the conversion of paid dividends by identifying missing analysis by
date of paid dividend and/or missing daily exchange rates.
Folder

Book

Schedule

C4

C43

C43-10 Checking the conversion of paid dividend

Checking Declarations
You can check that the declarations made by the distributor using flow F06 on account XE1610 and by the
beneficiary using flow Y99 on account P2140 are reciprocal by running the following reports in book C44:
Folder

Book

Schedule

C4

C44

C44-30 Reconciliation of internal gains & losses & dividends (threshold > 1)

Checking Elimination Journal Entries


Checking the impact on the income statement
Run the following report to check that the amounts in account P2140 correspond to dividends received from
non-Group partners for each reporting unit:
Folder

Book

Schedule

C4

C46

C46-15 Elimination of dividends - Impact on P&L

This report also enables you to know the amount of the conversion difference that was posted automatically
on account P2140, for each beneficiary/distributor pair. Make sure that it is real (justified) conversion
difference and that it is not due to another cause, such as an inconsistency in intercompany declarations.
Checking the distribution flow for shareholders' equity
Run the following report to check that there is no discrepancy between dividends received and paid:
Folder

Book

Schedule

C4

C46

C46-20 Elimination of dividends - Check distribution flow (F06)

If there are discrepancies, check the rows analyzed by reporting unit pair so that you can identify the origin
of the problem.

Provisions
Automatic Processing
Introduction
Provisions for consolidated companies are fully eliminated regardless of the:

consolidation method of each company, for example the full or proportionate consolidation or equity
method.

audit ID of the provision, for example the provisions on shares or other provisions.

The audit IDs used are as follows:


Processing

Automatic Audit IDs

Manual Audit IDs

Elimination of inter-company prov. on shares

PRO10

PRO11

Elimination of other inter-company provisions

PRO20

PRO21

67

Intercompany Transactions

Collecting Data in the Package


Provisions are broken down by partner in schedules:

PA2200: impairment on investments in subsidiaries

PA4410: intercompany provisions on bad debts,

P4420: intercompany provisions (liabilities).

Journal Entries
Elimination of intercompany provisions is performed against:

The income statement for allowances and write-back flows as well as for variation flow F15.

Net equity for the following flows: incoming units (F01), reclassification (F50), change of accounting
policies (F09), internal mergers (F70), conversion difference (F80), outgoing units (F98) and the
opening flow (F00) for consolidations without opening balances.

The table below describes accounts and flows from which processing originates and their counterparty in
income:
Balance sheet
source flow

Balance sheet account


A1812 Investments in subsidiaries, JV and
associates, Impair.

F25/F15

A1612 Loans and cash advances, Non current, Allow.

Income statement account

Audit ID

P2210 Allowances for provisions on


shares

PRO10

F25/F35/F15

P1650 Net internal provision

PRO20

F25/F35/F15

P1650 Net internal provision

PRO20

A1642 Receivables, Non current, Allow


A2212 Trade receivables, Allow. for bad/doubt. debts
A2262 Other receivables, Allow. for bad/doubt. debts
A2442 Loans and cash advances, Current, Allow.
L1230 Legal proceedings provision, Non current
L1260 Miscellaneous provisions, Non current
L2230 Legal proceedings provision, Current
L2260 Miscellaneous provisions, Current

Example
Source data
Schedule PA4420
ACCOUNT/PARTNER

Code

Miscellaneous provisions, L1260


Non current

F00

F99

F25
150

F35

300

250

U2

100

50

TP-999

200

200

150

-150

300

250

150

-200

F50

F60

F20

F30

F70

Control

-200

To be broken down
RU U2
Non-Group
Total

-50

Schedule PA2500
ACCOUNTS
Retained earnings
Net equity

68

CODE
E1610

F00

F99

F05

F10

-300

-250

50

-300

-250

50

F40

F50

F55

Spec.

Control

Intercompany Transactions

Automatic journal entries generated


L1260 Miscellaneous provisions, Non current
PACK01

250

PRO20

100

PACK01

PRO20

E1610 Retained earnings


300

PRO20
50

100

P1650 Net internal provision


PACK01

50

PRO20

50

Elimination of provision at opening


Elimination of write-back for provision for the period
Presentation by flow
Account

Flow
Audit ID

Code
E1610

Description
Retained earnings

F00

F10

PACK01

<300>

50

<250>

PRO20

100

<50>

50

<200>

<200>

TOTAL
L1260

Miscellaneous provisions, Non


current

PACK01

300

PRO20

<100>

TOTAL

F20

150

200

Total LIABILITIES & EQUITY


P1650

F15

Net internal provision

F35

F99/Y99

<200>

250

50

<50>

150

<150>

200

150

<150>

PACK01

50

PRO20

<50>

If applicable, the deferred tax will be posted by a manual journal entry, as follows:
Deferred income tax liability for the elimination of the provision at opening: 100 x 40% = 40
Audit ID

Account

Flow

Debit

PRO21

E1610 Retained earnings

F00

40

L1410 Deferred income tax liability

F00

Credit

40

Write-back of deferred income tax liability amounting to 50 x 40% = 20


Audit ID

Account

Flow

Debit

PRO21

L1410 Deferred income tax liability

F15

20

P5020 Deferred tax expense

Y99

Credit

20

Performing Checks
Open the following reports and identify the provision accounts (assets and liabilities):
Folder

Book

Schedule

C3

C31

C31-05 Balance Sheet by Flow

69

Intercompany Transactions

Then link to the following report:


Folder

Book

Schedule

C3

C32

C32-05 General ledger by Audit-ID, partner, JE number (flows)

For each account, use the detail by partner or share to check that any intercompany amount is eliminated
at 100%.

Gains or Losses on Internal Transfer of Assets


Presentation of the Automatic Processing
Introduction
Gains or losses on disposal of assets (tangible, intangible or securities) between consolidated companies
are eliminated:

At 100% when the buyer and seller are both fully consolidated.

Using the consolidation rate of the company that is proportionately consolidated if its partner is a
fully consolidated company.

Using the lowest consolidation rate if both buyer and seller are consolidated using the proportionate
method.

These concepts are summarized below:


Buyer
Seller
Full consolidation (FC)
Proportionate consolidation (PC)

Full (FC)

Proportionate (PC)

100%

Consolidation rate of PC

Consolidation rate of PC

Lowest consolidation rate

Collecting Data in the Package


Acquisitions and disposal of assets can be analyzed in specific reports:

Schedule PA4210 Purchase / Disposal of Property, Plant and Equipment

Schedule PA4220 Purchase / Disposal of Investment Property

Schedule PA4230 Purchase / Disposal of Intangible Assets

Schedule PA4240 Purchase / Disposal of Biological Assets

Schedule PA4250 Purchase / Disposal of Financial Assets

Schedule PA2300 Purchase / Disposal of investment in subsidiaries

In these reports, the seller breaks down amounts by type of asset or by investment row for securities and
by buyer:

The selling price is entered in flow X01.

The gains or losses are calculated based on the amounts declared on flow F30, both on the gross
value accounts for tangible, intangible assets and investment property and the accumulated
depreciation and impairment accounts.

The buyer breaks down amounts by type of asset or by investment row for securities, and by seller, using
flow F20.
For the purchase/disposal of investment in subsidiaries, an additional, optional schedule is available:
PA2350-Purchase/disposal of investment in subsidiaries / Date. Use this schedule if you choose to declare
F20 on investment by dates.

70

Intercompany Transactions

Journal Entries
Gains or losses on internal transfers of assets are eliminated from the income of the seller company. In the
buyer company the assets must be recorded at their historical value. The historical value is used in the
buyer's accounts to show the same gross value and cumulated depreciation for the asset as in the seller's
accounts at the date of disposal.
Automatic journal entries generated
Data entered

At seller's

at seller's
Debit

At buyer's
Credit

Debit

Credit

Gross value account

A11CL

Property, plant and equipment


Gross value (F30)

Depreciation (F30)
Impairment (F30)
Sales price (X01)

A11CL Clearing account Property, plant and


equipment

P1610

Depreciation account

P1610 Gains or losses on


sale of property, plant and
equipment

A11CL

A11CL

Impairment account
Gross value account

Investment property
Gross value (F30)

A12CL Clearing account Investment property

P1611

Gross value account

Depreciation (F30)
Impairment (F30)

A12CL
Depreciation account

P1611 Gains or losses on


sale of investment property

A12CL

A12CL

Sales price (X01)

Impairment account
Gross value account

Intangible assets
Gross value (F30)

A14CL Clearing account Intangible assets

P1612

Gross value account

Depreciation (F30)
Impairment (F30)

A14CL
Depreciation account

P1612 Gains or losses on


sale of intangible assets

A14CL

A14CL

Sales price (X01)

Impairment account
Gross value account

Biological assets
Gross value (F30)

A15CL Clearing account Biological assets

P1613

Gross value account

Depreciation (F30)
Impairment (F30)

A15CL
Depreciation account

P1613 Gains or losses on


sale of biological assets

A15CL

A15CL

Sales price (X01)

Impairment account
Gross value account

Non-current financial assets


Gross value (F30)

A18CL Clearing account Financial assets, Non current

P1614

Gross value account

A18CL

Sales price (X01)

P1614 Gains or losses on


sale of other assets

A18CL

A18CL

Gross value account

Current financial assets


Gross value (F30)

A24CL Clearing account Financial assets, Current

P1614

Gross value account

A24CL

Sales price (X01)

P1614 Gains or losses on


sale of other assets

A24CL

A24CL

Gross value account

71

Intercompany Transactions

Automatic journal entries generated


Data entered

At seller's

at seller's

At buyer's

Debit

Credit

Debit

Credit

Consolidated investment in subsidiaries, JV and associates


Gross value (F30)

Impairment (F30)
Sales price (X01)

A181CL Clearing account Inv. in subsidiaries, JV and


associates

P1615

Gross value account

P1615 Gains or losses on


sale of shares

A181CL

A181CL

A181CL

Impairment account
Gross value account

The audit IDs used are as follows:


Processing

Automatic audit ID

Manual audit ID

DIS10

DIS11

Elimination of gains and losses on internal


transfer of assets
Correction of the amort./impairment subsequent
to an internal transfer of assets

DIS11

Example
Company U1 has sold a building to U2 for 600. In U1s accounts, this building had a gross value of 900 and
an accumulated depreciation of 400 at the date of the internal transfer.
Data entered by U1 in schedule P10450
DISPOSAL
ACCOUNT/PARTNER
Lands and buildings

CODE

Selling
price

Gross
value

Depr.

Impair.

PURCHASE
Net book
value

Gains/
losses

A1110

600

-900

400

-500

100

U2

600

-900

400

-500

100

600

-900

400

-500

100

Acquisition
price

To be broken down
RU U2
Total

Data entered by U2 in schedule P10450


DISPOSAL
PARTNER
Lands and buildings

CODE

Selling
price

Gross
value

Depr.

Impair.

PURCHASE
Net book
value

Gains/
losses

Acquisition
price

A1110

600

U1

600

To be broken down
RU U1
Total

72

600

Intercompany Transactions

Automatic journal entries generated


U1 P1610 Gains or losses on sale of PPE
PACK01

100

DIS10

100

U1 A11CL Clearing account - PPE


DIS10

100

U2 A11CL Clearing account - PPE

U2 A1110 Lands and buildings


PACK01
DIS10

600

DIS10

100

U2 A1111 Lands and buildings, Dep.


DIS10

400

300

Elimination of gains at seller's


Adjustment to asset's historical value at buyer's
Presentation by flow
Account
Code
A11CL

A1110

A1111

E1610

P1610

Description
Clearing account - PPE

Lands and buildings

Lands and buildings, Dep.

Retained earnings

Gains or losses on sale of PPE

Flow

Reporting
unit

Audit ID

U1

DIS10

U2

DIS10

U1

PACK01

U1

DIS10

U2

PACK01

600

U2

DIS10

<600>

U1

PACK01

U1

DIS10

U2

DIS10

U1

PACK01

100

100

U1

DIS10

<100>

<100>

U1

PACK01

100

U1

DIS10

<100>

F00

F10

F20

F50

F99/Y99

<600>

500

<100>

600

<500>

100

900

F30

<900>
900

<400>

0
<900>

0
600

900
400

300
0

<400>

400

<400>

<400>

Performing Checks
Checking Declarations
Check that the declarations made by sellers (selling price in technical flow X01) and buyers (purchase price
in F20) are reciprocal by running the following report:
Folder

Book

Schedule

C44

C44-30 Reconciliation of internal gains & losses & dividends (threshold > 1)

If this report displays any differences due to an error in the breakdown by partner for sales and purchases;
the declaration must be corrected directly in the package, which must then be validated and integrated
again into the database.

Manual Journal Entries


When an internal transfer of assets occurs, the depreciation booked in the buyers accounts must be
corrected in order to take due account of the adjustment to historical value in the consolidated accounts.

73

Intercompany Transactions

Example (continued)
Following with the previous example, we suppose that:

In U2's company accounts, the asset is depreciated over 6 years, with a yearly allowance of 100.

In U1's company accounts, the asset would have been depreciated at a rate of 33.33%, with a
theoretical allowance of 300 in N and 200 (residual value) in N+1.

For the consolidation of fiscal year N, the manual journal entry to be posted for U2 is as follows (assuming
that the depreciation of the building comes under Other expenses:
Audit ID
DIS11

74

Account

Flow

A1111 Lands and buildings, Dep.

F25

P1510 Other expenses

Y99

Debit

Credit
200

200

Deferred Taxation

Deferred Taxation
Section Objectives
This section presents the processing of deferred tax in the Starter kit.

Key Points
Deferred tax must be entered in the package or booked manually by the consolidation department. There is
no automated process applying to deferred tax.
Any deferred tax journal entry must be booked on the same Audit ID as the one used to identify the base of
deferred tax (or the corresponding Audit ID on which you can book a manual journal entry).

Overview
Identifying the Bases of Deferred Tax
The bases of deferred tax can be split into two categories:

Deferred tax based on adjustments already included in the package using Audit ID PACK01 (such
as an IFRS adjustment) should be booked in the package

Deferred tax based on adjustments posted centrally by automatic or manual journal entries, for
example, the elimination of the gain/loss on an internal transfer of assets, should be booked by a
manual journal entry. Deferred tax is never booked automatically.

Booking Deferred Tax


The accounts used to book deferred tax are as follows:
Balance sheet
Income statement

A1710 Deferred tax assets


L1410 Deferred income tax liability
P5020 Deferred tax expense

There is no dedicated Audit ID to book deferred tax. As a general principle, deferred tax should be recorded
using the same Audit ID as the one used to record the original carrying amount or automatic/manual journal
entry giving rise to the temporary difference.

In case the base for deferred tax was generated automatically (for example, the elimination of
the gain/loss on an internal transfer of assets; Audit ID: DIS10), use the corresponding Audit ID
available for manual journal entries (DIS11 in this specific case).

Sometimes this principle may not apply, especially when a deferred tax is booked at the central level,
based on a temporary difference that is not recognized in the individual accounts, such as the carryforward
of unused tax losses. In this case, you should use Audit ID ADJ91-Other adjustment - Central - Man.
Example
An invoice issued for the sum of 1 000 was omitted from F's company accounts. This expense is booked in
the consolidated accounts using audit ID ADJ91.

75

Deferred Taxation

This additional expense posted in F's accounts should lead to the booking of a deferred tax asset (a tax
rate of 40% is used in this example):
Audit ID

Account

Flow

Debit

ADJ91

A1710 Deferred tax assets

F15

400

P5020 Deferred tax expense

Y99

Credit

400

Accounting for Deferred Tax


Variation in Tax Rates
According to IFRS standards, the impact of the variation in rates affects income when the original operation
also affects income. It affects reserves when the original operation is registered directly in
shareholders' equity. When deferred tax is associated with fair value adjustments, the impact of the
variation in rates is registered in income.
Manual journal entries should be booked in order to register the impact of variation in rates on deferred tax
existing at opening.

Offsetting Deferred Tax Assets and Liabilities by Reporting Unit


Deferred tax assets and liabilities could be offset for a given tax entity if conditions set out in IAS 12 are
met.
A manual journal entry for offsetting the deferred tax asset and liability balances must be booked to record
the net balance as an asset or liability.

76

Consolidation Entries

Consolidation Entries
Section objectives
This section presents the manual and automatic journal entries related to the following consolidation topics:

calculating non-controlling interests for shareholders' equity

booking the share of investments in companies consolidated using the equity method

eliminating consolidated shares

maintaining the historical conversion rate for shareholders' equity and consolidated shares

booking goodwill

The audit IDs used are as follows:


Audit ID

Description

CONS01

Consolidation entry not splittable

CONS10

Elimination of subsidiaries' capital and share premium

Available for
manual journal
entry
X

CTA01

Currency translation adjustments - Equity - Man.

CTA10

Currency translation adjustments - Equity - Auto

GW01

Disclosure of goodwill (gross value & impair.) and bargain


purchase - Man.

GW10

Booking of goodwill and bargain purchase - Auto

GW11

Booking of goodwill and bargain purchase - Man.

GW20

Currency translation adjust. on goodwill - Auto

GW21

Currency translation adjust. on goodwill - Man.

INV10

Elimination of investments - Auto

INV11

Elimination of investments - Man.

INV20

Currency translation adjust. on investments - Auto

INV21

Currency translation adjust. on investments - Man.

INV31

Adj. on gain/loss on disposal of a subsidiary, JV or associate


(Local currency)

INV32

Adj. on gain/loss on disposal of a subsidiary, JV or associate


(Consolidation currency)

NCI11

Calculation of non controlling interests - Correction

NCI-ADJ90

Other adjustment - NCI calc.

NCI-CTA10

Currency translation adjustments - Equity - NCI calc.

NCI-DIS10

Elim. of internal gain/loss on disposal of assets - NCI calc.

NCI-DIV10

Elimination of internal dividends - NCI calc.

NCI-DIV20

Currency translation adjust. on dividends - NCI calc.

NCI-FVA00

Fair value for incoming entities (central) - NCI calc.

NCI-INV30

Adjustment on gain/loss on disposal of subs. - NCI calc.

NCI-PACK01

Package data - NCI calc.

77

Consolidation Entries

Audit ID

Available for
manual journal
entry

Description

NCI-PACK10

Adjustment to Group accounting policies - NCI calc.

NCI-PKIFRS10

Adjustment to IFRS - NCI calc.

NCI-PKIFRS12

Adjustment to IFRS - NCI calc.

NCI-PKIFRS90

Package data - IFRS central correction - NCI calc.

NCI-PACK90
NCI-AJIFRS90

Package data - Central correction - NCI calc.


IFRS adjustments - NCI calc.

NCI-PRO10

Elimination of internal impairment on investments - NCI calc.

NCI-PRO20

Elimination of internal provisions - NCI calc.

Calculation of Non-controlling Interests


Principles
The consolidated subsidiaries' shareholders equity is distributed between Group and non-controlling
interests. This is done using one of the NCI-xxxx audit IDs, depending on the source Audit ID. The
correspondence between source and destination Audit ID can be displayed in Dimension Builder,
(reference table: AUDIT-ID; characteristic: SPLIT).
In order to retrieve the variation in net equity as required by IAS1, the accounts that store the consolidated
subsidiaries shareholders equity are distributed using the following Group and Non-controlling interests
accounts:
Group equity account

NCI equity account

E1110

Issued capital *

E2010

NCI - Reserves and retained earnings

E1210

Share premium *

E2010

NCI - Reserves and retained earnings

E1510

Revaluation surplus, before tax

E2020

NCI - Revaluation surplus before tax

E1511

Income tax on revaluation surplus

E2021

NCI - Income tax on revaluation surplus

E1520

Actuarial gains and losses, before tax


(suspense account)

E2030

NCI - Actuarial gains and losses, before tax


(suspense acc)

E1521

Income tax on actuarial gains and


losses (suspense acc.)

E2031

NCI - Income tax on actuarial gains and


losses (suspense acc.)

E1540

Hedging reserve, before tax

E2040

NCI - Hedging reserve, before tax

E1541

Income tax on hedging reserve

E2041

NCI - Income tax on hedging reserve

E1550

Fair value reserve, before tax

E2050

NCI - Fair value reserve, before tax

E1551

Income tax on fair value reserve

E2051

NCI - Income tax on fair value reserve

E1560

Foreign currency translation reserve,


before tax

E2060

NCI - Foreign currency translation reserve,


before tax

E1561

Income tax on foreign currency


translation reserve

E2061

NCI - Income tax on foreign currency


translation reserve

E1570

Equity component of compound


financial instruments

E2080

NCI - compound financ. instruments

E1610

Retained earnings

E2010

NCI - Reserves and retained earnings

* These accounts are also transferred to the retained earnings (E1610) for any entity except the groups Parent company.

78

Consolidation Entries

The calculation of non-controlling interests depends on the consolidation rate and the financial interest of
the scope. Depending on the flow, the calculation may use the opening or closing rate:
Data

Flow

Shareholders' equity at opening


Payment of dividends
Effect of changes in accounting policies
Net income for the period
Variation of capital in number of shares and subscription
Impact of reclassification
Fair value
Effect of internal mergers
Impact of variations in conversion rates

F00
F06
F09
F10
F40
F50
F55
F70
F80

Rates
Opening

Closing

When the consolidation rate and/or financial interest varies between opening and closing, the effect of
this variation is automatically taken into account in specific flows (see Scope Changes on page 99).
If needed, manual journal entries can be booked to correct the automatic calculation of non-controlling
interests:
Audit ID
NCI11

Account

Flow

E1xxx Equity attributable to owners of parent

Fxx*

E2xxx - Non-controlling interests

Fxx*

Debit

Credit

*The flow should be selected depending on the operation. For instance,flow F10 should be used to correct the NCI share of
the Net Income.

Example
Scenario

Parent company M subscribed to 60% of company F's capital when the latter was created in N. F is fully
consolidated on 31/12/N.
Package for F

General trial balance on 31/12/N


F00
Opening

Accounts

F99
Closing

ASSETS
Cash on hand

120

LIABILITIES
Issued capital

100

Retained earnings*

20

* This corresponds to the net income for the year.

Schedule PA2500
ACCOUNTS

CODE

F00

F99

F06

F10

Issued capital

E1110

100

Retained earnings

E1610

20

20

120

20

Net equity

F20

F30

F40

F50

F55

Spec.

Control

100

100

79

Consolidation Entries

Automatic journal entries (before eliminating shares)


E1110 Issued capital
PACK01

E1610 Retained earnings

100

PACK01

NCI-PACK01

40

NCI-PACK01

CONS10

60

CONS10

A2610 Cash on hand


PACK01

20
8

60

E2010 - NCI - Reserves and retained earnings

120

NCI-PACK01

40

NCI-PACK01

Calculation of the non-controlling interests on capital (40% x 100 = 40)


Calculation of non-controlling interests in net income: 40% x 20 = 8
Reclassification of capital to retained earnings
Presentation by flow
Accounts

Audit ID

A2610 Cash on hand

F10

PACK01

Total ASSETS
E1110 Issued capital

F15

F40

F99

120

120

120

120

PACK01

100

100

NCI-PACK01

<40>

<40>

CONS10

<60>

<60>

Total

E1610 Retained earnings

PACK01

20

20

NCI-PACK01

<8>

<8>

CONS10
Total

12

60

60

60

72

40

40

NCI-PACK01

NCI-PACK01

Total

40

48

Total LIABILITIES & EQUITY

20

100

120

Control (assets - liabilities = equity)

N/A

N/A

0K

E2010 - NCI - Reserves and retained


earnings

N/A

Elimination of Investments
Principles
Consolidated investments in subsidiaries are eliminated by the parent against account A181OC-Elimination
of investment in subsidiaries - Owner company using audit ID INV10.
Account A181OC is then balanced in the subsidiarys balance sheet on account A181HC, using the same
audit ID INV10. This elimination impacts the subsidiary's reserves (account: E1610-Retained earnings).
The calculation of the impact on non-controlling interests is based on the financial interest of the Group in
the parent.

80

Consolidation Entries

Example
Overview

The Group's organization chart is as follows:


M

F
80%

SF
50%

50% of SF is held by F and the rest by a non-Group company. SF is consolidated using the proportionate
method.
The scope of the Group at 31/12/N is as follows:
Company

Opening
method

Opening
consolidation
rate

Opening fin.
int.

Closing
method

Closing
consolidation
rate

Closing
owner. int.

Closing fin.
int.

Variation

FC

100%

100%

FC

100%

100%

100%

FC

100%

80%

FC

100%

80%

80%

SF

PC

50%

40%

PC

50%

50%

40%

Package for M on 31/12/N


Trial balance
Accounts

F00
Opening

F99
Closing

80

80

80

80

ASSETS
Investments in subsidiaries
LIABILITIES
Issued capital

Schedule PA2100 Investments in Subsidiaries


INVESTMENT IN
SUBSIDIARIES

CODE

Investments in subsidiaries,
A1810
JV and associates
To be broken down
Subsidiaries, JV & assoc.

F00

F99

F20

80

80

80

80

80

80

F30 F40 F50 F55 F09

F70

Control

Code

RU F

Total

Package for F on 31/12/N


Trial Balance
F00
Opening

F99
Closing

500

500

Issued capital

100

100

Bank - Non current borrowings

400

400

Accounts
ASSETS
Investments in subsidiaries
LIABILITIES

81

Consolidation Entries

Schedule PA2100 Investments in Subsidiaries


INVESTMENT IN SUBSIDIARIES

CODE

Investments in subsidiaries, JV and


associates

A1810

F00

F20

500

500

500

500

500

500

To be broken down
Subsidiaries, JV & assoc.

F99

F30 F40 F50 F55 F09

F70

Control

Code

RU SF

SF

Total

Package for SF on 31/12/N


Trial Balance
Accounts

F00
Opening

F99
Closing

1 000

1 400

1 000

1 000

ASSETS
Cash on hand
LIABILITIES & EQUITY
Issued capital
Retained earnings

400

Schedule PA2500
ACCOUNTS

CODE

Issued capital

E1110

Retained earnings

E1610

Net equity

F00

F99

1 000

1 000

1 000

F05

F10

400

400

1 400

400

F20

F30

F40

F50

F55

Automatic journal entries


Company M
A1810 Investment in subs. JV and assoc.
PACK01

80

E1110 Issued capital


PACK01

INV10

80

80

A181OC Elimination of investment in subsidiaries Owner company


INV10

80

Company F
A1810 Investment in subs. JV and assoc.
PACK01
INV10

82

500

E1110 Issued capital


PACK01

500

100

NCI-PACK01

20

CONS10

80

Spec.

Control

Consolidation Entries

L1510 Borrowings, Non current


PACK01

400

A181OC Elimination of investment in subsidiaries Owner company


INV10

A181HC Elimination of investment in subsidiaries Held company


INV10

80

500

E1610 Retained earnings


CONS10
INV10

80
80

E2010 - NCI - Reserves and retained earnings


NCI-PACK01

20

Company SF
A2610 Cash on hand
PACK01

700

E1110 Issued capital

PACK01

NCI-PACK01

40

400

100

CONS10

400

200

400

INV10

500

CONS10
INV10

NCI-PACK01

A181HC Elimination of investment in subsidiaries Held company

E1610 Retained earnings


PACK01

500

E2010 - NCI - Reserves and retained earnings


NCI-PACK01
INV10

140
100

Local data from SF is consolidated at 50%


Calculating NCI in SF's equity:

Capital: Group share = 40% x 1000 = 400, NCI = 500 400 = 100
Net income: Group share = 40% x 400 = 160, NCI = 200 160 = 40
Reclassification of capital for SF
Elimination of SF's shares held by F
Impact on Group reserves = <500> x 80% = <400>
Impact on NCI = <500> x 20% = <100>
Calculating NCI in Fs equity: Group share = 80% x 100 = 80, NCI = 20% x 100 = 20
Reclassification of capital for F
Elimination of F's shares held by M
Impact on Group reserves = <80> x 100% = <80>

83

Consolidation Entries

Presentation by flow
Accounts

Audit ID

Reporting
unit

F00

A1810 Investment in subs. JV and assoc.

PACK01

80

PACK01

500

500

INV10

<500>

<500>

INV10

<80>

<80>

Total
A181HC Elimination of investment in
subsidiaries - Held company

<500>

<500>

INV10

<80>

<80>

<580>

<580>

INV10

500

500

INV10

80

80

580

580

PACK01

SF

Total ASSETS
E1110 Issued capital

200

700

500

200

700

500

200

700

80

80

PACK01

100

100

PACK01

SF

500

500

NCI-PACK01

SF

<100>

<100>

SF

<400>

<400>

NCI-PACK01

<20>

<20>

<80>

<80>

80

80

CONS10

CONS10
Total

PACK01

SF

200

200

NCI-PACK01

SF

<40>

<40>

CONS10

SF

400

400

INV10

SF

<400>

<400>

CONS10

80

80

INV10

<80>

<80>

Total

160

SF

NCI-PACK01

SF

SF

<100>

<100>

20

20

INV10

Total
PACK01
Total

100
40

20
F

100
40

40

60

400

400

400

400

Total LIABILITIES & EQUITY

500

200

Control (assets liabilities)

OK

N/A

84

160

NCI-PACK01

NCI-PACK01
L1510 Borrowings, Non current

500

PACK01

E2010 - NCI - Reserves and retained earnings

80

SF

Total

E1610 Retained earnings

F99

INV10

Total
A2610 Cash on hand

F15

Total
A181OC Elimination of investment in
subsidiaries - Owner company

F10

700
N/A

OK

Consolidation Entries

Converting Consolidated Shareholders' Equity and


Investments in Subsidiaries
Principles
Consolidated shareholders' equity (except Hedging reserves and Fair value reserves) and shares
belonging to foreign subsidiaries are maintained at their historical conversion rate.
As regards shareholders' equity, the differences between the historical and closing rates are carried over to
a specific account for shareholders' equity, E1560-Foreign currency translation reserve, before tax, using
audit ID CTA10. The NCI share will then be transferred from account E1560 to account E2060-NCI Foreign currency translation reserve, before tax, using audit ID NCI-CTA10.
The currency translation adjustment of consolidated investments in subsidiaries is triggered with the
same approach as the elimination of shares, but the journal entry is posted on dedicated accounts in
the equity (E1560 and E2060) and uses the dedicated audit ID INV20-Currency translation adjust. on
investments Auto).
The automatic processing is based on the conversion difference flow (F80) calculated automatically for all
of the balance sheet accounts and, in particular, for shareholders' equity and investment accounts (see
Converting Data on page 40).

Manual Journal Entries


When using the application to perform a consolidation for the first time, any opening conversion reserves
that exist should be posted by manual journal entry.

Conversion differences for shareholders' equity


Audit ID

Account

Flow

CTA01

E1xxx Shareholders' equity local accounts

F00

E1560 Foreign currency translation reserve, before tax

F00

Debit

Credit

Conversion differences for consolidated investments in subsidiaries

Entry posted in the shareholders accounts


Audit ID

Account

Flow

Debit

Credit

Investments

Debit

Credit

INV21

A1810 Investment in subs. JV and assoc.

F00

Subs.

A181OC Elimination of investment in


subsidiaries - Owner company

F00

Subs.

A
B

When the historical value of shares is greater than the value converted using the opening rate
When the historical value of shares is lesser than the value converted using the opening rate

85

Consolidation Entries

Entry posted in the subsidiarys accounts


Audit ID

Account

Flow

Debit

Credit

Investments

INV21

A181HC Elimination of investment in


subsidiaries - Held company

F00

Owner comp.

E1560 Foreign currency translation reserve,


before tax

F00

Owner comp.

E2060 NCI - Foreign currency translation


reserve, before tax

F00

Owner comp.

A
B
*

Debit

Credit

When the historical value of shares is greater than the value converted using the opening rate
When the historical value of shares is lesser than the value converted using the opening rate
If applicable, the impact on equity should be split between Groups share and NCI, based on the groups share in the
owner company

Example
Overview

Parent company M created company F in the United States in N-1.


F's capital amounts to 100 USD. The conversion rate applicable when the company was created was 1.10
USD for 1 EUR. In M's local accounts, the value of F's shares is therefore 91 EUR (= 100 USD / 1.10).
Consolidation is performed for the first time using the application on 31/12/N. The evolution of F's
shareholders' equity between its creation date and the opening of period N is presented below:
(in USD)
1/1/N-1
Net income N-1
31/12/N-1

Capital

Reserves

Net income

Total

100

100

0
200
200

100
200
300

The evolution of the dollar's conversion rate for the period is as follows:
1/1/N-1

Average N-1

31/12/N-1

Average N

31/12/N

0.90

0.90

0.80

1EUR =

The conversion rate table for period N is as follows (certain for uncertain):
Currency

Closing rate

Average rate

Opening rate

EUR

USD

0.80

0.90

Package for M on 31/12/N


Trial balance
F00
Opening

F99
Closing

A1810 Investment in subs. JV and assoc.

91

91

A2160 Cash on hand

100

100

Accounts
ASSETS

LIABILITIES & EQUITY


E1110 Issued capital

86

Consolidation Entries

Schedule PA2100 Investments in Subsidiaries


INVESTMENT IN SUBSIDIARIES

CODE

Investments in subsidiaries, JV and


associates

A1810

F00

F20

91

91

91

91

91

91

To be broken down
Subsidiaries, JV & assoc.

F99

F30 F40 F50 F55 F09

F70

Control

Code

RU SF

Total

Package for F on 31/12/N


Trial balance (USD)
F00
Opening

F99
Closing

300

400

E1110 Issued capital

100

100

E1510 Retained earnings

200

300

Accounts
ASSETS
A2160 Cash on hand
LIABILITIES & EQUITY

Schedule PA2500
ACCOUNTS

CODE

F00

F99

F05

F10

F20

Issued capital

E1110

100

100

Retained earnings

E1610

200

300

100

300

400

100

Net equity

F30

F40

F50

F55

Spec.

Control

Manual Journal Entries


When the historical data is retrieved, cumulated conversion differences at opening should be restored by manual journal
entry.
Evaluation of conversion reserves at opening:
Analysis of shareholders' equity on 01/01/N
Capital

Amount
in USD

Historical rate

N Opening
rate

100

Difference

Definition

Rate

(EUR)

Rate at creation date

1.10

<9>

Average N-1 rate

0.90

22

1
Retained earnings

200
300

13

Journal entry to be posted:

Post the following journal entry in EUR for F:


Audit ID

Account

Flow

Debit

CTA01

E1110 Issued capital

F00

E1610 Retained earnings

F00

E1560 Foreign currency translation reserve, before tax

F00

Credit

22
13

87

Consolidation Entries

Automatic journal entries generated for F

Journal entries that eliminate investments in subsidiaries without any specificity are not presented here:
A2610 Cash on hand
PACK01

500

E1110 Issued capital

PACK01

CTA01
CTA10
CONS10

88

64

CTA01

CTA10

25

CONS10

91

E1560 Foreign currency translation reserve, before


tax

E1610 Retained earnings


PACK01

125

375

CTA01

22

CTA10

91

13

25

F's local data converted at closing rate


Restoring cumulative translation differences at opening for capital and reserves (manual journal entry)
Elimination of the period's conversion variation for Issued capital: 100/0.80 100/0.90 = 25
Elimination of the period's conversion variation
Opening retained earnings: 200/0.80 200/1 = 50
Net income for the period: 100/0.80 100/0.90 = 14
Total = 64
NCI calculation (N/A because the group holds 100% of F) and transfer of Capital to Retained earnings

Consolidation Entries

Presentation by flow
Accounts

Audit ID

Reporting
unit

F00

A1810 Investment in subs. JV and assoc.

PACK01

91

91

INV10

<91>

<91>

<91>

<91>

<91>

<91>

91

91

91

91
9

Total
A181HC Elimination of investment in
subsidiaries - Held company

INV10

Total
A181OC Elimination of investment in
subsidiaries - Owner company

INV10

Total
A2610 Cash on hand

F99

PACK01

300

111

89

500

309

111

89

509

309

111

89

509

PACK01

100

PACK01

100

CTA01

<9>

CTA10

CONS10

Total

100
25

CTA01

CTA10

125
<9>

<25>
<91>

<25>
<91>

100

Total
E1610 Retained earnings

F80

Total ASSETS

E1560 Foreign currency translation reserve,


before tax

F15

PACK01

Total

E1110 Issued capital

F10

<13>

100
<13>

<13>

89

89

76

64

375

PACK01

200

INV10

<91>

<91>

CTA01

22

22

CTA10

CONS10

Total

111

89

<64>
91

<64>
91

222

111

333

Total LIABILITIES & EQUITY

309

111

89

509

Control (assets liabilities)

OK

N/A

OK

OK

N/A

Analysing the changes in the foreign currency exchange reserve for


the Group
A report provides an analysis of the impact of changes in conversion rates on the net equity kept at
historical value.
Folder

Book

Schedule

C4

C46

C46-30 Year-to-date - Analysis of changes in Foreign currency exchange


reserve

89

Consolidation Entries

Optional Conversion Process on Investment and Capital/Share


Premium
By default, for any B/S account, flows F20-Increase/Purchase and F40-Subscription to capital
increase/decrease are converted using the average rate of the period.
It is possible to perform a more accurate conversion based on the exact daily rate on the following
account/flow combinations:

A1810-Investments in subsidiaries, JV and associates / F20,

A1810-Investments in subsidiaries, JV and associates / F40,

E1110-Issued capital / F40,

E1210-Share premium / F40.

This can be used to handle more easily some consolidation events such as an incoming company in the
scope or the subscription to a capital increase. Indeed, the conversion of the amounts entered on these
account/flow combinations is done using the specific exchange rate at the date of the event, and you do not
need to post manual journal entries to refine conversion.
This optional conversion process is based on:

An additional detail by date provided in the package for these account/flow combinations.

Daily rates entered in the conversion rate table.

Data Entry Schedules


To enter detail by dates on Investment and Capital/Share premium, use the following schedules, depending
on which account/flow combination you want to detail:
Account/Flow
combination

Data entry schedule

Link from schedule

A1810 / F20

PA2350 Purchase/disposal of investment in


subsidiaries / Date

PA2300 Purchase/Disposal of
investment in subsidiaries

A1810 / F40

PA2360 Subscriptions to subsidiaries capital


increase / Date

PA2100 Investments in subsidiaries

PA2550 Variations of issued capital and share


premium / Date

PA2500 Equity statement

E1110 / F40
E1210 / F40

Note: these schedules must be filled out only by entities using a reporting currency that differs from the
consolidation currency.

Retrievals
The following reports have been configured to check:

the consistency of the analysis by date entered in the packages and the daily rates entered in the
exchange rate table

the conversion at daily rate by identifying missing analysis by date and/or missing daily exchange
rates

Folder

Book

Schedule

C4

C43

C43-05 Check consistency between Analysis by date - Daily exchange rate


C43-15 Checking the conversion of capital increase/decrease
C43-20 Checking the conversion of subscription to capital increase
C43-25 Checking the conversion of purchase of investments

90

Consolidation Entries

Example: Subscription to a capital increase


Overview

Parent company M holds US subsidiary F1 at 100% since it was created. Reporting currency for M and
consolidation currency are EUR.
On 12/07/N, M subscribes to 100% of an increase in capital made by F1. At this date, the conversion rate
for the USD is 1 EUR=1.17 USD. The increase in capital amounts is 100 USD.
Suscription by M = 100 USD / 1.17 = 85 EUR.
Extract from the conversion rate table for 30/09/N (certain for uncertain 1EUR = x CUR)
Currency

OR
Opening rate

AR
Average rate,
current period

07.12
Rate for
July 12

CR
Closing rate

EUR

USD

1.02

1.11

1.20

1.17

Package for M on 31/09/N


Schedule PA2100 Investments in Subsidiaries
INVESTMENT IN SUBSIDIARIES

CODE

Investments in subsidiaries, JV and


associates

A1810

F00

F20

F30 F40 F50 F55 F09

140

225

140

225

85

140

225

85

To be broken down
Subsidiaries, JV & assoc.

F99

F70

Control

85

Code

RU F

Total

Package for F on 31/09/N


Schedule PA2500
ACCOUNTS

CODE

F00

F99

F05

F10

Issued capital

E1110

200

300

Retained earnings

E1610

150

200

50

350

500

50

Net equity

F20

F30

F40

F50

F55

Spec.

Control

100

100

Schedule PA2550 Variations of issued capital and share premium / Date


CODE
Issued capital

E1110

To be broken down

F40
100
0

Transaction dates
07.12 July 12

100

Total

100
th

Based on the additional data provided in schedule PA2550 and the exchange rate for July 12 entered in
the exchange rate table, the flow F40 on Investment and Issued capital will be converted at the exact
exchange rate, that is 1.17.
If the subscription to the capital increase is made by a subsidiary reporting in a foreign
currency, schedule PA2360 is used to detail this subscription by date. Refer to the Data entry
guide for further information.

91

Consolidation Entries

Equity Method
Principles
Equity method journal entries consist of booking the share of net assets in the account Investments
accounted for using equity method. This value is based on the subsidiary's shareholders' equity after taking
into account adjustments, eliminations and the consolidation rate of the scope.
These journal entries are booked using the original audit IDs, for example package or adjustment.
Example
Overview

The Group's organization chart is as follows:


M

F
80%

20%

S
F

The scope of the Group at 31/12/N is as follows:


Company

Opening
method

Opening
consolidation
rate

Opening
fin. int.

Closing
method

Closing
consolidation
rate

Closing
owner.
int.

Closing fin.
int.

Variation

FC

100%

100%

FC

100%

100%

100%

FC

100%

80%

FC

100%

80%

80%

SF

EM

20%

16%

EM

20%

20%

16%

F00
Opening

F99
Closing

160

160

160

160

Package for M on 31/12/N


Trial balance
Accounts
ASSETS
A1810 Investment in subs. JV and assoc.
LIABILITIES
E1110 Issued capital

Schedule PA2100 Investments in Subsidiaries


INVSESTMENT IN SUBSIDIARIES

CODE

Investments in subsidiaries, JV and


associates

A1810

To be broken down
Subsidiaries, JV & assoc.
RU F
Total

92

F00

F99

F20

160

160

160

160

160

160

Code
F

F30 F40 F50 F55 F09

F70

Control

Consolidation Entries

Package for F on 31/12/N


Trial balance
Accounts

F00
Opening

F99
Closing

200

200

200

200

ASSETS
A1810 Investment in subs. JV and assoc.
LIABILITIES
E1110 Issued capital

Schedule PA2100 Investments in Subsidiaries


INVESTMENT IN SUBSIDIARIES

CODE

Investments in subsidiaries, JV and


associates

A1810

F00

F20

200

200

200

200

200

200

To be broken down
Subsidiaries, JV & assoc.

F99

F30 F40 F50 F55 F09

F70

Control

Code

RU SF

SF

Total

Package for SF on 31/12/N


Schedule PA2500
ACCOUNTS

CODE

Issued capital

E1110

Retained earnings

E1610

Net equity

F00

F99

F05

F10

1 000

1 000
400

400

1 000

1 400

400

F20

F30

F40

F50

F55

Spec.

Control

Automatic journal entries


Company M
A1810 Investment in subs. JV and assoc.
PACK01

160

E1110 Issued capital


PACK01

INV10

160

160

A181OC Elimination of investment in subsidiaries Owner company


INV10

160

Company F
A1810 Investment in subs. JV and assoc.
PACK01
INV10

200

E1110 Issued capital


PACK01

200

NCI-PACK01
CONS10

200
40

160

93

Consolidation Entries

A181OC Elimination of investment in subsidiaries Owner company


INV10

200

INV10

E1610 Retained earnings


INV10

160

160

NCI-PACK01
160

E2010 - NCI - Reserves and retained earnings

CONS10

A181HC Elimination of investment in subsidiaries Held company

40

Company SF
A1500 Investments accounted for using equity
method
280

E1110 Issued capital


PACK01
NCI-PACK01
CONS10

INV10
NCI-PACK01

160

16

CONS10

40

160

80

160

INV10

E2010 - NCI - Reserves and retained earnings


INV10

40

NCI-PACK01

56

Booking of investments in associates:

94

A181HC Elimination of investment in subsidiaries Held company

E1610 Retained earnings


PACK01

200

At opening: Equity method value = 1000 x 20% = 200


Net income for the period = 400 x 20% = 80
Elimination of SF's shares held by F
Impact on Group reserves = <200> x 80% = <160>
Impact on NCI = <200> x 20% = <40>
Calculating NCI in SF's equity:
Capital: Group share = 16% x 1000 = 160, NCI = 200 160 = 40
Net income: Group share = 16% x 400 = 64, NCI = 80 64 = 16
Reclassification of capital for SF
Elimination of F's shares held by M
Impact on Group reserves = <160> x 100% = <160>
Calculating NCI in Fs equity: Group share = 80% x 200 = 160, NCI = 20% x 200 = 40
Reclassification of capital for F

200

Consolidation Entries

Presentation by flow
Accounts
A1500 Investments accounted for using equity
method

Audit ID

Reporting
unit

F00

F10

F99

PACK01

SF

200

80

280

200

80

280

Total
A1810 Investment in subs. JV and assoc.

PACK01

160

160

PACK01

200

200

INV10

<200>

<200>

INV10

<160>

<160>

Total
A181HC Elimination of investment in
subsidiaries - Held company

INV10

SF

<200>

<200>

INV10

<160>

<160>

<360>

<360>

Total
A181OC Elimination of investment in
subsidiaries - Owner company

INV10

200

200

INV10

160

160

360

360

Total
Total ASSETS

200

E1110 Issued capital

PACK01

280

160

160

PACK01

200

200

PACK01

SF

200

200

NCI-PACK01

SF

<40>

<40>

SF

<160>

<160>

NCI-PACK01

<40>

<40>

<160>

<160>

160

160

CONS10

CONS10
Total

E1610 Retained earnings

PACK01

SF

INV10

SF

80
<160>

80
<160>

NCI-PACK01

SF

CONS10

SF

160

160

INV10

<160>

<160>

CONS10

160

160

Total
E2010 - NCI - Reserves and retained earnings

80

INV10

<16>

64

<16>

64

SF

<40>

<40>

NCI-PACK01

SF

40

40

NCI-PACK01

SF

NCI-PACK01

Total

16
40

16
40

40

16

56

Total LIABILITIES & EQUITY

200

80

280

Control (assets liabilities)

OK

N/A

OK

95

Consolidation Entries

Booking of Goodwill
Full and Proportionate Consolidation Methods
Booking Gross Goodwill
Goodwill is booked automatically in the consolidated balance sheet based on declarations made by manual
journal entry using audit ID GW01 on technical account XA1310-Declared goodwill analyzed by owner,
Gross. This has an effect on balance sheet account A1310-Goodwill.
The manual journal entry is booked for the subsidiary, with a breakdown per share used to identify the
owner company. It must be entered in the subsidiarys reporting currency.
The automatic journal entry is posted for the subsidiary using audit ID GW10-Booking of goodwill and
bargain purchase - Auto. The impact on the consolidated equity is split between Group and Non-controlling
interests, based on the groups financial interest in the owner company.
The account for declaring the goodwill uses the same sign convention as its corresponding account in the
balance sheet. When you enter a debit amount for account XA1310, this will generate an increase in
goodwill for account A1310. When you enter a credit amount, this will generate a decrease in goodwill for
the same account.
Example of journal entry:
Audit ID
GW01

Account

Flow

XA1310-Declared goodwill analyzed


by owner, Gross

Debit
B

Credit
X

Share

Debit

Credit

Code of the subsidiarys owner. The journal entry for declaring goodwill is posted in the subsidiarys
accounts.

The flow to be used in the journal entry depends on the event from which goodwill originates. For example,
use flow F01 for an incoming entity.

Booking Goodwill Impairment


The principles are identical to those presented above for booking goodwill.
The account for declaring goodwill impairment is XA1312-Declared goodwill analyzed by owner, Impair.
The corresponding account in the balance sheet is A1312-Goodwill, Impair. and in the income statement
P1630-Impairment of goodwill.
The flow to be used for booking impairment is flow F25.
Example of journal entry:
Audit ID
GW01
A

Account

Flow

XA1312 Declared goodwill analyzed by


owner, Impair.

F25

Debit

Credit

Share

Debit

Credit
X

Code of the subsidiarys owner. The journal entry for declaring goodwill impairment is posted in the
subsidiarys accounts.

Bargain Purchase
When a business combination causes a bargain purchase, the corresponding gain is recorded by a manual
journal entry on technical account XA1300-Declared bargain purchase analyzed by owner. An automated
journal entry will impact the income statement (P1640-Gain on bargain purchase) against the consolidated
equity.
To make sure that flow F01-Incoming units remains balanced, a clearing account (A13CL-Clearing account
- Bargain purchase) is used on both flows F01 and F25.
The other principles are the same as for booking a goodwill: the same Audit ID (GW01), impact on the
consolidated equity, and breakdown by owner using the Share dimension.

96

Consolidation Entries

Full Goodwill Method


It is possible to account for a business combination by applying the full goodwill method. The manual
journal entry is posted with a share detail on TP-999-Third parties.
The automated journal entry then impacts account A1310-Goodwill against Non-controlling interests
(account E2010-Non-controlling interests - Reserves and retained earnings).

Goodwill Conversion
For consolidated entities reporting in a foreign currency, any change in the conversion rate impacts the
goodwill (A1310), against the foreign currency translation reserves (E1560 for the Group, E2060 for Noncontrolling interests).
A report enables you to analyse the changes in the foreign currency translation reserve for the Group
resulting from a change in exchange rate impact the net goodwill.
Folder

Book

Schedule

C4

C43

C43-75 Year-to-date - Analysis of changes in Foreign currency exchange


reserve - net goodwill

Example
Scenario 1

The Group's organization chart is as follows:


M

F
90%

SF
80%

By acquiring SF on 01/01/N, goodwill amounting to 2 000 was generated. An impairment of 100 is entered
for the period. The group does not apply full goodwill method for this business combination.
Manual journal entries to be posted

Declaration of goodwill:
Reporting
unit

Audit ID

SF

GW01

Account

Flow

Debit

XA1310-Declared goodwill
analyzed by owner, Gross

F01

2 000

Credit

Share

Debit

2 000

Credit

Share

Debit

100

Credit

Declaration of goodwill impairment for the period:


Reporting
unit

Audit ID

SF

GW01

Account

Flow

XA1312 Declared goodwill


analyzed by owner, Impair.

F25

Debit

Credit
100

Accounting entries generated

These journal entries are generated for SF.


Balance sheet:
A1310 Goodwill
GW10

2 000

E1610 Retained earnings

GW10
GW10

E2010 NCI - Reserves and retained earnings


GW10
GW10

200
10

1 800
90

A1312 Goodwill, Impair.


GW10

100

97

Consolidation Entries

Income statement:
P1630 Impairment of goodwill
GW10

100

Booking of goodwill: The impact on reserves is allocated between Group and NCI based on the
parent's financial interest, i.e. Group share = 90% x 2000 = 1800, NCI = 200.

Booking of goodwill impairment. The impact on net income is allocated between Group (90%x100 =
90) and NCI (10%x100 = 10).

Scenario 2 Applying full goodwill method

Using the previous example, suppose the Group applies the full goodwill method. Based on the estimated
fair value of the Non-controlling interests, the Goodwill attributable to NCI is 250.
The journal entry to declare this goodwill should be posted as follows:
Reporting
unit

Audit ID

SF

GW01

Account

Flow

Debit

XA1310-Declared goodwill
analyzed by owner, Gross

F01

XA1310-Declared goodwill
analyzed by owner, Gross

F01

Credit

Share

Debit

2 000

2 000

250

TP-999

250

Credit

Goodwill for EM Entities


When a goodwill or a bargain purchase is booked for an entity accounted for using Equity method, the
principles described above for Full or Proportionate consolidation subsidiaries apply. The only exceptions
are as follows:

98

To comply with IAS28 standard, the gross goodwill and, if applicable, the corresponding impairment,
is booked in the balance sheet using account A1500-Investments accounted for using equity
method. In other words, the goodwill is not distinguished from the Groups share of the subsidiarys
net assets.

In the income statement, the impairment of goodwill impacts account P3000-Share of profit (loss) of
assoc. & JV accounted for using EM. The same account is used in case a business combination
generates bargain purchase.

Scope Changes

Scope Changes
Section Objectives
This section gives an overview of the scope changes and deals in deeper details with the following cases:

An entity enters the consolidation scope.

An entity exits the consolidation scope.

Key Points
For incoming units:

Specific exchange rates must be entered for an incoming unit.

Package data on flow F00 must correspond to the position at the date the subsidiary enters the
scope.

Fair value adjustment is booked manually using audit ID FVA11.

Goodwill or bargain purchase is booked by an automatic journal entry based on a manual


declaration on technical accounts.

For outgoing units:

Specific exchange rates must be entered for an outgoing unit.

Entities can exit the consolidation scope at the opening or during the fiscal year; in this case, they fill
out a package in which F99 corresponds to the position at the date of the exit.

A manual journal entry must be posted on audit ID INV31 with the local currency or INV32 with the
consolidation currency to book the difference between the net gain/loss on disposal in the individual
accounts of the owner company and the net gain/loss in the consolidated accounts.

Overview of the Scope Changes


Typology of Scope Changes
Business combinations, defined in IFRS3 and IAS27 standards, and scope changes as they are defined in
SAP BusinessObjects Financial Consolidation can be summarized as follows:
Consolidation
method *

Status in FC (consolidation engine) *

Events
Opening Closing

Incoming Outgoing
entity

entity

Change in method
FC/PC->E

E->FC/PC

Comments
Change in
cons. %

ACQUISITION
Acquisition of a significant
influence

NC

Acquisition of a joint-control

NC

PC

Acquisition of a controlling
interest

NC

FC

99

Scope Changes

Consolidation
method *

Status in FC (consolidation engine) *

Events
Opening Closing

Step acquisition (business


combinations achieved in
stages)

Incoming Outgoing
entity

entity

FC

PC

FC

PC

NC

FC

PC

FC

NC

FC

NC

FC

FC

PC

PC

PC

PC

Change in method
FC/PC->E

E->FC/PC

Comments
Change in
cons. %

X
X

LOSS OF CONTROL

With or without retaining a


residual interest

X
X
X

EQUITY TRANSACTIONS
Transactions with NCI that do
not change control

Variation of interest %
in the conso scope

OTHER OPERATIONS
Joint control achieved in stage
Partial disposal of a JV

Increase in parents ownership


interest

X
X

Variation of interest %
in the conso scope

* NC: Not consolidated


FC: Full consolidation
PC: Proportionate consolidation
E: Equity method

Scope Changes: Using the Right Flow


In the IFRS Starter Kit, three flows are dedicated to record investments and disposals of shares in
consolidated entities:

F20: Increase/Purchase

F30: Decrease/Disposal

F40: Subscription to capital increase/decrease

100

Scope Changes

The following table indicates which flow is used in the held entitys equity to deal with the scope change,
depending on the flow used in the package and the status of the held entity:
Flow used in
the package

Status of held entity in scope

Flow used in held entitys equity

Incoming

F01 (incoming entities)

Change in consolidation method

F03 (new method)

Others (held entity fully consolidated)

F92 (increase/decrease in interest rate)

Others (held entity PC or EM)

F04 (change in consolidation rate)

Outgoing

F98 (Outgoing entities)

Change in consolidation method

F03 (new method)

Others (held entity fully consolidated)

F92 (increase/decrease in interest rate)

Others (held entity PC or EM)

F04 (change in consolidation rate)

All

F40 (capital increase)

F20

F30

F40

Events Covered in this Documentation


This documentation will cover in detail the two following consolidation events:

incoming entities

outgoing entities

Indeed, these events happen quite frequently in a consolidation; additionally, some of the information
presented here (concepts, journal entries, and so on) will be applicable when dealing with other types of
scope changes: booking goodwill or bargain purchase, correcting the net gain on disposal of investments.
It may also be pointed out that, according to IFRS3, a business combination achieved in stages (E->FC or
PC->FC) should be dealt with as if the existing entity had been disposed of, and a new entity (consolidated
using Full consolidation) had been acquired.
Any manual journal entries posted on a company changing in consolidation methods should be
entered with a journal entry restriction (Variant, Scope or Currency) to be accurately taken into
account during the consolidation process.

Incoming Entities
Preparing the Reporting Cycle
Updating Exchange Rates
The principles for updating the exchange rate table for entities with a foreign reporting currency are
described in chapter Entering Conversion Rates on page 21.
When such an entity enters the scope at a date that is not the beginning of the fiscal year, however,
specific exchange rates should be entered for this reporting unit, using the RU-specific rates functionality.
The table below shows how to populate the exchange rate table, with the assumption that consolidations
are run each quarter, and that the entity enters the scope during Q3.
The two options for data conversion are:

YTD

quarterly

101

Scope Changes

Rate version
Rate type
A-YTD (Year-to-date) for Q3*

A-PER (Periodic) for Q3*

ARPP - Average exch. rate, prior


period

[Not used]

[Not used] **

OR - Opening exch. rate, current


period

Rate at the acquisition date

Rate at the acquisition date

AR - Average exch. rate, current


period

Average rate between


th
acquisition date and Sept 30

Average rate between acquisition


th
date and Sept 30

CR - Closing exch. rate, current


period

Rate at Sept 30

th

Rate at Sept 30

th

* No RU-specific exchange rates are needed for Q1 and Q2.


** The ARPP rate type is not used because it applies to quarter Q2 during which the entity was not consolidated.

If you opt for a periodic conversion, populating the exchange rate for the subsequent period (Q4 in our
example) must be done as follows:
Rate version
Rate type
A-PER (Periodic) for Q4
ARPP - Average exch. rate, prior
period

Average rate between acquisition


th
date and Sept 30

OR - Opening exch. rate, current


period

Rate at the acquisition date

AR - Average exch. rate, current


period

Average rate between Oct 1 and


st
Dec 31

CR - Closing exch. rate, current


period

Rate at Dec 31

st

st

You will only enter the daily rate types of the quarter in the periodic conversion..

Consolidation Package
The package for an incoming entity should be entered following the principles described in chapter
Collecting Data on page 23.
The opening balances for the balance sheet, however, will not be pre-loaded, and flow F00 must be
populated based on the position at the date the entity enters the scope, and the movements will correspond
to the variation between that date and the closing date only.
As for the income statement, the amounts to enter correspond to the income and expenses over the same
period.

Consolidation Scope
In the consolidation scope, any entity not consolidated at the opening and consolidated at closing,
regardless of the consolidation method applied, is identified as an incoming entity.

Automatic Processing
Consolidation Engine
The opening balances of an incoming entity are automatically transferred from flow F00-Opening position to
flow F01-Incoming units by the consolidation engine.

102

Scope Changes

Intercompany Eliminations
The incoming entity must declare any intercompany transaction, for example payable/receivable,
loan/financial debt, provision, and income/expense, towards the relevant Groups entities.
As for the entities that are consolidated at opening, they should make sure that they disclose correctly
intercompany data towards the incoming entity. Two situations may occur:

The incoming entity was already codified in the list of reporting units at the end of the previous fiscal
year, and the counterparts have declared their intercompany transactions with the incoming entity.
In this case, intercompany data is automatically eliminated on flow F01-Incoming units.

Otherwise, intercompany transactions with the incoming entity are included in the amount declared
towards Third-parties (TP-999). In the package, the corresponding amounts should be reclassified
on the relevant entity using flow F50.
In this case, intercompany data will be automatically eliminated on flow F50. If you want to refine the
analysis by flows on intercompany eliminations, transfer the intercompany declarations from flow
F50 to flow F01-Incoming units by a manual journal entry.

Dividends
When dividends are paid by an entity that enters the consolidation scope, one of the following scenarios
occurs:

If the dividends are paid to the former shareholders, flow F06 on equity is automatically transferred
to flow F01, so that the equity on flow F01 is net of dividends. Goodwill is calculated based on this
amount, and flow F01 on Groups equity equals zero.

If the dividends are paid to the new shareholders, consolidated entities, they are first eliminated on
flow F06. Then, two additional automatic journal entries are triggered:

In the payers accounts, flow F06 on equity is transferred to flow F01.

In the beneficiarys accounts, the impact of dividends elimination is transferred from flow F06 to
flow F01.

In both scenarios, after automatic journal entries have been triggered, flow F06 equals zero.

Manual Processing
Fair Value Adjustment
According to IFRS, the assets and liabilities of an incoming entity must be evaluated at their fair value at
the acquisition date.
In the starter kit, any difference between the value of an asset/liability in the package and its fair value must
be posted by a manual journal entry using audit ID FVA11-Fair value for incoming entities (central) - Man.
If needed, a deferred tax on the fair value adjustment must be posted, using the same audit ID.
Examples of fair value adjustment journal entries are presented in chapter Making Adjustments to
Packages on page 51.

Booking Goodwill
The principles for booking goodwill are explained in chapter Booking of Goodwill on page 96.

103

Scope Changes

Outgoing Entities
Preparing the Reporting Cycle
An entity may exit the consolidation scope when:

the Group has transferred control or significant influence on this entity to external shareholders,

this entity is merged into another consolidated entity.

Consolidation Package
Normally, any entity exiting the consolidation scope at a date that is different from the first day of the fiscal
year should fill out a consolidation package, detailing all the income/expenses and balance sheet
movements that occurred from the beginning of the fiscal year until control was transferred, or the entity
was merged.
However, getting the corresponding information is not always easy. Provided that this has not a significant
impact, the Group has several options:

Take the package used for the last interim consolidation, considering that the figures are very similar
to the actual figures at the date of the exit.

Fill out a package with the exact figures at the date of the exit.

Process the exit as if it happened at the beginning of the fiscal year.

If you fill out a package, the entity is considered as exiting the scope during the fiscal year.
On the contrary, if the impact of the exit corresponds to the closing position of the previous fiscal year, the
entity will be considered as exiting the scope at opening. No package is required in this case.

Consolidation Scope
In the consolidation scope, any entity consolidated at opening and not consolidated at closing is considered
as exiting the scope.
Depending on which additional information you enter in the scope for this entity, this entity will have one of
the four following statuses:
Intermediate data entry period

Acquiring reporting unit

Status

Not specified

Not specified

Outgoing at opening

Not specified

Specified

Outgoing acquired at opening

Specified

Not specified

Outgoing during period

Specified

Specified

Outgoing acquired during period

Intermediate Data Entry Period


The data entered in this field is used by the consolidation engine to identify which package must be loaded
in the consolidation.
Examples

The entity is disposed of on 15/07/2009. When running the consolidation for 31/12, the Group
decides to take the financial position on 30/06 for this entity (which corresponds to the package filled
out for the 30/06 consolidation). Intermediate data entry period should be 2009.06.

The entity is disposed of on 31/10/2009, and has provided financial statements as of 31/10. These
financial statements are used to fill out the package used for 2009.12 consolidation. Intermediate
data entry period should be 2009.12.

104

Scope Changes

If no intermediate data entry period is entered, no data entry package will be loaded by the consolidation
engine and the entity will exit the scope based on the opening balances.
Acquiring Reporting Unit
This field must be filled out when an internal merger occurs during the fiscal year, to identify the acquiring
entity.
When an entity is merged into a non-group entity, it is considered a classical exit and the Acquiring
reporting unit field must not be entered. DO NOT enter TP-999 in the Acquiring reporting unit field.

Updating Exchange Rates


When a foreign entity exits the scope, specific exchange rates should be entered for this reporting unit,
using the RU-specific rates functionality.
The tables below show how to populate the exchange rate table, with the assumption that consolidations
are run each quarter.
The two options for data conversion are:

YTD

quarterly

Exit at Opening
Rate version
Rate type

A-YTD (Year-to-date) for Q1 to


Q4

A-PER (Periodic) for Q1

ARPP - Average exch. rate, prior


period

[Not used]

[Not specified]

OR - Opening exch. rate, current


period

Rate at opening (default)

Rate at opening (default)

AR - Average exch. rate, current


period

Rate at Jan 1

CR - Closing exch. rate, current


period

Rate at opening

st

Rate at Jan 1

st

Rate at opening

If you opt for a periodic conversion, populating the exchange rate for the subsequent periods (Q2, Q3 and
Q4 in our example) must be done as follows:
Rate version
Rate type
A-PER (Periodic) for Q2, Q3, Q4
ARPP - Average exch. rate, prior
period
OR - Opening exch. rate, current
period

Rate at Jan 1

st

st

Rate at Jan 1 (default)

AR - Average exch. rate, current


period

Rate at Jan 1

st

CR - Closing exch. rate, current


period

Rate at Jan 1

st

105

Scope Changes

Exit during the Period


We assume the entity exits the scope in Q2. No RU-specific exchange rates are needed for Q1.
Rate version
Rate type
A-YTD (Year-to-date) for Q2*

A-PER (Periodic) for Q2

ARPP - Average exch. rate, prior


period

[Not used]

Average rate Jan 1 to Mar 31

OR - Opening exch. rate, current


period

Rate at Jan 1 (default)

AR - Average exch. rate, current


period

Average rate Jan 1 to exit date

Average rate Apr 1 to exit date

CR - Closing exch. rate, current


period

Rate at exit date

Rate at exit date

st

st

st

st

st

Rate at Jan 1 (default)


st

* The A-YTD exchange rate tables for Q3 and Q4 will be populated with the same values.

If you opt for a periodic conversion, populating the exchange rate for the subsequent periods, Q3 and Q4 in
our example, must be done as follows:
Rate version
Rate type
A-PER (Periodic) for Q3 and Q4
ARPP - Average exch. rate, prior
period

Average rate Apr 1 to exit date

OR - Opening exch. rate, current


period

Rate at Jan 1 (default)

AR - Average exch. rate, current


period

Average rate Apr 1 to exit date


(same as Q2)

CR - Closing exch. rate, current


period

Rate at exit date

st

st

st

Automatic Processing
Consolidation Engine
When an entity exits the scope, the consolidation engine reverses all the balance sheet data (assets,
liabilities and equity) for this entity.

For an entity outgoing at opening, the reversal is triggered on flow F98 based on the opening
position (flow F00) for package data, manual journal entries without restrictions, and automatic
journal entries.

For an entity outgoing during the period, the reversal is triggered on the same flow F98, but based
on the opening position (flow F00) plus the movements of the period.

In case the entity is merged into another group entity, the same reversal is triggered but on dedicated flow
F70.
Journal entries with a restriction (Scope and/or Version and/or Consolidation currency) must be
reversed manually if required.

Intercompany Eliminations
The eliminations of reciprocal transactions are reversed when an entity or its counterpart exits the
consolidation scope.

106

Scope Changes

As for the eliminations of internal provisions that were booked towards an entity that exits the scope, they
are also reversed automatically.

Manual Processing
Intercompany Eliminations
The elimination of the gain/loss on internal transfer of assets must be reversed by a manual journal entry
when an entity or its counterpart exits the consolidation scope.

Correcting the Net Gain/Loss on Disposal


When an entity exits the scope, the net gain/loss booked in the individual accounts of its owner company
does not correspond to the net gain/loss that must appear in the consolidated financial statements.
The correction must be booked manually on Audit ID INV31- Adjust. on gain/loss on disposal of a subs., JV
or associate (Local currency) or INV32- Adjust. on gain/loss on disposal of a subs., JV or associate
1
(Consolidation currency) .The journal entry is posted in the owner entitys accounts, as follows:

Audit ID
INV31

Account

Flow

Debit

Credit

Share

Debit

Credit

E1610 Retained earnings

F98

Held entity

P1615 Gains or losses on sale of shares

Y99

When the consolidated gain/loss is lower than in the individual accounts (that is, consolidated reserves are positive)

In the case where the consolidated gain/loss is higher than in the individual accounts.

INV32 should be used if the holding company of an outgoing company is in foreign currency. In that case the correction of the
gain/loss should be booked with the consolidation currency to avoid conversion calculation.

107

Completing the Consolidation

Completing the Consolidation


Section Objectives
This section describes the tasks required to complete the consolidated accounts.

Key Points
You should check the statement of changes in equity (including the statement of comprehensive income)
and the consolidated cash flow statement.
Checking consolidated shareholders' equity involves:

Eliminating subsidiaries' shareholders' equity, like capital or premium package data, should only
correspond to consolidated data for the parent company

Justifying the variations in the Group's share of net equity

The Statement of cash flows is generated automatically using flow analyses of movements in balance
sheet items. Discrepancies that appear between analyzed cash movements and actual change in cash in
the balance sheet should be corrected. These corrections are booked:

In balance sheet accounts for which the flow analysis has not been performed correctly or
completely

Directly in the line items of the cash flow statement if required

Checking the Statement of Comprehensive Income


Overview of the Statement of Comprehensive Income Reports
The starter kit for IFRS proposes two approaches to present the comprehensive income.

A unique report: a statement of comprehensive income including profit and loss and other
components of comprehensive income (SCI)

Two reports: an income statement (IS) and a statement of other comprehensive income (SOCI)

The following reports are available:


Folder

Book

Schedule

C1

C11

C11-20 Statement of Comprehensive Income

C1

C11

C11-10 Income Statement

C1

C11

C11-15 Statement of Other Comprehensive Income

Depending on the approach chosen, customers can archived either the statement of
comprehensive income or the income statement and the statement of other comprehensive
income

The detail by Reporting Unit can be displayed with the following reports:
Folder

Book

Schedule

C2

C21

C21-10 Income Statement by Reporting unit

C2

C21

C21-15 Statement of Other Comprehensive Income by reporting unit

108

Completing the Consolidation

Additional analysis reports of the Income Statement and of the Statement of Other Comprehensive Income
are available. You can access these reports by linking to them from one of the summarized reports above.
Folder

Book

Schedule

C2

C22

C22-10 Analysis of line item by account (Income Statement)

C2

C22

C22-25 Analysis of line item by reporting unit (Income Statement)

C2

C22

C22-30 Analysis of line item by reporting unit (Statement of Other


Comprehensive Income)

C2

C23

C23-05 Statement of Other Comprehensive Income breakdown

Schedule C23-05, in particular, provides details on the different account/flow pairs for each line item of the
SOCI.

Calculation matrix
Statement of Comprehensive Income
Profit (loss) for the period

Equity accounts
E1610

Retained earnings

E2010

NCI - Reserves and retained earnings

Gains (losses) on exchange differences on E1540


E1541
translation, before tax

Income tax relating to gains (losses) on


exchange differences
Reclassification adjustments on exchange
differences on translation, before tax
Income tax relating to reclassification
adjustments on exchange differences
Gains (losses) on remeasuring AFS
financial assets, before tax
Income tax relating to gains (losses) on
AFS
Reclassification adjustments on AFS
financial assets, before tax
Income tax relating to reclassification
adjustments on AFS
Gains (losses) on cash flow hedges, before
tax
Income tax relating to gains (losses) on
cash flow hedges
Reclassification adjustments on cash flow
hedges, before tax
Income tax relating to reclassification
adjustments on cash flow hedges
Adjustments for amounts transferred to
initial carrying amount of hedged items
Income tax relating to transfer to initial
carrying amount of hedged asset

Flows
{F10}

Hedging reserve, before tax


Income tax on hedging reserve

E1550

Fair value reserve, before tax

E1551

Income tax on fair value reserve

E1560

Foreign currency translation reserve, before tax

E2040

Fair value reserve, before tax

E2041

Income tax on fair value reserve

E2050

Foreign currency translation reserve, before tax

E2051

NCI - Income tax on fair value reserve

E2060

NCI - Foreign currency translation reserve, before tax

E1561

Income tax on foreign currency translation reserve

E2061

NCI - Income tax on foreign currency translation reserve

E1560

Foreign currency translation reserve, before tax

E2060
E1561

NCI - Foreign currency translation reserve, before tax


Income tax on foreign currency translation reserve

E2061

NCI - Income tax on foreign currency translation reserve

E1550

Fair value reserve, before tax

E2050

Foreign currency translation reserve, before tax

E1551

Income tax on fair value reserve

E2051

NCI - Income tax on fair value reserve

E1550

Fair value reserve, before tax

E2050

Foreign currency translation reserve, before tax

E1551

Income tax on fair value reserve

E2051

NCI - Income tax on fair value reserve

E1540

Hedging reserve, before tax

E2040

Fair value reserve, before tax

E1541

Income tax on hedging reserve

E2041

Income tax on fair value reserve

E1540

Hedging reserve, before tax

E2040

Fair value reserve, before tax

E1541

Income tax on hedging reserve

E2041

Income tax on fair value reserve

E1540

Hedging reserve, before tax

E2040

Fair value reserve, before tax

E1541

Income tax on hedging reserve

E2041

Income tax on fair value reserve

{F80}

{F80}
{F02/F98}
{F02/F98}
{F55}
{F55}
{F02/F30/F98}
{F02/F30/F98}
{F55}
{F55}
{F02/F30/F98}
{F02/F30/F98}
{F20}
{F20}

109

Completing the Consolidation

Statement of Comprehensive Income


Gains (losses) on revaluation, before tax
Income tax relating to gains (losses) on
revaluation
Actuarial gains (losses) on defined benefit
plans
Income tax relating to actuarial gains
(losses)

Equity accounts

Flows

E1510

Revaluation surplus, before tax

E2020

NCI - Revaluation surplus before tax

E1511

Income tax on revaluation surplus

E2021

NCI - Income tax on revaluation surplus

E1520

Actuarial gains and losses, before tax

E2030

NCI - Actuarial gains and losses, before tax

E1521

Income tax on actuarial gains and losses

E2031

NCI - Income tax on actuarial gains and losses

{F55}
{F55}
{F55}
{F55}

Manual Journal Entries


Manual journal entries can be booked to reclassify line items in the SCI.
These journal entries are booked using a dedicated account, XSCI - SCI reclassifications and calculations,
flow Y99 and the ANALYSIS dimension to identify the SCI items. There is also one dedicated audit ID for
these journal entries: CFS01-Consolidated Financial Statements correction - Man.
Double-sided journal entries are posted in SCI line items in order to make adjustments to the
Statement of Comprehensive Income. By convention, you enter a credit amount to increase the
relevant item and a debit amount to decrease it.

For instance, a journal entry should be booked to populate the SCI line item TSCI270 Other comprehensive
income related to non-current assets and disposal groups classified as held for sale (not calculated
automatically). Other journal entries should remain the exception as it is always preferable to modify the
source account/flow combinations.
Example
The reclassification of Gains (losses) on remeasuring available-for-sale financial assets, before tax
(SCI2210) in Other comprehensive income related to non-current assets and disposal groups classified as
held for sale (TSCI270) should be posted as follows:
Audit ID

Account

Flow

Analysis (SCI
line item)

Debit

CFS01

XSCI SCI reclassifications and calculations

Y99

SCI2210

TSCI270

Credit

Path between the Statement of Comprehensive Income and the


Statement of Changes in Equity
Statement of comprehensive income
Profit for the year
Change in revaluation surplus
Other comprehensive income for the year
Total comprehensive income for the year
Attributable to:
- Owners of the parent
- Non Controlling interest

1000
200
200
1200
960 Amount at 100% = 200
240 Attributable to owners (80%) = 160

Statement of changes in equity


Issued
Capital
Balance at opening
Total comprehensive income

110

Revaluation Retained
Surplus
earnings

160

Equity
Non
attributable Controlling
to owners
interest

800

960

240

Completing the Consolidation

Checking the Statement of Changes in Equity


Checks Specific to Certain Accounts
The following Group shareholders' equity accounts should only correspond to data for the parent company:
CODE

DESCRIPTION

E1110

Issued capital

E1210

Share premium

E1310

Treasury shares

Checking Variation Flows


Reference Report
Check the variation of shareholders' equity by running the following report:
Folder

Book

Schedule

C1

C11

C11-30 Statement of Changes in Equity

This report displays data for the entire Group or for just one reporting unit.
Note: This report provides an aggregated presentation of the accounts and flows. Further details can be
obtained using the following report, which displays all the equity accounts and all the flows:
Folder

Book

Schedule

C4

C46

C46-05 Statement of changes in consolidated equity and NCI

For each account, if needed, you can link to the following report to display a detail by Audit ID and entity:
Folder

Book

Schedule

C3

C32

C32-15 General Ledger by Reporting Unit and Audit ID (Flows)

Types of Flow
The flows that analyze net equity movements can be organized into four main categories.
Current Movements
Current movements in shareholders' equity include net income for the period, distribution of dividends and
the effect of changes in conversion rates on the contribution from foreign subsidiaries.
Net income for the period is booked in flow F10. The checks to be performed are:

Data for flow F10 should only be stored in accounts E1610-Retained earnings and E2010-Noncontrolling interests - Reserves and retained earnings.

The sum of accounts E1610 and E2010 for flow F10 should always correspond to the net income of
the P&L, stored on account TP000.

Dividends paid during the period appear on the flow F06. The checks to be performed are:

Flow F06 for Group shareholders' equity must correspond exactly to the distribution of dividends
made by the parent company.

Flow F06 for the NCI equity accounts should correspond to the dividends paid by consolidated
subsidiaries to external shareholders.

111

Completing the Consolidation

The effect of changes in conversion rates are shown in F80-Currency Translation Adjustment. In the
consolidated accounts, data should be stored on flow F80 only for the accounts related to:

Hedging reserve (E1540, E1541, E2040, E2041),

Fair value reserve (E1550, E1551, E2050, E2051),

Foreign currency translation reserve (E1560, E1561, E2060, E2061).

Flow F80 should equal zero for any other equity account, due to the conversion process that maintains
these accounts at their historical conversion rates.
Ad Hoc Operations
Ad hoc operations include:

Changes in accounting policies (F09)

Subscription to capital increase/decrease (F40)

Increases or decreases in capital are:

Those by the parent company which affect the variation of Group shareholders' equity.

Those performed by the subsidiaries. The impact on Group shareholders' equity should be
eliminated:

When the operation is subscribed to by each shareholder according to the initial investment, the
Group share of capital increase corresponds to the investment made, where the increase
corresponds to share value. Therefore, flow F40 is balanced for Group shareholders' equity.

If it is not the case, flow F40 should be balanced by flow F92-Change in interest rate for Group
shareholders' equity.

Scope Changes
For information on scope changes, see Scope Changes on page 99.
Other Variations
Transfer flow F50 is used to book transfers from one account to another. This flow should be balanced for
both the sum of Group shareholders' equity and the sum of Non-controlling interests, excluding accounts
E1570-Equity component of compound financial instruments and E2080-NCI-coupound finance.
Instruments. Check that this is the case for every company.

The effect of the fair value adjustment of assets and liabilities is displayed in flow F55.
Flows F20 and F30 on net equity are used as follows:
Flow

Usage

F20

F30

Hedging reserves reclassification adjustments (recycling)


To remove any hedging reserve gains or losses that was previously recorded from
hedging reserves and to include it in the initial cost of the acquired asset or liability.
Hedging reserves reclassification adjustments (recycling)
Transfer of hedging reserves gains or losses previously recorded in equity to the P&L
in the same period that the hedged cash transaction affects the P&L.
Reclassification adjustment (recycling) of the fair value reserve cumulative gain or loss
when the assets are disposed of.

Except for specific cases to be analyzed and justified, flow F15 is not used for changes in net equity.

112

Completing the Consolidation

Performing Detailed Checks for Reporting Units


You should check that the balance sheet controls are valid. These controls ensure that shareholders' equity
is produced from valid accounts, flows and audit IDs.
You can analyze the contribution of one or several reporting units to shareholders' equity by running the
following report:
Folder

Book

Schedule

C4

C46

C46-05 Statement of changes in consolidated equity and noncontrolling interest

You can link from this schedule to a General ledger by Reporting Unit and Audit ID.

It is also possible to display a report detailed by equity accounts (Group and NCI) with a detailed
contribution of each reporting unit.
Folder

Book

Schedule

C4

C46

C46-10 Check Shareholder's Equity

A detailed analysis of net equity is also available for one Reporting Unit:
Folder

Book

Schedule

C4

C46

C46-25 Detailed analysis of Net Equity

This report enables the validation of net equity impacts at each step of the consolidation process

This report gives the detail in rows of the different consolidation entries impacting net equity: adjustment,
non controlling interest corrections, elimination of investments and goodwill.
For elimination of investments and goodwill, the document provides the detail by holding companies.
In columns, the document proposes the validation of the exchange rate and consolidation rate application
and of non controlling interests calculation.
Control columns are calculated by the difference between the amount calculated in the document (grey
column) and the amount calculated during the consolidation process and stored in the consolidated
database.
Amounts are automatically calculated in the document thanks to exchange, consolidation and interest rates
that are retrieved in the three first column of the document.

113

Completing the Consolidation

Calculation matrix
Issued capital Share premium
Changes in accounting policies E1110 - {F09}

E1210 - {F09}

Treasury
shares
E1310 - {F09}

Issue of convertible notes


Share-based payments
Purchase and disposal of
treasury shares
Transactions with NCI
Other movements

E1510 E1570 - E1610 - {F09}


{F09}
E1610 - {F10}

Profit (loss)
Other Comprehensive Income

Issue of shares
Dividends paid
Transfers

Retained
earnings

Other reserves

E1540 E1561 {F02/F80/F98}


E1540, E1541 {F20}
E1540 E1551 {F30}
E1510 E1551 {F55}
E1110 - {F40}

E1210 - {F40}

E1110 - {F06}

E1210 - {F06}

E1110 - {F50}

E1210 - {F50}

E1510 E1561 - E1610 - {F50}


{F50}
E1570 - {F50}
E1610 - {F20}

E1310 - {F20/F30}
E1510 E1570 {F92}
E1110 E1210 E1310 E1510 E1570 {F01/F02/F03/F04 {F01/F02/F03/F04 {F01/F02/F03/F04 {F01/F03/F04/F15
/F15/F70/F80/F92 /F15/F70/F80/F92 /F15/F70/F80/F92 /F70}
/F98}
/F98}
/F98}
E1510 E1521,
E1570 {F02/F80/F98}

E2010 E2080 {F09}


E2010 - {F10}
E2040 E2061 {F02/F80/F98}
E2040, E2041 {F20}
E2040 E2051 {F30}
E2020 E2051 {F55}

E1610 - {F06}
E1310 - {F50}

NCI

E2010 - {F06}
E2010 E2070 {F50}
E2080 - {F50}
E2010 - {F20}
E2070 - {F20/F30}

E2010 E2080 {F92}


E1610 E2010 E2080 {F01/F02/F03/F04 {F01/F03/F04/F15
/F15/F40/F70/F80 /F70}
/F98}
E2010 E2031,
E2070, E2080 {F02/F80/F98}
E2010 - {F40}
E1610 - {F92}

Checking the Statement of Cash Flows


Overview of the Statement of Cash Flows Reports
The IFRS Starter Kit presents the consolidated statement of cash flows (SCF) using the indirect method.

The following reports are available:


Folder

Book

Schedule

C1

C11

C11-25 Statement of Cash Flows

C2

C21

C21-20 Statement of Cash Flows by Reporting Unit

The latter explains how differences between analyzed and actual cash movements arise. See Analyzing
Differences.
Additional analysis reports of the cash flow statement are available. You can access these reports by
linking to them from one of the summarized reports.
Folder

Book

Schedule

C2

C22

C22-35 Analysis of line item by reporting unit (Statement of Cash


Flows)

C2

C23

C23-10 Statement of Cash Flows breakdown

Schedule C23-10, in particular, provides details on the different account/flow pairs for each line item of the
SCF.

114

Completing the Consolidation

Analyzing Differences
When the cash movement analyzed in the cash flow statement does not correspond to the cash movement
in the balance sheet (that is, Closing Opening), the difference is booked in a control row. This row
is analyzed in bottom section of report C21-20-Statement of Cash Flows by Reporting Unit.
You can discover the source of the difference between the actual and calculated cash movements by the
configuration settings defined.
All authorized account/flow pairs are carried over to items in the cash flow statement, regardless
of whether they are analyzed or control items.
For example, variation flow F15 on Issued capital is normally equal to zero for equity accounts.
Theoretically, it therefore has no effect on Group cash flow. However, it is included in a control item,
SCF9340, so that if it does not equal zero, the difference can immediately be identified.

The table below describes the reasons why the cash flow statement may not balance:
SCF Line item

Differences highlighted

Differences on scope changes flows


SCF9110

Unbalanced flow F01

[a]

SCF9120

Unbalanced flow F03

[a]

Other unbalanced flows


SCF9210

Unbalanced flow F09

[b]

SCF9220

Unbalanced flow F50

[b]

SCF9230

Unbalanced flow F80

[b]

Other differences to be analysed

[a]

SCF9310

Change in depreciation/amortization to be analysed

[c]

SCF9320

Change in impairment/ provision to be analysed

[c]

SCF9330

Change in investing to be analysed

[c]

SCF9340

Change in financing to be analysed

[c]

SCF9350

Change in associates to be analysed

[d]

SCF9360

Business units - Balancing account

[e]

Assets should be equal to liabilities for flow F01-Incoming units. If this is not the case, then this
error originates in package data (a manual journal entry that does not balance on flow F01 cannot
be posted).
You can identify the Audit ID for which there is an inconsistency by running the following report:
Folder

Book

Schedule

C4

C42

C42-35 Flow balance by Audit ID

To find out from which company this error originates, run the following report:
Folder

Book

Schedule

C4

C42

C42-40 Flow balance by Reporting Unit

Run package controls again for this company using the Package Manager module.
The same check procedure applies to flow F03-Change in consolidation method (new). On this
flow, however, the inconsistency could also originate from a manual journal entry not balanced on
this flow.

115

Completing the Consolidation

[b]

Assets should be equal to liabilities for flows F09, F50 and F80. If there are errors, run the following
report:
Folder

Book

Schedule

C4

C42

C42-35 Flow balance by Audit ID

You can then check the relevant audit IDs.


For the relevant reporting unit, run the following report:
Folder

Book

Schedule

C4

C42

C42-40 Flow balance by Reporting Unit

You can then identify the relevant reporting unit.

Then run the following ledger containing journal entries posted for this Audit ID/Reporting unit
combination.
Folder

Book

Schedule

C3

C33

C33-05 Debit Credit Ledger for 1 Reporting Unit and 1 Audit ID

You can then identify the journal entry that is causing this error.
[c]

Changes in non-current accounts as well as depreciation and provision accounts should be broken
down into the relevant flows, such as increase/purchase, decrease/disposal, increase in
depreciation, and decrease in depreciation.
If this is not done, then variation flow F15 will not equal zero for these accounts and the statement
of cash flows will not balance.
Run the following report:
Folder

Book

Schedule

C2

C21

C21-20 Statement of Cash Flows by Reporting Unit

In case of error, identify the entities for which cash flow items SCF9310, SCF9320, SCF9330 or
SCF9340 do not equal zero, and link to the following report (for the corresponding entities):
Folder

Book

Schedule

C2

C23

C23-10 Statement of Cash Flows breakdown

You can then identify the accounts for which F15 does not equal zero.
For these accounts, run the following report to identify the origin (package, journal entry) of the
amounts stored on flow F15:

[d]

Folder

Book

Schedule

C3

C32

C32-05 General Ledger by Audit ID, Partner, JE number (Flows)

Data on flow F15 for account A1500-Investments accounted for using equity method may originate
from:
a manual journal entry
an automatic journal entry when change in net equity for the relevant subsidiary is not
completely broken down, that is, F15 does not balance

Except in specific cases, F15 is not involved in analyzing investments in associates and should
therefore equal zero by being booked against the relevant movement flow.
In case of errors, run the following report for account A1500 to identify the relevant Reporting unit
and Audit ID:

116

Folder

Book

Schedule

C32

C32-15 General Ledger by Reporting Unit and Audit ID (Flows)

Completing the Consolidation

You should then link to the following report for this Reporting unit/Audit ID combination, for account
A1500:
Folder

Book

Schedule

C32

C32-05 General Ledger by Audit ID, Partner, JE number (Flows)

You can then identify the journal entry posted in F15.


If needed, you can also open the following schedule for the relevant entity, and focus on the equity
accounts for which F15 would not equal zero:

[e]

Folder

Book

Schedule

C31

C31-10 Balance Sheet by Flow and Audit ID

If an error originates from a misuse of the balancing account for Business units (L26BU), run the
following report for this account:
Folder

Book

Schedule

C32

C32-15 General Ledger by Reporting Unit and Audit ID (Flows)

You should then link to the following report for this Reporting unit/Audit ID combination:
Folder

Book

Schedule

C32

C32-05 General Ledger by Audit ID, Partner, JE number (Flows)

This enables you to identify the reasons why F15 does not equal zero.

Manual Journal Entries


Principles
Manual journal entries can be booked to reclassify line items in the SCF.
These journal entries are booked in a dedicated account, XCFS-CF reclassifications and calculations, using
flow Y99 and the ANALYSIS dimension to identify the cash flow items. There is also one dedicated audit ID
for these journal entries: CFS01-Consolidated Financial Statement correction - Man.
Double-sided journal entries are posted in SCF line items in order to make adjustments to the cash
flow statement. By convention, you enter a credit amount to increase the relevant item and a debit
amount to decrease it.

These journal entries should remain the exception as differences that crop up between analyzed and actual
cash movements should normally be corrected through balance sheet flows. In certain cases, however, the
Group may want to correct the cash flow statement directly.
Any journal entry to correct the SCF directly without modifying the source account/flow combinations should
be posted as follows:
Audit ID

Account

Flow

Analysis (SCF
line item

CFS01

XCFS CF reclassifications and calculations

Y99

SCFxxx

Debit

Credit

SCFxxx

Example
A small subsidiary has not entered the breakdown of changes in financial debts.
Extract from F's package schedule PA3450:
ACCOUNT

CODE

Cash on hand

A2610

F00
20

F99
50

F15

F50

F55

Spec.

30

117

Completing the Consolidation

Extract from F's package schedule PA3550:


ACCOUNT

CODE

F00

F99

F20

F30

F50

F55

Spec.

Control

Borrowings, Non current

L1510

100

150

50

Other financial liabilities, Non current

L1550

10

-10

Extract from Fs package Schedule PA2500:


ACCOUNTS

CODE

F00

Issued capital

E1110

10

10

Retained earnings

E1610

30

20

-10

40

30

-10

Net equity

F99

F06

F10

F20

F30

F40

F50

F55

Spec.

Control

F's contribution to the Statement of cash flows:


SCF1000

Profit (loss) attributable to owners of the parent

-10

TSCF300

Net cash flows from (used in) operating activities

-10

SCF5310

Proceeds from borrowings

SCF5320

Repayments of borrowings

TSCF500

Net cash flows from (used in) financing activities

TSCF700

Net increase (decrease) in cash and cash equivalents

SCF7100

Cash and cash equivalents at beginning of period

20

SCF7200

Cash and cash equivalents at end of period

50

SCF9340

Change in financing to be analysed

40

TSCF900

Differences to be analysed

40

-10

The Group chooses to balance the Statement of cash flows by classifying the changes in financial debts as
Proceeds from borrowings (-20) and Repayments of borrowings (+60).
The manual journal entry to correct the SCF is as follows:
Audit ID

Account

Flow

Analysis (SCF
line item

CFS01

XCFS CF reclassifications and calculations

Y99

SCF5310

Debit

60

SCF5320

20

SCF9340

40

F's contribution to the Statement of cash flows after corrections are made:
SCF1000

Profit (loss) attributable to owners of the parent

-10

TSCF300

Net cash flows from (used in) operating activities

-10

SCF5310

Proceeds from borrowings

60

SCF5320

Repayments of borrowings

-20

TSCF500

Net cash flows from (used in) financing activities

40

TSCF700

Net increase (decrease) in cash and cash equivalents

30

SCF7100

Cash and cash equivalents at beginning of period

20

SCF7200

Cash and cash equivalents at end of period

50

SCF9340

Change in financing to be analysed

TSCF900

Differences to be analysed

118

Credit

Completing the Consolidation

Checking IFRS adoption


The starter kit for IFRS provides a complete set of pre-configured reports to ensure a fast and correct
reconciliation between local Gaap and IFRS. These reports are grouped together into the folder C5 IFRS
Adoption. It includes:

Financial statements enabling local Gaap and IFRS consolidated data comparison

Balance reconciliation with an analysis by audit IDs of differences between local GAAP and IFRS

Analysis reports that allow a complete audit trail of the differences till the journal entry number.

All reports should be initialized with two different consolidation versions: the first should be the
Local gaap version and the second one the IFRS version.
An exception exists for the report C51-05 Statement of Financial Position that requires to
initialize the versions both times, first for the opening position and second for the closing position.
The correct variables initialization is illustrated below:

Local Gaap version

IFRS version

To know more about the IFRS adoption operating process, see IFRS Adoption in Consolidated
Statements on BusinessObjects / Financialconsolidation / 7.5 / Master Guides on http://help.sap.com/

119