Perform financial consolidations
In a consolidation, it is possible to gather transactions from several company accounts into a single set of company accounts. You can print reports, such as financial statements, from the consolidated company, but not use this company for daily transactions.
Before you perform a consolidation at the close of a period, ensure that the period closing preparatory activities are performed, but do not close the subsidiary accounts until the consolidation is complete.
You can consolidate data from companies with databases that are external to the consolidated company database, or consolidate data from companies in the same database, a so-called "online" consolidation.
Consolidations do not necessarily require that you set up the consolidated company in advance. However, if you want to use the consolidation conversion principles to convert subsidiary data in foreign currencies, you must set up the consolidated company main accounts.
To prepare a consolidated company (the company that collects the results and balances of the subsidiaries) for a consolidation, you should have a legal entity created with the Use for financial consolidation process option enabled in Organization administration > Organizations > Legal entities. Like any other legal entity, you should complete the General ledger module configuration for the consolidation company. To learn more about configuring the General ledger module, see the link in the Summary unit at the end of this module.
After you complete the setup process in the consolidated company, you can focus on the subsidiary company. The amount of setup that is needed in a subsidiary depends on how closely the chart of accounts and dimensions for the consolidated company and subsidiary are aligned.
Perform consolidation by using a shared chart of accounts
If the subsidiary ledger accounts have the same account numbers and chart of account structure as the consolidated company ledger accounts, you do not have to manually map the subsidiary main accounts to consolidated company accounts.
On the Consolidations > Consolidate online page of the consolidated company, make sure that the Use consolidation account option is enabled before consolidation. The transfer of transactions and balances to the correct account occurs automatically during consolidation.
If the account numbers do not correspond during the consolidation process, the process will stop and the system generates an error message.
If the Use consolidation account option is set to Yes, the transactions and balances are transferred to the specified main account in the consolidated legal entity. This main account is specified in the Consolidation account field on the Main accounts - chart of accounts page for each subsidiary main account.
If the Use consolidation account option is set to No, the transactions and balances of each subsidiary main account are transferred to the account in the consolidated legal entity that has the same account number as the subsidiary account. If the corresponding main account does not exist in the consolidated legal entity, the main account is created automatically during consolidation.
Perform consolidation by using a blank chart of accounts
You can perform a consolidation without creating a consolidated company chart of accounts in advance.
If you have planned the structure that you want to use in the consolidated company, you can map the subsidiary accounts to this structure. When you perform the consolidation, the consolidated accounts that you indicated in the Consolidation account field are created automatically during consolidation.
If you make no mappings on subsidiary accounts, the consolidated company accounts are created automatically when subsidiary data is transferred to the consolidated company. Subsequent data, for example, from the second company that is being consolidated, is accumulated in consolidated company accounts with the same account number as the subsidiary account.
Regardless of whether you have done mapping or not, disable the Use consolidation account option on the Consolidate page of the consolidated company before running this type of consolidation.
Mapping subsidiary and consolidated chart of accounts
If the subsidiary chart of accounts does not follow the chart of accounts of the consolidated company, you can map the subsidiary accounts to the consolidated company accounts.
In the subsidiary company, go to General ledger > Chart of accounts > Accounts > Main accounts page. Then, select each subsidiary ledger account that will be transferred to the consolidated company.
On the General FastTab, in the Consolidation account field, enter the account in the consolidated company to which the balance or transactions of the selected subsidiary ledger account will be transferred.
If the chart of accounts in the consolidated company is simpler than the subsidiary account structure, enter the same consolidated company ledger account on several subsidiary accounts.
To prepare reports and financial statements that are based on dimensions in the consolidated company, map the dimensions that are used in subsidiary accounts to consolidated company dimensions.
If the account types of the subsidiary accounts that are transferring differ from the consolidated company, the values of transaction accounts override the values of total and parent accounts during consolidation.
Perform a consolidation
Finance supports consolidations as an online consolidation, where the subsidiary companies are within the same database as the consolidated company.
If the subsidiary companies reside in a different database than the consolidated company, follow these steps:
In the subsidiary company, go to Consolidations > Export company balances > Consolidate [Export to].
Specify the values for the Criteria tab.
Map the financial dimension with proper sequences.
Include the legal entities that this subsidiary has financial transactions with and include the consolidated company as well. You can select either Profit and loss or Balance for each legal entity, not both.
Select OK.
When you export the data, perform the following tasks in the consolidated company:
Go to Consolidations > Consolidate with Import page.
Specify the value for the Criteria tab.
Select the subsidiary legal entity and select the file to be imported.
Select either Profit and loss or Balance for each file.
In the Currency translation, select the exchange rate type to be used for consolidation for each subsidiary company.
Select OK.
Intercompany eliminations
Elimination transactions are required when a parent company conducts business with one or more subsidiary companies and uses consolidated financial reporting.
Some transactions that occur between the companies must be eliminated because consolidated financial statements must only include transactions that occur between the consolidated entity and the other entities that are outside the consolidated group. Because of this requirement, transactions between a parent company and its subsidiary companies must be removed or eliminated.
Predefined elimination rules create elimination transactions in a company that is specified as the destination company for eliminations. You can generate the elimination journals during the consolidation process or by using an elimination journal proposal.
Learn more
For more information about elimination rules, see Elimination rules.