Preparation for Change of Consolidation Group

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Table of content

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Table of content
1 Preparation for Change of Consolidation Group
1.1 Preparation for Acquisition
1.2 Preparation for Divestiture

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1 Preparation for Change of Consolidation Group

Use
When a consolidation unit is acquired by a consolidation group or divested from a consolidation group in the middle of the fiscal year, the following data must
be adjusted:
The reported financial data
The standardized financial data
The consolidated financial data of posting levels 20 and 23
These adjustments are necessary so that the consolidation of investments and reporting for a consolidation group in which acquisitions or divestitures took
place supply correct results.

Prerequisites
In Customizing for Consolidation, you have defined the following under
Data
Automatic Posting
Preparations for Changes in the Consolidation Group
or under
Consolidation Functions
Automatic Posting
Preparations for Changes in the Consolidation Group
:
Document types for preparation postings
This includes specifying the number ranges and defining an automatic reversal for the subsequent period (if applicable), detailed settings for selected FS items
(financial statement imbalances, etc.) and subassignment options for manual postings.
Tasks
For adjusting the reported financial data and the standardized financial data
For adjusting the consolidated financial data
In addition, you have defined subitems for acquisitions and divestitures for the consolidation group in subitem maintenance.

Features
Overview of Adjustment Entries
The system makes the following adjustment entries in preparation for the acquisition or divestiture:
With Balance Sheet Items Broken Down by
Transaction Type

With Income Statement Items

Acquisition

Reclassification to subitem 130 (acquisition to

consolidation group)

Elimination of the revenue and expenses that were

incurred prior to the acquisition of the consolidation unit

Divestiture

Reclassification to subitem 150 (divestiture from

consolidation group)

(No adjustment necessary, since data no longer exists

after the date of divestiture)

Posting Levels
There are special posting levels for the adjustment entries.
The following table shows the posting levels in which entries were originally made, and the posting levels for the associated adjustment entries:
Original Posting Level

Posting Level for Adjustment Entries for Consolidation Group Changes

Space

Reported Financial Data from Realtime

Update

02

Reported Data: Consolidation Group

Changes

00

Reported Financial Data

02

"

01

Adjustments to Reported Financial Data

02

"

08

Item Substitution and Calculation of

Retained Earnings

02

"

10

Standardizing Entries

12

Standardizing Entries: Consolidation

Group Changes

20

Two-Sided Elimination Entries

22

Two-Sided Elimination Entries:

Consolidation Group Changes

23

Two-Sided Elimination Entries: Special

Logic

24

Two-Sided Elimination Entries:

Consolidation Group Changes with
Special Logic

Data records entered with posting levels 02, 12, 22, and 24 are valid only in the consolidation group for which they were entered. Entries in higher-level
consolidation groups are therefore not included in reporting.
For posting levels 22 and 24, both the consolidation unit and the partner consolidation unit must be part of the consolidation group.
Document Types
For each adjustment entry posting level (that is, for posting levels 02, 12, 22, and 24 ) there is one document type for the preparation for acquisition and one
document type for the preparation for divestiture. There are therefore a total of eight document types.
The document types for posting levels 02 and 12 post in local currency, transaction currency, and group currency.
The document types for posting levels 22 and 24 post in transaction currency and group currency.
Tasks and Task Sequence

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By assigning one or more document types to tasks you can define tasks that handle only acquisitions, only divestitures, or both acquisitions and divestitures.
A task can post simultaneously to posting levels 02 and 12 or to posting levels 22 and 24. However, it is not possible to combine these two groups of posting
levels (that is, you cannot post to 02/12 and also to 22/24).
This means that you must define at least two tasks:
Task 1: With document types for posting levels 02 and 12
Task 2: With document types for posting levels 22 and 24
The following applies to the sequence of the tasks Currency Translation and Preparation for Consolidation Group Change :
Currency translation must be performed before the preparations for the consolidation group change.
The preparations for the consolidation group change can additionally be performed before the currency translation (in a provisional run).
The data records for the preparation postings for consolidation group changes are neither translated nor carried forward.

1.1 Preparation for Acquisition

Use
When a consolidation group acquires a consolidation unit during the year, you can use this function to adjust the reported financial data, the standardized
financial data, and the consolidated financial data. After this data is adjusted, the financial statements contain only the data that arose during the time the
consolidation unit was part of the consolidation group.

Features
Data Selection and Posting Period
The adjustment entries are performed for the periods prior to the acquisition.
For acquisition in period n , the following applies:
Time of Acquisition

Data Selected by the System

End of period n

Data of periods 0 to n

Start of period n

Data of periods 0 to ( n 1)

Example
If a consolidation unit is acquired by a consolidation group on May 31, the system selects the data of periods 0 to 5 for the adjustment entries.
The system uses the adjustment entries in the period of the acquisition (period n ).

Note
The period that you specify as acquisition period n for the preparation for acquisition must match the period that you specified as the first accounting
period in consolidation group maintenance. If the acquisition takes place at the end of period n , you must have set the indicator First consolidation at
the end of period accordingly in consolidation group maintenance.
Adjustment Entries
Balance Sheet Items
The task Preparation for Acquisition performs a reclassification from transaction type 100 (opening balance) or 120 (acquisitions) to transaction type 130
(acquisition by consolidation group) at the level of reported data for each balance sheet item that is broken down by transaction type. This is accomplished by
posting all balance sheet items that are broken down by transaction type with a reversed debit/credit sign on the same balance sheet item but on the
acquisition subitem.
This ensures that the acquisitions are displayed properly in the asset history sheet and in the stockholders equity aging report.

Financial Statement Item

Subitem

Posting Level

Value in GC

Reported financial data

(cumulative) for first
consolidation on May 30

M&E (machinery and

equipment)

100

00

100

"

M&E

120

00

50

Preparation for acquisition

M&E

100

02

-100

"

M&E

120

02

-50

"

M&E

130

02

150

Income Statement Items

The consolidated income statement should contain only the revenue and expenses incurred while the consolidation unit was part of the consolidation group
(that is, after the first consolidation). If a consolidation unit is acquired by a consolidation group in the middle of the year, that part of the revenue and
expenses incurred before the acquisition must be eliminated. The system therefore reverses this part. The offsetting entry is made to the item Annual Net
Income Income Statement .
With retained earnings the reclassification does not take place just within the transaction types. Instead, the net income that was earned up to the first

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consolidation is transferred to the item Annual Net Income Prior to First Consolidation .

Financial Statement Item

Posting Level

Value in GC

00

-70

00

40

00

-30

Sales Revenue

02

70

Expenses

02

-40

Annual Net Income Income

Statement

02

-30

Annual Net Income Prior to First 100

02

30

02

-30

Reported financial data

(cumulative) for first
consolidation on May 30

Sales Revenue

"

Expenses

"

Annual Net Income Balance

Subitem

100

Sheet
Preparation for acquisition

Consolidation
Annual Net Income Prior to First 130
Consolidation

1.2 Preparation for Divestiture

Use
When a consolidation unit is divested from a consolidation group during the year, you can use this function to adjust the reported financial data, the
standardized financial data, and the consolidated financial data. After this data is adjusted, the financial statements contain only the data that arose during the
time the consolidation unit was part of the consolidation group.

Features
Data Selection and Posting Period
The adjustment entries are performed for the periods following the divestiture.
For divestiture in period n , the following applies:
Time of Divestiture

Data Selected by the System

End of period n

Data of periods 0 to n

Start of period n

Data of periods 0 to ( n 1)

Example
If a consolidation unit is divested from a consolidation group on June 30, the system selects the data of periods 0 to 6 for the adjustment entries.
The system makes the adjustment entries in the period of the divestiture (period n ).

Note
The period you specify as divestiture period n for the preparation for divestiture must match the period that you specified as the divestiture accounting
period in consolidation group maintenance. If divestiture takes place at the beginning of period n , you must have set the indicator Divestiture accounting
at beginning of period accordingly in consolidation group maintenance.
Adjustment Entries
Balance Sheet Items
The task Preparation for Divestiture performs an adjustment entry on posting level 02 for each balance sheet item. If an item is broken down by a subitem,
that subitem is also transferred to a divestiture subitem.
FS Items Without Subitems
Financial Statement Item

Posting Level

Value in GC

Reported financial data (cumulative)

Cash

00

400

Preparation for divestiture

Cash

02

-400

FS Items With Subitems

Reported financial data

Financial Statement Item

Subitem

Posting Level

Value in GC

Land

100

00

100

(cumulative)

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Preparation for divestiture

Land

150

02

-100

The system combines posting levels 00 and 02 so that a net balance of zero is achieved for the reported data (level 00) and the preparation for divestiture
entries (level 02).
Appropriation of Retained Earnings
Financial statement items of retained earnings are not reversed separately, since they are protected items.
These items are reversed in conjunction with the item Clearing of Consolidation of Investments.

A debit entry in the amount of 300 is made, broken down as follows:

Financial Statement Item

Posting Level

Value in GC

Retained Earnings, Prior Years

00

-200

Retained Earnings, Current Year

00

-100

Clearing, Consolidation of Investments

02

300

The items for the distribution of dividends and the management bonus also are reversed through the clearing item Clearing for Consolidation of Investments .
The clearing item Clearing for Consolidation of Investments no longer appears on the consolidated balance sheet. It is offset during the consolidation of
investments.

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