A Simplified Approach for Consolidation of Investments

  • by Dan Sullivan, Senior Consultant, focusSAP
  • March 2, 2012
Learn how to automate consolidation of investments as you use Enterprise Controlling-Consolidation (EC-CS) and Strategic Enterprise Management-Business Consolidation System (SEM-BCS) functionality to expedite your period-end close. See how you can achieve this without a full-blown implementation of the consolidation of investments component.
Key Concept
The consolidation of investments (COI) component comes delivered with Strategic Enterprise Management-Business Consolidation System (SEM-BCS) and Enterprise Controlling-Consolidation (EC-CS). SEM-BCS and EC-CS are different from SAP BusinessObjects Planning and Consolidation and SAP BusinessObjects Financials Consolidation offerings. Although they provide ways to accommodate consolidation of investments, the methods used in SEM-BCS and EC-CS are not necessarily applicable to these products.

Many companies find the consolidation of investments (COI) component more complicated than is warranted for their businesses needs, so they make consolidation of investments entries manually. However, you can automate these manual entries without fully implementing the COI component in SAP ERP Financials Enterprise Controlling-Consolidation (EC-CS) and Strategic Enterprise Management-Business Consolidation System (SEM-BCS).

Instead you can use inter-unit eliminations and reclassification functionalities of EC-CS and SEM-BCS to create automatic journal entries for investment activities. These journal entries are simple and easy to understand. The interunit eliminations and reclassifications functionalities also allow you to avoid time-consuming and risk-prone manual entries or additional COI postings that are often more complex than is necessary for many situations. They prevent duplicate records and cover both the purchase and equity methods of consolidation.

In many cases no implementation or only a partial implementation COI is needed to have automated consolidation of investments entries in SEM-BCS and EC-CS. For example, implementation of COI is not necessary when ownership of subsidiaries does not change often or when subsidiaries accounted for with the equity method do not provide a full trial balance to be loaded into the consolidation system.

When those types of subsidiaries can provide a full trial balance to be easily loaded into the consolidation system, partial implementation of COI may be more beneficial for automating the equity earnings postings for consolidation.

COI related entries are required in financial reporting to reflect ownership relationships between the holding companies (parents) and their subsidiaries and affiliates. The reporting entity draws one set of financial statements combining several entities under one umbrella or group.

Starting with an explanation of what COI does, I present options that SEM-BCS and EC-CS offer for consolidation of investments and ways to automate it in SEM-BCS and EC-CS without a full-blown implementation.

 

Dan Sullivan

Dan Sullivan is a consultant with more than 28 years of experience in accounting and systems design. He has been an accounting manager for a Fortune 200 global enterprise, where he first implemented global ERP systems. He has worked in numerous industries implementing global enterprise solutions with a focus on SAP. These industries include retail, manufacturing, and utilities.

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Comments

2/11/2015 8:01:59 AM
Rajesh SVN

Hi Dan
Thanks for information sharing.

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