Advanced Intercompany Elimination Using BPC

  • by BumSoo Lee, Director, PricewaterhouseCoopers Advisory
  • September 24, 2014
Discover how to implement an advanced solution of intercompany elimination using SAP Business Planning and Consolidation (BPC) business rule-based automatic adjustment functionality. Find out how this solution stacks up against other BPC elimination methods, such as US elimination and standard business rule-based elimination.
Learning Objectives

By reading this article, you will learn:

  • The benefits that you can receive from the solution compared with other ways of intercompany elimination, such as US elimination and standard business rule-based elimination
  • How to set up the advanced business rule-based intercompany elimination
Key Concept
Intercompany elimination is the process for eliminating transactions resulting from the exchange of goods and services within a consolidation group as well as for reconciling any amount difference between two companies involved in intercompany transactions. The process using business rule-based eliminations and adjustments in SAP Business Planning and Consolidation (BPC) is an advanced elimination method. It uses multiple components, such as ownership data in a separate application from consolidation application, methods and multipliers, elimination and adjustment rules, and a foreign exchange rate. This unique intercompany elimination setting provides users with control of intercompany elimination and consolidation of investment in BPC.
A company that used a legacy SAP consolidation system for 18 years wanted to have an elimination functionality that it used for its consolation when it implemented SAP Business Planning and Consolidation (BPC) for its consolidation. The solution I explain to you is the deliverable of the project that went live in 2011 and has been used for multiple consolidation projects after the project using BPC business rule-based automatic adjustment functionality.

The solution met the company’s requirement of wanting to keep similar solutions and processes that it used. The benefits that this solution brought to the client were very big because the client has more than 800 active subsidiaries (total entity master has 1,800 entity dimensions members) and multiple joint venture consolidation groups in BPC. The client now can use a simple drill-down report for elimination difference analysis rather than a matching report that would contain a huge number of lines that could cause a report performance issue.

I had an episode related to this solution happen on a BPC consolidation project in 2012. The project team divided into two groups. One group was for the solution, and the other was for the standard BPC rule-based elimination. The team discussed the solutions for two months to finalize the solution design for the project, but the team couldn’t reach an agreement on the solution of elimination that they would implement for the project.

Therefore, the team held a meeting with the clients to ask which solution they wanted to use for their consolidation system. The meeting didn’t last more than 10 minutes. The client went for the advanced BPC elimination method. The team then could wrap up the long internal design discussion because of the client’s quick decision based on its long business experience in consolidation. This episode indirectly indicates the values and benefits that users could realize using the solutions because they couldn't choose the solution so quickly without seeing what they wanted for their consolidation process out of the solution.

I compare the solution with other BPC elimination methods such as US elimination and standard business rule-based elimination to show you the benefits from the solutions. I also guide you in how to set up the advanced solution of intercompany elimination using BPC business rule-based automatic adjustment functionality for your projects.

BumSoo Lee

BumSoo Lee is a director at PwC Advisory with successful experience in providing enterprise performance management, business planning, consolidation, and business intelligence solutions for world-leading companies in the chemical, utility, automotive, high-tech, and finance industries. He analyzed clients’ businesses needs and identified requirements and key performance indicators (KPIs) along with the solutions that help them plan, monitor, and evaluate their businesses, strategic objectives, and goals. BumSoo has been using solutions such as SAP BPC, BW-IP (SEM-BPS), SEM-BCS (ECCS), SEM-CPM, and BW for achieving his clients’ business objectives.

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