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How do I set up a model for shares calculation and consolidation?

Consolidation is the process that transforms individual financial statements for a group of entities into a single financial statement. In the United States, this process creates a consolidated financial statement that is based on US Generally Accepted Accounting Principles (GAAP), the standard that applies to external, or statutory, financial reporting. To create a consolidated financial report, companies that own all or part of other companies must create financial reports to meet both internal and external reporting requirements.

This procedure describes how to set up a model in Planning Business Modeler to so that you can perform shares calculations and consolidation. Planning Business Modeler includes a basic definition for a financial model with shares calculation, but this model is, in effect, just a framework for a model of an actual business. To perform shares calculation or consolidation, the basic model must be customized to fit both the requirements of the consolidation processes and the requirements of the specific business.

This procedure provides guidelines for customizing a financial model with shares calculation. The guidelines help you design a model so that its dimension structure supports the kinds of calculations and data movement that occur during the related processes. That is, for each entity that is involved in consolidation and shares calculation, the model must support critical functions. For example, the model must support the storage of calculated values such as percent ownership, storage of Business Process values such as Elimination, and the handling of any balancing requirements of intercompany reconciliations.

What you can do when you finish

After you set up a model that is appropriate, you can run a shares calculation job or a currency conversion, or you can perform intercompany (IC) reconciliation.

In addition, you can begin to customize the rules that the business must have in order to run consolidation.

Additional important information

If the business model does not include shares, or if the consolidation report does not require this information, the consolidation process is more limited. In this case, the rules that perform consolidation just eliminate any IC transactions and convert any foreign currencies to the currency of the parent company.

Prerequisites

This process assumes that you have completed the following prerequisites:

  • You have Modeler permissions.

  • If your overall process includes currency conversion, you have set up an appropriate Exchange Rate model for currency conversion.

  • You have the following information at hand:

    • The organizational levels that are required for full financial consolidation

      For example, a parent company might want consolidated financial statements only for the parent itself, or for the parent company and a single selected child company.

    • The controlling interest threshold percentage

      US GAAP uses 50% as the controlling interest threshold percentage. This means that if an entity company owns at least 50% of another entity, the owning entity will be a full consolidation.

    • The default currency for triangulation

      If there is no direct exchange rate between the entity that is being converted and the consolidation currency that you want, you must triangulate the calculation. The default currency for triangulation is the currency that will be used to triangulate a rate. When the consolidation process is complete, the final financial reports appear in this currency.

Setting up a model for shares calculation and consolidation

Use the steps in the following table to track your progress.

Step Task Related topic

1.

Review the legal entity ownership structure of the company that is to be consolidated.

Not applicable

2.

Review the description of the consolidation rules. This includes the detail descriptions of the templates for individual elimination rules.

Consolidation rule templates

3.

In Planning Business Modeler, open a model site.

Open, close, and save a model site

4.

In Planning Business Modeler, create a new member set in the Entity dimension to group the entities that you want to include in the shares calculation and consolidation process.

Create a member set by using the wizard

5.

In the member set you created in step 4, create an entity of type CORPORATE. This entity will be the group parent entity.

For ease of use, name this additional entity in a way that reflects its status as a consolidation point. For example, if the entity is MySubsidiary, you might name the consolidation entity MySubsidiaryConsol.

Add a member to a member set

6.

Using the entity that you you created in step 5 as a parent, populate the member set with the child entities that you want to include in the process:

  • Include every entity that might have data. If you omit an entity that might have had data, the process may not provide the consolidated results that you want.

  • Make sure that all entities in the member set are child entities whose parent is the entity you created in step 5.

Add a member to a member set

7.

If you are setting up a model for shares calculation only, go to step 10.

If you are setting up a model for both shares calculation and consolidation, continue to step 8.

Not applicable

8.

In Planning Business Modeler, create a member set in the Account dimension to group the consolidation accounts that you want to include in the consolidation.

Create a member set by using the wizard

9.

In the member set you created in step 7, add account dimension members for the consolidation accounts that your process requires.

Make sure that all intercompany accounts, such as payables, receivables, income, and expense, are assigned correct account types, so that the elimination rules will correctly affect them.

Add a member to a member set

10.

In Planning Business Modeler, create a model for your process. Use the following settings:

  • Select a model type of Financial model with shares calculations.

  • Add the Intercompany dimension.

  • If you will perform currency conversion, add the Currency dimension.

  • For the Entity dimension, specify the member set that you created in step 4.

  • If you are setting up a model to do both shares calculation and consolidation, specify the member set that you created in step 7 for the Account dimension.

  • Make sure that the member set for the Time dimension is compatible with the time measure that is used in the Exchange Rate model.

    The Exchange Rate time measure may not be smaller than the Financial model time measure. For example, if the Financial model uses a quarterly reporting period, the Exchange Rate model can be quarterly or yearly, but not monthly.

Create a model

11.

In the Models workspace on the Model Properties tab, set the following model properties:

  • Group parent entity

  • Group holding entity

  • Controlling interest threshold

  • Default currency

Add, edit, or delete a model property

12.

Save the model.

Open, close, and save a model site

13.

Deploy the model.

Deploy a model site

Next steps

After you deploy the model, you can load the following kinds of data:

  • Shares information

  • Exchange rate data

  • Financial data that is required for consolidation

After you load the appropriate data, you can perform the following tasks:

  • Intercompany reconciliation

  • Shares calculation

  • Currency conversion

In addition, you are ready to customize the business rules that perform intercompany elimination for consolidation.

See Also

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