Consolidation Overview

You can consolidate your financial data from several sites for timely reporting and online queries.

Entities

In a multi-site environment, you can specify a hierarchy of financial entities that operating sites report to. A financial entity is a level of business operation for which there is:

A complete set of financial statements,
Its own domestic currency code, which must be shared by sites that report to it, and its own currency rates, which may or may not be shared by reporting sites/entities.
Its own account template, chart of accounts, and accounting periods, which must be shared by reporting sites. (Reporting entities do not have to share these characteristics.)

Each entity allows no business activity aside from period, chart and currency maintenance, and the reporting of its consolidated ledger and budgets. Entity users should all belong to the default authorization group Entity Forms, which limits them to using only entity-level forms. They should also be licensed for the "Entity" module.

If the Ledger Detail category is replicated to the entity from the sites, you may be able to view detail down to the level of the originating transaction. (This assumes that any other categories required for the transaction-level detail are also being replicated. Having this level of G/L and other transaction detail replicated to the entity generally does not make sense from a performance standpoint.) Otherwise, you will need to access the specific site in order to view the transaction detail.

For more information about replicating categories, see the Multi-Site Planning Guide.

Sites Reporting to an Entity

The majority of operations at sites reporting to an entity remain the same as at a non-reporting site, including the financials. If a site reports to an entity, the site's Chart of Accounts is now owned by the entity and copied from it. In the local copy of the Chart of Accounts, you can delete records to use a subset of the accounts. The site must use the domestic currency of its entity, but it may use its own rates. Consolidation utilities must be run at the reporting sites to copy the posted ledger transactions and budgets into the entities all the way up the hierarchy.

A site is not required to report to an entity, in which case its financials are not consolidated.

Setup of Entities and the Reporting Structure

When you create system databases or add sites and entities to a database, you must specify a site type. When you create a site that will be used as a financial entity, specify a site type of entity.

Operational data such as entry or selection of customers and vendors is not necessary for entities.

Defining the Hierarchy

To define or change the hierarchy of your sites and entities, several tools are available:

Change Reports to Entity: Use this utility at the reporting site/entity to specify the next-level entity to which this site/entity reports.
Multi-Site Chart Copy: Use this utility at the entity to copy the Chart of Accounts to the reporting sites/entities.
Ledger Consolidation: Use this utility at the reporting site/entity to consolidate all previously unconsolidated records for the site, all the way up the financial reporting hierarchy.

Note: Additional steps are required in order to initially set up a financial hierarchy.

For more information, see Setting Up a Consolidation Reporting Structure.

We suggest that you contact Infor Consulting Services to help with your implementation.

It is not necessary to have a balanced financial hierarchy.

Changes to Your Reporting Structure

Over time, sites come and go and the hierarchy of entities may change. As these changes occur, the historical consolidated financial data will not change, and an historical time-phased site/entity structure will be maintained. This allows prior period reporting and drill-downs to yield identical results, even after the structure has changed. On the date of a reporting structure change, a large transaction is posted to close out all accounts for all selected subordinate sites, computing the account balance of each account. Half of this transaction is immediately consolidated to the existing structure, effectively zeroing the balances from the books. After the hierarchy is changed, the other half of the transaction is consolidated to the new structure, creating opening balances for all the accounts. At the site level, this has no effect, since a debit and credit for the same amount is posted to the same account on the same date.

Be aware of the following when changing the reporting hierarchy:

Financial statement reporting at entities only shows data for transactions that occurred during the time period that the hierarchy was in place.
When you change an entity's Reports To mapping, there is no historical audit trail of how it was formerly set up.
Transactions are consolidated to the current structure only, regardless of effective date of the hierarchy change or the ledger transaction date.

Note: Sites can only report to entities that have matching reporting parameters. This includes the same chart template, domestic currency and financial periods, as well as every Chart of Accounts already defined at the entity.

Currency

Average exchange rates are calculated based on exchange rates established by sites (set up by site or mid-level entity that the site reports to in a shared currency environment). During ledger consolidation, when posting revenue and expense accounts, exchange rates set up at the site level (set up by site or mid-level entity that the site reports to in a shared currency environment) are used to calculate average exchange rate for the period and are used to translate site amounts in site's currency to corporate currency. Exchange rates must be set up at the site (or mid-level entity that the site reports to in a shared currency environment) for Ledger Consolidation to correctly post amounts in corporate currency.

When dealing with multiple currencies in a consolidated environment:

The base (domestic) currency must be the same at all sites reporting to an entity. However, you may set up the sites so they can maintain their own currency exchange rates - or you may want to maintain the rates only at the entity.
For more information, see the section on replicating shared currency in Default Replication Categories.
In each entity's Chart of Accounts, the currency translation method and the exchange rate type are specified for each account.
The currency table of the entity is the one used for translation during the consolidation. (Sites use the domestic currency of their entity, so there is no currency translation at this level.)

To comply with FASB52 or GAAP standards, on the Chart of Accounts form, you must make sure the currency translation methods are set to Average for revenue and expense accounts, End for asset and liability accounts, and Spot for Owner's Equity accounts. You can exclude Owner's Equity accounts from being revalued by setting the Account Class in the Chart of Accounts form to Equity - Non-Monetary.

Note: This adjustment is necessary only when the ledger is consolidated in a multi-site setup where a subordinate entity's domestic currency is different from its parent entity's domestic currency, different account types are posted with different translation methods, and the exchange rates varies.

See FASB52 Overview.

Combined vs. Consolidated Reporting

Financial statements generated by an external tool such as the Excel add-in can either show combined data from a group of sites, or consolidated data from an entity and its reporting sites.

If you want to create sample financial statements before changing a hierarchical structure, to see what the combined data from multiple sites will look like, you can mimic the new proposed structure. Use the Excel Financial Reporting tool to pull data from multiple sites using GL functions and combine them using Excel features. The balance can be converted into the currency of your choice for reporting.

With the Excel Financial Reporting tool, it is not necessary to use the same Chart of Accounts format or currency across sites. For example, you can combine the cash balances from different sites with a formula like =SLGLBAL(“10000”,,,,,”DALS”) + SLGLBAL(“10100”,,,,,”LOND”, “USD”). This formula specifies the account number, site and currency (when necessary). In the example:

The LOND Cash Account uses a currency parameter which converts the amount to USD. The DALS Cash Account does not need a currency parameter because it is already in USD.
Both 10000 and 10100 represent Cash Account in the different sites.

Even after you have set up a consolidated environment, you can still run combined financial statements for a group of sites.

Before you run consolidated financial reports for an entity, all sites that report to the entity must have run the Ledger Consolidation utility. When the financial statement is run, no currency translation is required, because the data at the entity level is already translated into the entity's currency and Chart of Accounts.

About Ledger Consolidation

You can consolidate the ledger at the end of the year. When you select the Year End check box, the system posts CTA adjustment transactions to the ledger for the revenue and expense accounts.

The following checks are made:

The hierarchy is valid
The accounts map correctly
The unit codes map correctly
The currencies convert properly

The system uses the currency rate tables that are defined by each financial entity where the consolidation entries are being written. The translation is performed directly on data from the originating site's transaction.

Period totals are created, using the definitions at each entity additionally segregated by hierarchy.

As this utility runs, it creates a report of any exceptions, undoing only the affected ledger record and continuing with the remaining processing.

Before actually posting the transactions, you can run in Verify mode by not selecting the Consolidate check box.

Note: Before running this utility, you must specify a valid account in the CTA Account field on the General Parameters form at the corporate entity level; otherwise, an error message displays.

If you are reconsolidating, use the Set Ledger Consolidated Flag utility to reset the Ledger Consolidated field. Then delete the data in the ledger and pertot database tables for the corporate and lower entities, but not for sites. If you do not take these steps before rerunning Ledger Consolidation, the entity ledger will be out of balance.

Unit Code Mapping

Each unit code is copied to the Reports To entity verbatim if that account in the Reports To entity has the unit code enabled.

Budget Consolidation

Use the Budget Consolidation utility at the reporting site/entity to consolidate all previously unconsolidated site budgets and plans through the cutoff date. All entities in the hierarchy that are senior to the current site must be replicating G/L or Ledger Consolidation data with the current site. Each budget and plan for each account is consolidated all the way up the hierarchy; the budget and plan at the current site remains unchanged. For higher level entities, the newly created budgets and plans are stored using that entity's chart of accounts, base currency, and financial periods.

If a site or entity enters and leaves a hierarchy in the course of a single year, the original budget/plan will be replaced with the later one.