Examples - At Equity

Recognition of an equity entity's profit

The parent has a participation of 10,000 in the group currency. The subsidiary reports a profit of 5,000 in the group currency. The subsidiary's profit of 5,000 is multiplied by the 25% ownership, which results in 1,250.

5,000 * 25% = 1,250

This table shows a journal in which the profit of 1,250 from an associated entity is recognized. In this example, segments 1, 2, 3, and intersegments 1, 2, 3 are unassigned.


Entity	Account	Intercompany	Schedule Detail	Debit	Credit
RU0003 Genesis Automotive	(A131510) Investments in Associated Entities	RU0006 Genesis Asia	Disposals	1,250
RU0003 Genesis Automotive	(I300300) Profit from Associated Entities or Joint Ventures	RU0006 Genesis Asia			1,250

Recognition of an equity entity's loss

The parent has a participation of 10,000 in the group currency. The subsidiary reports a loss of 5,000 in the group currency. The subsidiary's loss of 5,000 is multiplied by the 25% ownership, which results in 1,250.

5,000 * 25% = 1,250

This table shows a journal in which the loss of 1,250 from an associated entity is recognized. In this example, segments 1, 2, 3, and intersegments 1, 2, 3 are unassigned.


Entity	Account	Intercompany	Schedule Detail	Debit	Credit
RU0003 Genesis Automotive	(I300300) Losses from Associated Entities	RU0006 Genesis Asia		1,250
RU0003 Genesis Automotive	(A131510) Investments in Associated Entities	RU0006 Genesis Asia	Disposals		1,250

Recognition of a dividend paid by an equity entity

The participation account must be adjusted if the parent entity receives a dividend from a subsidiary. For example, the parent receives a dividend of 2,000 in the group currency. That amount must be eliminated from the profit and loss account and must be posted against the investment. This decreases the investment.

This table shows a journal in which a dividend of 2,000 from an associated entity is recognized. In this example, segments 1, 2, 3, and intersegments 1, 2, 3 are unassigned.


Entity	Account	Intercompany	Schedule Detail	Debit	Credit
RU0003 Genesis Automotive	(I30050) Dividends Income for Associated Joint Ventures	RU0006 Genesis Asia		2,000
RU0003 Genesis Automotive	(A131510) Investments in Associated Entities	RU0006 Genesis Asia	Disposals		2,000

Parent's participation is lower than the parent's portion of a loss or paid dividend

The parent has a participation of 10,000 in the group currency. The subsidiary reports a loss of 100,000 in the group currency. The subsidiary's loss of 100,000 is multiplied by the 25% ownership, which results in the parent's loss portion of 25,000.

100,000 * 25% = 25,000

The portion of a loss or dividend that is higher than the parent's participation cannot be recognized. The participation can never be lower than 0.

Because the participation (10,000) is lower than the loss portion (25,000), only the participation amount can be recognized in a journal.

This table shows an example of a journal in which only the participation amount of 10,000 is recognized:


Entity	Account	Intercompany	Schedule Detail	Debit	Credit
RU0003 Genesis Automotive	(I300300) Losses from Associated Entities	RU0006 Genesis Asia		10,000
RU0003 Genesis Automotive	(A131510) Investments in Associated Entities	RU0006 Genesis Asia	Disposals		10,000

The difference between the participation of 10,000 and the loss portion of 25.000 is -15,000

10,000 - 25,000 = -15,000

This difference is stored by the rule in the Equity element of the DDATA dimension within the TFINANC cube.

If, in the following year, there is a profit, it can be recognized in a journal only if the profit exceeds the participation-loss difference of -15,000 from the previous year. The rule adjusts the value in the Equity element in the current period. If this value is 0, the rest of the profit can be recognized in a journal.

If, for example, there is a profit of 80,000 in the following year, then these steps are performed by the rule:

Calculating the parent's profit portion.
```
80,000 * 25% = 20,000
```
Comparing the profit against the previous year's loss.
```
20,000 - 15,000 = 5,000
```

The profit (20,000) is higher than the previous year's loss (-15,000). The value in the Equity element is zeroed and the rest of the profit is posted in a journal.

This table shows how the difference between the profit (20,000) and the previous year's loss (-15,000) can be posted in a journal:


Entity	Account	Intercompany	Schedule Detail	Debit	Credit
RU0003 Genesis Automotive	(A131510) Investments in Associated Entities	RU0006 Genesis Asia	Disposals	5,000
RU0003 Genesis Automotive	I300300) Profit from Associated Entities or Joint Ventures	RU0006 Genesis Asia			5,000

If, for example, there is a profit of only 10,000 in the following year, then these steps are performed by the rule:

Calculating the parent's profit portion.
```
10,000 * 25% = 2,500
```
Comparing the profit against the previous year's loss.
```
2,500 - 15,000 = -12,500
```

The profit (2,500) is lower than the previous year's loss (-15,000). The value in the Equity element is reduced from -15,000 to -12,500 and no journal is posted.

If there is no profit in the following year but instead there is a loss of -10,000, then these steps are performed by the rule:

Calculating the parent's loss portion.
```
-10,000 * 25% = -2,500
```
Adding the loss portion to the previous year's loss.
```
(-2,500) + (- 15,000) = -17,500
```

The value in the Equity element is increased from -15,000 (the previous year's loss) to -17,500 and no journal is posted.