Ownership
Ownership in Infor EPM
This table shows ownership-related terms that are used in Financial Consolidation:
| Term | Description |
|---|---|
| Owner | An entity that has shares of another entity. An owner may be a parent entity but not necessarily. |
| Owned or Intercompany | An entity whose shares have been bought by another entity. |
| Group | A group of entities that are included in the consolidated financial statements that are prepared by the parent entity. |
| Parent entity | A holding entity of a group. A group must always have one parent entity assigned. |
| Control | Control is important to the definition of consolidation methods, such as Full, Proportional, At equity, or None. To identify the appropriate consolidation method, you must consider the percentage of control over an entity. |
| Ownership | Required for the calculation of the effective ownership (direct and indirect minorities). For example, if the control is 50%, then the consolidation method is set to Proportional. If the ownership is 60%, then 60% of the financial statement is transferred to the group context. |
An entity becomes a group member when the entity is controlled directly or indirectly by the holding entity of the group based on the effective ownership calculation. All entity relationships must first be set up with Entities Ownership. After that, all entities relationships can be taken into the group context with the Groups Ownership results based on the effective ownership calculation.
The ownership interest is represented through the possession of shares or capital stock. In Financial Consolidation, the possession percentage is relevant to understanding how much an entity contributes to another entity, which can own another entity, and how the financial statements of the owned entity are recognized in the parent entity.
The controlling interest defines the power of an investor over an investee to manage the investee's business. Even if an investor owns the majority of an investee's capital stock, they may not control the investee's business. Control is usually achieved through ownership but can also be achieved through contracts that can lead to the majority of votes. Therefore, the controlling interest is not ownership-dependent but can be maintained independently. Sometimes, you must correct the calculated control manually.
The ownership concept in Infor EPM is based on changes in ownership and control. You can only add a change request where you define an increase or decrease in ownership percentage or control percentage, or both for a certain period. The total percentage of ownership and control is automatically rolled up to future periods. The total ownership and control percentage stays the same in ongoing periods until another change happens.
This table shows an example how the total ownership or control percentage can change with time through change requests to increase:
| Jan 2020 | Feb 2020 | Mar 2020 | Apr 2020 | May 2020 | Jun 2020 | Jul 2020 | |
|---|---|---|---|---|---|---|---|
| Current ownership/control | 0% | 0% | 20% | 20% | 20% | 70% | 70% |
| Change request (increase) | 20% | 50% | |||||
| Total ownership | 0% | 20% | 20% | 20% | 70% | 70% | 70% |
Legal and management ownership
In Financial Consolidation, you can build separate ownership structures, those for legal reporting purposes and those for management reporting purposes. Legal ownership structures must comply with legal requirements, such as GAAP and tax requirements. Management ownership structures are more flexible. In management ownership, users can create any structures that they require and are not bound to obey any legal requirements.
Legal ownership and management ownership are separate calculation processes. The calculation of legal group ownership is based on the entity-intercompany level. The calculation of management group ownership is based on a group level. Currently, management ownership process is not status-controlled.
When you create groups in Business Modeling, you must define whether they are legal groups or management groups. We recommend that you prefix group names with, for example, LG_ for legal groups and MGT_ for management groups. This is to differentiate group types at a glance.
This table shows examples of two legal group ownership structures with the same parent entity:
| Legal group 1 | Owner entity | Intercompany (owned entity) | Ownership percentage | Legal group 2 | Owner entity | Intercompany (owned entity) | Ownership percentage |
|---|---|---|---|---|---|---|---|
| Parent entity 1 | Parent entity 1 | ||||||
| Parent entity 1 | Entity 1 | 50% | Parent entity 1 | Entity 1 | 50% | ||
| Parent entity 1 | Entity 2 | 90% | Parent entity 1 | Entity 2 | 90% | ||
| Entity 2 | Entity 3 | 90% | Entity 2 | Entity 3 | 90% |
If you create two legal groups with the same parent entity, then both structures must be identical, including the ownership percentage values. They cannot differ in any way. This is because entity-intercompany relationships are set up globally, independent of a group. If you assign a parent entity to a group, then all affected entity-intercompany relations of the parent are taken into consideration by the ownership calculation process. The calculation results are the same for both legal groups. Therefore, having identical legal groups makes sense only in case of the parallel consolidation.
This table shows examples of two structures for management group ownership with the same parent entity:
| Management group 1 | Owner entity | Intercompany (owned entity) | Ownership percentage | Management group 2 | Owner entity | Intercompany (owned entity) | Ownership percentage |
|---|---|---|---|---|---|---|---|
| Parent entity 1 | Parent entity 1 | ||||||
| Parent entity 1 | Entity 1 | 50% | Parent entity 1 | Entity 1 | 100% | ||
| Parent entity 1 | Entity 2 | 90% | Parent entity 1 | Entity 2 | 100% | ||
| Entity 2 | Entity 3 | 90% | Entity 2 | Entity 3 | 100% | ||
| Entity 3 | Entity 4 | 100% |
If you create multiple management groups with the same parent entity, you can create any structures that you require under the parent entity. You can change, for example, the percentage ownership values in all entity-intercompany relationships or add new entity-intercompany relationships.
In legal and management groups, the ownership percentage values cannot exceed 100% for each entity-intercompany relationship.