Enabling M3 Group Consolidation

Outcome

• Each subsidiary is configured for group consolidation and registered at the parent company.
• The balance accounts to consolidate indicate which exchange rate to apply at conversion.
• A table for converting the subsidiary's chart of accounts to that of the parent company is created.

Use the outcome to carry out the process described in Managing Group Consolidation.

Before you start

Before you can start, you must complete these requirements:

• The corporation must have well-defined rules, routines and policies for group consolidation. You must have a good understanding of the parent company's and the subsidiary's accounting policies.
• The subsidiaries and the parent company must be defined in 'Company. Open' (MNS095) or in 'Company. Connect Division' (MNS100).
• You must know the identity and division of the parent company.
• The chart of accounts of the subsidiaries and the parent company must be defined in 'Accounting Identity. Open' (CRS630). If the subsidiary's chart of accounts is not to be converted, the accounting identities of the parent company must also be registered for the subsidiary.
• The currency must be defined in 'Currency. Open' (CRS055).
• If the currency is to be converted, exchange rates must be defined in 'Exchange Rate. Open' (CRS056).

Follow these steps

1. Define Basic Settings for Subsidiary for M3 Group Consolidation

   First, set the basic consolidation rules for the subsidiary company. This includes selecting:

   • The subsidiary's identity to be displayed in all the subsidiary's transactions at the parent company
   • The consolidation currency.

   Program used: 'Settings – Subsidiary' (GMS010).

2. Select Conversion Method for Balance Accounts

   If you want to convert the cumulative balance of each period balance using the exchange rate valid at the end of each period, you must select alternative 1='Cumulative conversion' for each balance account to consolidate in 'Accounting Identity. Open' (CRS630/F).

   In the USA, such conversion is required as part of the financial reporting under the GAAP standard. The conversion normally applies to equity accounts. Note that this solution requires that the subsidiary does not convert its balances to the parent company's currency, but instead lets the parent company do the currency conversion.

   The default value is alternative 2, which causes the balance of each period to be converted at the exchange rate valid during the last (current) period.

3. Configure Transfer of General Ledger and Budget Transactions in Group Consolidation

   For each subsidiary, you must define how to handle general ledger and budget transactions during transfer to the parent company. This includes defining:

   • The accounting dimensions whose transactions you want to transfer
   • The dimension where the subsidiary's identity will be displayed, which makes it possible for the parent company to identify the transactions
   • Whether the chart of accounts is to be converted to the parent company's chart of accounts based on the account conversion table (see below)
   • Exchange rate types to use.

   Programs used: 'Settings – Transfer of General Ledger' (GMS015) and 'Settings – Transfer of Budget' (GMS020).

4. Define Conversion of Subsidiary's Chart of Accounts

   If the subsidiary's chart of accounts differs from the one used by the parent company, you register the parent company's differing accounts. For each account, you define one or more ranges of the subsidiary company's accounts to be totaled in the parent company's accounts when transferring all the transactions in the range.

   Although this activity is done per subsidiary, normally the account conversion rules are owned by the parent company.

   Program used: 'Account Conversion. Open Table' (GMS100).

5. Register Subsidiary in Parent Company

   In the parent company, you register information about each subsidiary that is necessary for the parent company to receive transactions. This includes registering contact information, the consolidation currency and the percentage of the holding of each account that the subsidiary sends to the parent company.

   Program used: 'Settings – Parent Company' (GMS090).