Method Selection

You can perform elimination of acquisition calculations, intercompany balances and intercompany profit on either a legal or a management basis. You can define which method to use in the consolidation type.

For more information, see Consolidation Types.

Generated transactions are stored on the company or group together with the base values. In a legal consolidation type, eliminations are stored on the level where the counterparts meet.

The choice of legal or management consolidation type is of significance for eliminations with a counterpart, for example, intercompany balances and shares in subsidiaries, and when there are several owners of a company in the group.

In a strictly legal structure, all ownership relations are included both in the acquisition register and in the company structure and eliminations are calculated correctly. In a legal structure where the company structure looks different from the ownership relations in the acquisition register, eliminations may be incorrect.

Example: In the investment register, company A owns company B with 90%. In the company structure, company B is owned with 80% (Purchase method). If share capital is 1000, automatic journal type 1 eliminates 900 (calculated from the register) and automatic journal type 90 eliminates 200 (calculated from the company structure). This results in a an amount of - 100 where 0 should be expected. This situation may occur when you want to build an operational structure type. To work around this issue, you need to adjust the percentages in the company structure, as the investment data is used in all company structures.

Management consolidation types will only get the same result as a legal structure if the following conditions are met:

  • the legal structure does not have any cross ownerships
  • etyp 35 or 36 are not used as the basis for any automatic journal where you can select contribution version (when IC/IP are booked as company journals).
  • correct percentages are used (you get them automatically if the management structure is automatic and linked to the legal structure).
Note: In practice it is very difficult to get the same result in the management structure as in the legal structure.