Accounting for Multiple Companies with a Single Set of Books
You can maintain one set of books for multiple companies as long as the companies share the same account structure, accounting calendar, and functional currency. When setting up the account structure for your set of books, use the segment representing your companies as the balancing segment. This will ensure that each company is always in balance, which makes it easy for you to maintain and report on multiple companies as stand-alone entities, even when you maintain their accounting records in the same set of books.
You can also create summary accounts that maintain consolidated balances for faster reporting and online inquiry. For example, you can see consolidated cash balances, or non-exempt salaries across all companies, and so on.
If you set up your accounts to capture the appropriate information, you can then use the Financial Statement Generator (FSG) to report separately on different industries, foreign operations and export sales, and major customers in accordance with SFAS 14 (U.S.).
Additional Information: If you maintain your parent and all of its subsidiaries within one set of books and you do not have average balance processing enabled, you only need to read this section of the consolidation chapter. You do not need to use the Global Consolidation System to view and report on your consolidated financial information.
To create a single set of books for multiple companies:
1. Define the account structure, accounting calendar, functional currency, and set of books, as described in the setup chapter.
- When you define the account structure, be sure to identify your company segment as the balancing segment.
- When you define the set of books, assign the options that you want to use for the set of books. For example, if you want to balance out-of-balance journals by company automatically, specify an intercompany account.
2. Set up a separate company segment value for your eliminating entries. You can then post elimination entries to this elimination company without needing to reverse them later.
3. Set up a parent company segment value that includes as children all the company segment values you want to consolidate. Be sure to include the eliminating entries company you set up in the previous step. For example, if you want to consolidate companies 01 through 07 and your eliminating entries are made to company 08, define a parent company 09 whose children are companies 01 through 08.
4. Include the parent company in a rollup group and then define summary templates with this rollup group.
To enter multi-company transactions:
- Enter intercompany journals. If you defined your set of books to have General Ledger offset your intercompany journal entries automatically, General Ledger records balancing entries to the appropriate intercompany accounts for each company.
You can also set up automatic eliminating entries to speed consolidations within a set of books.
To report and inquire on consolidated balances:
- Report and inquire on consolidated balances the same way you do with any other balances. Simply enter the parent summary account when requesting an online inquiry or accounting reports, or when defining and requesting financial statements.
Note: If you have average balance processing enabled and want to consolidate average balances, you must use the Global Consolidation System provided with General Ledger because you have to use separate sets of books.
If you use multiple Applications instances, discuss your consolidation needs with an Oracle consultant.
Creating Automatic Eliminating Entries
If you maintain multiple companies within one set of books, you can define automatic entries to eliminate intercompany receivables and payables, investments in subsidiaries, intercompany sales, and so on.
To expedite consolidations and enhance consolidation reporting, define a separate company for your eliminating entries. You can then post eliminating entries to this elimination company without needing to reverse them later. You can also prepare financial statements that clearly identify consolidating and eliminating amounts, making it easy to reconcile your consolidated balances.
If you define a separate company for your eliminating entries, be sure to include it as a child of your consolidated company.
To define automatic eliminating entries:
- Create recurring journal formulas that calculate the amounts for your consolidating and eliminating entries by using the accounts in your consolidating companies as formula factors. For example, define amounts for a journal entry line affecting your investment in subsidiary account by summing your subsidiary equity accounts in your formula calculations.
Creating Consolidated Reports
If you maintain multiple companies within one set of books, you can use FSG to define and request consolidated financial statements using the consolidated parent company accounts. FSG will automatically print consolidated balances in your reports.
You can also use FSG to create consolidating reports -- a side-by-side listing of all your consolidating companies. You may find this useful when reconciling your subsidiaries' totals to the consolidated total. For example, a consolidating report might show your report line items down the left side, then present each subsidiary and your consolidated totals in separate columns:
|
Cash
| $ 1,250,000
| $ 750,253
| $ 1,345,253
| -
| $ 3,345,506
|
Investments
| 2,725,000
| 1,152,750
| 856,253
| 350,425
| 4,383,578
|
Receivables
| 4,523,795
| 885,952
| 1,648,253
| $ 25,000
| 7,033,000
|
Fixed Assets
| 24,354,253
| 2,425,253
| 8,152,425
| 854,125
| 34,077,806
|
. . . .
| . . . .
| . . . .
| . . . .
| . . . .
| . . . .
|
. . . .
| . . . .
| . . . .
| . . . .
| . . . .
| . . . .
|
Retained Earnings
| 115,895,452
| 12,752,200
| 22,452,887
| 1,758,665
| 149,341,874
|
To create a consolidating report with the Financial Statement Generator:
1. Define your balance sheet row set. Include rows for your intercompany receivables and payables, your investments in subsidiaries, and your intercompany amounts.
2. Create a column set that has separate columns for each company. If you enter your eliminating entries in a separate company, also define a column for that company.
3. Define a total consolidated column by adding all the columns for each of your companies, including the eliminating company.
4. Edit the column headings to show the names of each company.
5. Run the consolidating report with the consolidating row and column sets. Note that to get a consolidating income statement report, you can simply define a consolidating income statement row set and run it with the same consolidating column set.
See Also
Defining Sets of Books
Defining Summary Accounts
Defining Intercompany Accounts
Creating Recurring Journal Formula Batches
Overview of the Financial Statement Generator
Overview of Average Balance Processing
Designing Your Accounting Flexfield
Defining Segment Values