Defining Non-Controlling Interest Rules

This section provides an overview of non-controlling interest eliminations and discusses how to:

Establish non-controlling interest rules.
Establish non-controlling interest sets.
Establish non-controlling interest groups.

Pages Used to Define Non-Controlling Interest Rules

Page Name	Definition Name	Navigation	Usage
Non Controlling Interest Rule	GC_NCI_RUL_PG	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule	Define a non-controlling interest rule and identify the source ChartField value sets for the subsidiary equity and parent investment accounts.
Non Controlling Interest Rule - Elimination	GC_NCI_RUL_PG6	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Elimination	Specify the target ChartField values that the system uses to eliminate the parent investment, eliminate the subsidiary equity corresponding to the parent investment, eliminate (or adjust) the subsidiary equity for non-controlling interest, and book (or adjust) the non-controlling interest liability.
Non Controlling Interest Rule - Out of Balance	GC_NCI_RUL_PG3	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Out of Balance	Identify to which ChartFields you want to record any out of balance amounts that result from non-controlling interest eliminations.
Non Controlling Interest Rule - Tolerance	GC_NCI_RUL_PG4	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Tolerance	(Optional) Specify the tolerance rule to use while processing non-controlling interest eliminations.
Non Controlling Interest Rule - Notes	GC_NCI_RUL_PG5	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Notes	(Optional) Record details about a non-controlling interest rule.
Non-Controlling Interest Set	GC_NCI_SET_PG	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Set	Associate ownership sets with non-controlling interest rules to calculate the non-controlling interest amount and identify the set of non-controlling interest eliminations that should be generated for a group of subsidiaries.
Non-Controlling Interest Set - Notes	GC_NCI_SET_PG2	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Set, then select Notes	Record details about a non-controlling interest rule set.
Non-Controlling Interest Group	GC_NCI_GRP_PG	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Group	Define the non-controlling interest rule sets that comprise a non-controlling interest group and the order in which to process them.
Non-Controlling Interest Group - Notes	GC_NCI_GRP_PG2	select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Group, then select Notes	Record details about a non-controlling interest group.

Understanding Non-Controlling Interest Eliminations

Use non-controlling interest (NCI) rules to eliminate subsidiary equity against parent investment and to account for the investment of non-controlling interests in the subsidiary. In consolidating the books of a subsidiary with those of the parent company, you credit the parent with the portion of the subsidiary that it actually owns and exclude what outside investors own. The system reports the value of non-controlling interests in terms of the aggregate net assets rather than in terms of a fractional equity in each of the assets and liabilities of the subsidiary.

When processing NCI eliminations for the controlling parent, the system records the original entries to eliminate the remaining subsidiary equity and book NCI Liability. At higher levels of the tree, you may adjust these entries if non-controlling parents are incorporated into the consolidation.

The system calculates the amount of the non-controlling interest entry by multiplying the ownership percentages of non-controlling interests in the subsidiary by the total equity of the subsidiary. How the calculation is processed depends on the ledger template that is associated with the consolidation model. When the Processing Method on the Ledger Template-Consolidation Variables page is set to Use year-to-date data, the system uses the ownership percentage at the period end date on the run control page. This ensures that the NCI liability calculation is based on the current ownership percentage for all periods processed. If the processing method is set to Use period data, only the specified period is processed for the current ownership percentage.

You set up NCI elimination rules to:

Specify the source ChartField values sets to use for subsidiary equity and parent investments.
Specify NCI elimination target ChartFields.
Specify which ChartFields to use to record out of balance amounts resulting from NCI eliminations.
Optionally, specify a tolerance rule to apply, and enter notes about the rule.

When processing NCI eliminations, the system:

Generates journal entries that eliminate the parents's investment in subsidiary account balances.

These entries eliminate 100 percent of the parent investment, the ownership percentage of the subsidiary equity, and generate an out of balance entry for the difference.
Eliminates the remaining subsidiary equity against NCI liability.

The system calculates the amount of the NCI entry by multiplying the ownership percentages of non-controlling interests in the subsidiary by the total equity of the subsidiary.
If non-controlling parents are either at higher levels in the tree or in branches other than the controlling parent, the system generates two additional sets of entries:
- The first set of entries eliminates the parent investment against the portion of the subsidiary equity that corresponds to the parent ownership percentage.
- The second set of entries adjust the NCI liability that was recorded for the controlling parent.

Note: Even if the parent owns 100 percent of its subsidiaries, you must define NCI rules in order for the system to eliminate the parent investment and subsidiary equity balances.

The combined result of the adjustments (journal entries, allocations) and elimination entries is to express the value of the parent investment in terms of the assets and liabilities of the subsidiary, offset by a non-controlling interest liability. The equity ownership for each subsidiary in the consolidation is eliminated, with only the parent company's equity accounts and non-controlling interest account remaining. Consolidated capital stock and retained earnings are equal to the balances of the parent.

Image: Setup for non-controlling interest for 20 percent of Company B2 (0.2 x 50,000 USD)

In this example, Company B1 owns 80 percent of Company B2, and B2's total shareholder equity is 50,000 USD:

* Non-Controlling interest entry to recognize the 20 percent non-controlling interest owned by other than B1 in B2.

** Elimination of the total equity of B2 versus the investment in Company B2.

The amounts of 35,000 USD and 15,000 USD to eliminate Company B equity are recorded in multiple entries. The first set of entries (recorded with a GC_SOURCE of 6A) eliminate the total parent investment of 40,000 USD and eliminate 80 percent of the subsidiary equity (28,000 USD to capital stock and 12,000 USD to retained earnings). Then the second set of entries (recorded with a GC_SOURCE of 6B) deal with the NCI—they eliminate the remaining 20 percent of the subsidiary equity (7,000 USD and 3,000 USD, respectively) and book the offsetting 10,000 USD entry to the NCI Liability.

Non-Controlling Interest Rule Page

Use the Non Controlling Interest Rule page (GC_NCI_RUL_PG) to define a non-controlling interest rule and identify the source ChartField value sets for the subsidiary equity and parent investment accounts.

Navigation

select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule

Image: Non Controlling Interest Rule page

This example illustrates the fields and controls on the Non Controlling Interest Rule page. You can find definitions for the fields and controls later on this page.

Ledger Template

Select the ledger template structure. This must be the same template used for your consolidation ledger. This value controls which ChartFields are available.

See Understanding Ledger Templates.

Match Affiliate Value

If the source ledgers contain a ChartField to record with which affiliate the transaction took place, then the consolidation engine can match the affiliate values to correctly eliminate the intercompany NCI transactions. Because fewer account numbers are used with the affiliate method, fewer NCI rules are required. To enable this option, select the Match Affiliate Value check box. The fields that appear on the Non Controlling Interest Rule - Elimination page vary based on this selection.

Consolidation Dimension

Select the dimension by which you are consolidating, for example, Ledger Business Unit.

See Understanding Business Units.

Data Processing Option

Select the data processing option that you want the elimination rule to use. Your options are Skip Previously Processed Data or Process All Data.

If you select Skip Previously Processed Data, the system processes the data once for a single rule and skips over previously processed data for any other rules.

If you select Process All Data, the system can process the same data again for a different rule.

Create ChartField Value Set

Select this link to go to the ChartField Value Set page and define a new ChartField Value Set.

Account ChartField Value Set

Subsidiary Equity

Specify the ChartField value set that identifies the source of the subsidiary equity accounts.

Parent Investment

Specify the ChartField value set that identifies the source of the asset accounts where the subsidiary is carried on the parent company's books.

Establishing Non-Controlling Interest Rule Eliminations

Use the Non Controlling Interest Rule - Elimination page (GC_NCI_RUL_PG6) to specify the target ChartField values that the system uses to eliminate the parent investment, eliminate the subsidiary equity corresponding to the parent investment, eliminate (or adjust) the subsidiary equity for non-controlling interest, and book (or adjust) the non-controlling interest liability.

Navigation

select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Elimination

Image: Non Controlling Interest Rule - Elimination page

This example illustrates the fields and controls on the Non Controlling Interest Rule - Elimination page. You can find definitions for the fields and controls later on this page.

Complete the fields within each of these grids to identify the target dimension or ChartField values that the system uses for NCI eliminations.

Eliminate Parent Investment-Parent Investment

Specify the fields and the values used to eliminate the parent's investment in a subsidiary.

Eliminate Subsidiary Equity-Subsidary for Parent Investment

Specify the fields and the values used to eliminate the subsidiary equity corresponding to the parent's investment.

Eliminate Subsidiary Equity-Subsidary for Non-Controlling Interest

Specify the fields and the values used to book (or adjust) the subsidiary equity for non-controlling interest.

Non-Controlling Liability-Non-Controlling Interest

Specify the fields and the values used to book (or adjust) the non-controlling interest liability.

In each grid, Account is required. The default Option for each dimension specified is to Retain Source Value. . If you select the default option, the system creates NCI elimination entries that retain the dimension values of the input ledger lines, reversing the amounts, and booking them to the elimination unit. If a dimension (ChartField) is not included, then its value is left blank on the NCI elimination entry.

For each grid, complete these fields:

Get ChartFields

Click to populate the associated grid with all of the ChartFields or dimensions defined by the implementation. Any target rows that you have already defined remain. You can then delete any rows that you don't need, and the system leaves those ChartField (dimension) values blank. If you include the consolidation dimension, the system ignores it; during processing the system populates the consolidation dimension with the appropriate elimination entity.

Field Name

Select a dimension or ChartField to use as a target. Account is required.

Option

Choose how the system should determine the ChartField value to use as a target. Options are:

Retain Source Value: Use the source elimination value as the target.

Use a Constant: Use a specific value as the target. Specify the value in the ChartField Value field.

Note: For the Field Name Flow Code, only the Use a Constant option can be selected.

Value

Specify the value to use as a target. This field is only available for entry when the Option field is set to Use a Constant .

Establishing Non-Controlling Interest Rule Out of Balance Accounts

Use the Non Controlling Interest Rule - Out of Balance page (GC_NCI_RUL_PG3) to identify to which ChartFields you want to record any out of balance amounts that result from non-controlling interest eliminations.

Navigation

select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Out of Balance

Image: Non Controlling Interest Rule - Out of Balance page

This example illustrates the fields and controls on the Non Controlling Interest Rule - Out of Balance page. You can find definitions for the fields and controls later on this page.

If the NCI elimination does not balance, the system directs the remaining amount to the appropriate out of balance account or ChartFields that you specify on this page. You can specify special ChartFields for the out of balance amounts. For example, you can enter a department for both the Debit and Credit ChartFields in addition to an account. The out of balance amount is booked to the elimination entity attached to common node between the two entities with interunit transactions.

Complete these fields:

Group Out of Balance By

(Optional) Specify one or more source ChartFields by which to group the out of balance amounts. For example, you could group them by Customer ID and Department.

Out of Balance Credit and Out of Balance Debit

Indicate to which ChartFields the out of balance credits or debits should be posted. Add additional rows to specify more than one ChartField value.

Assigning a Tolerance Rule (Optional)

Use the Non Controlling Interest Rule - Tolerance page (GC_NCI_RUL_PG4) to (Optional) Specify the tolerance rule to use while processing non-controlling interest eliminations.

Navigation

select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Rule, then select Tolerance

Image: Non Controlling Interest Rule - Tolerance page

This example illustrates the fields and controls on the Non Controlling Interest Rule - Tolerance page. You can find definitions for the fields and controls later on this page.

Tolerance Rule

Select the tolerance rule to use with this NCI elimination rule. The system creates and posts journals when the amount by which a transaction is out of balance is less than the threshold specified in the tolerance rule. If the out of balance amount or percentage is greater than the threshold amount or percentage specified in the tolerance rule, the entire NCI elimination entry does not get posted, however the system does create the NCI elimination entry. When processing the NCI elimination rule, select the Send Tolerance Email check box on the Run Control request page if you want the Contact defined on the Ledger Detail page to be notified of an out of tolerance condition.

Edit/View Tolerance Rule

Select to go the Tolerance Rule page and view or edit the specified tolerance rule.

Create Tolerance Rule

Select to go to the Tolerance Rule page and create a new tolerance rule.

See Defining Tolerance Rules.

Non-Controlling Interest Set Page

Use the Non-Controlling Interest Set page (GC_NCI_SET_PG) to associate ownership sets with non-controlling interest rules to calculate the non-controlling interest amount and identify the set of non-controlling interest eliminations that should be generated for a group of subsidiaries.

Navigation

select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Set

Image: Non-Controlling Interest Set page

This example illustrates the fields and controls on the Non-Controlling Interest Set page. You can find definitions for the fields and controls later on this page.

Non-Controlling interest sets associate the subsidiary with NCI rules and are used to identify the non-controlling interest elimination rules that should be processed for a set of subsidiaries. The NCI rules eliminate the parent's investment in a subsidiary, eliminate subsidiary equity, and create a NCI liability amount.

Ledger Template

Select the ledger template structure. This must be the same template used for your consolidation ledger. This value controls which ChartFields are available.

See Understanding Ledger Templates.

Consolidation Dimension

Select the dimension by which you are consolidating, for example, Ledger Business Unit.

Add/Update Subsidiary Entity

This group box is a work area that you can use to help you complete the Non Controlling Interest Rules grid. By specifying a business unit tree name, then clicking Get Subsidiary Entity, you can retrieve and insert all of the ownership sets for the business units with an ownership rule defined in that tree that are not currently in the Non Controlling Interest Rules grid. Similarly, if you select a non-controlling interest rule, then click Apply the Non-Controlling Rule, the selected rule is associated with the rows in the Non-Controlling Interest Rules grid that do not have an assigned non-controlling interest rule.

Non-Controlling Interest Rules

Insert rows to specify each subsidiary's ownership set and its non-controlling interest rule. The system uses this pairing to compute the non-controlling interest amount to eliminate. The consolidation process generates one journal for the entire job, composed of journal lines for each non-controlling interest set and ownership set pair. If there are any out of balance conditions, the out of balance account specified on the non controlling interest rule is debited or credited for the corresponding elimination entity.

Non-Controlling Interest Group Page

Use the Non-Controlling Interest Group page (GC_NCI_GRP_PG) to define the non-controlling interest rule sets that comprise a non-controlling interest group and the order in which to process them.

Navigation

select Global Consolidations, then select Define Consolidations, then select Non-Controlling Interest Rules, then select Non-Controlling Interest Group

Image: Non-Controlling Interest Group page

This example illustrates the fields and controls on the Non-Controlling Interest Group page. You can find definitions for the fields and controls later on this page.

Within the Non-Controlling Interest Set grid, specify all of the non-controlling interest sets to include in this non-controlling interest group. Include all of the rule sets you need to identify every subsidiary for eliminating non-controlling interests. You can only assign one non-controlling interest group to a consolidation model. The rules are processed in ascending order based on the Use Order value. If the same rule exists in multiple sets, the first rule encountered is used. In other words, only unique rules are used.

Ledger Template

Select the ledger template structure. This must be the same template used for your consolidation ledger. This value controls which ChartFields are available.

See Understanding Ledger Templates.

Consolidation Dimension

Select the dimension by which you are consolidating, for example, Ledger Business Unit.

Non-Controlling Interest Set

Specify all of the non-controlling interest sets to include in this non-controlling interest group, adding additional rows as needed. Include all of the rule sets needed to identify every subsidiary for which non-controlling interests should be eliminated, because only one non-controlling interest group is assigned to a consolidation model.

Use Order

Enter the use order value. Rule sets processing occurs in ascending order based on the number in this field.

If you selected the data processing option, Skip Previously Processed Data, in an NCI rule, and the same data exists in multiple rule sets, the first time the data is encountered, it is processed, then it is not processed again, even if it is encountered in another rule.
If you selected the data processing option, Process All Data, in an NCI rule, the data is processed each time the data is included in a rule set.