This chapter provides information about the Legal Entity consolidation in the Oracle Financial Services Data Foundation application.
Topics:
· Legal Entity Consolidation Data Flow
The reporting bank may be a part of a financial group that has multiple legal entities such as parent or child entities (subsidiaries) under its name. User can select the entity for which processing is to happen, and whether a ‘Solo’ or ‘Consolidation’ execution is to be done. Select these options using the Run Execution screen, but if it is executed using RRF execution then these options have to setup using the rule ‘Capital Consolidation Level Selection’ in the process 'CAPITAL_CONSOLIDATION’.
CAPITAL_CONSOLIDATION is the first process to be added in all the runs defined through Run Rule Framework except the ones for staging data population. Process Modelling Framework selects this process by default.
Run Parameters Assignment:
BASEL Accord mentions about different approaches for calculating RWA. Process Modelling Framework in the product allows the reporting bank to define and execute a Run by selecting a combination of different BASEL II approaches for RWA computation.
Run parameter Assignment is also part of Capital Consolidation process. The rule ‘Run Definition User Defined Run Param Assignment’ is used to assign the run parameters in case of a run executed through Run Rule Framework. But if the execution is through Process Modelling Framework, the parameters are populated based on the process defined.
Following listed are the Consolidation procedures:
· Combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries
· Offset (eliminate) the carrying amount of the parent's investment in each subsidiary and the parent's portion of equity of each subsidiary (IFRS 3 Business Combinations explain how to account for any related goodwill)
· Eliminate or retain in full intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the group (profits or losses resulting from intragroup transactions that are recognized in assets, such as inventory and fixed assets, are eliminated or retained in full). During Consolidation Run, a parameter INTRAFLAG is introduced for Intra Company Elimination at the setup level with YES and NO values. The Intra Company Elimination can be chosen by the customer to eliminate (YES) or skip the elimination (NO) of Intra Company Accounts.
Following listed are the types of Consolidation:
· Simple Aggregation: As name suggests Simply aggregate across entities without any elimination
· Full Consolidation: Aggregate. Eliminate Intra group transactions.
· Proportionate Consolidation: Aggregate. Eliminate Intra group transactions and balances reflect consolidation percentage owned by parent in subsidiary (This can be configured as per the customer requirement).
Scope of consolidation is about list of Entities which participate in consolidation. Legal Entity Structure is looked through Organization Structure Dimension. This stores parent child relationship. This is stored only once. While moving the data, Legal Entity can move related entities to processing/reporting area. Legal structure being finalized once, this structure only stores one parent child relationship.
This section provides data flow information in the Legal Entity Consolidation process.
Figure 16: Legal Entity Consolidation Data Flow