Consolidation Process

Consolidation is the process of gathering data from dependent entities and aggregating the data to parent entities. After you enter or load data into base-level entities, calculate and adjust data, you run a consolidation for a selected Scenario and Period to aggregate the data throughout the organization. As data consolidates, the system performs the necessary currency translation and intercompany eliminations, and equity adjustments or minority ownership calculations if needed.

Oracle Hyperion Financial Management provides a default consolidation method. To enable statutory consolidations, you can customize the consolidation process. When you create an application, you can set the Consolidation Rules attribute. By default, when this setting is not enabled, the system performs the default consolidation and eliminations. When this setting is enabled, the system performs consolidation according to the rules written in the Sub Consolidate() routine, as defined by the administrator. See the Oracle Hyperion Financial Management Administrator's Guide.

You launch the consolidation process from data grids. Launching consolidation runs the consolidation rules for the specified scenario, year, period, entity, and value. As part of that process, consolidation is run for all descendent entities and all prior time periods within the same year. The consolidation process runs all Calculate functions for each affected entity and value. The translation process is run as required to convert data from the child entity currency to the parent entity currency. If the child and parent entity use the same currency, the translation process is not run.

After you select the parent entity into which the dependent entities consolidate, processes that are required run automatically.

• The system runs calculation rules for all descendants of the entity.

• If the data for the child entity and the data for the parent entity are in different currencies, the system translates data based on the exchange rate. For the child entity, the translated value is stored in the Parent Currency member of the Value dimension. The translated value in Parent Currency is rolled up to the parent.

• You can enter adjustments to data through journals.

• The consolidation process begins. If the parent's ownership of the child is less than 100%, the ownership percentage is applied. The system generates proportion and elimination detail, and creates contribution data. You can make further adjustments to contribution data through journals.

At the entity level of the consolidation process, you enter data in input accounts and enter adjustments through journals in the entity currency. The system runs calculation rules at the entity level, resulting in adjusted data for the entity.

Financial Management stores values as double precision floating point numbers which translates to the equivalent of 15 significant digits. Depending on how applications are configured, currencies and overall values, it is possible for the system to “round” values when it reaches the precision limits. If you encounter this situation, Oracle recommends that you work with a trusted consultant who can recommend several different approaches for the issue. Please note that the difference in numbers is originating from the precision limitation and this is not a software bug. Oracle has no plans of increasing the precision to more than 15 digits in the near future.

Example:

Assume you have these 3 numbers:

A: 0.000000000000003

B: 0.000000000000003

C: 1

If you add A+B = 0.000000000000006

Then adding C will makes it 16 significant digits, so the system would round the last digit 6 up. The result is:

1.00000000000001

If you add B+C first, and then A, each of the 0.000000000000003 will be dropped as soon as it’s added to the 1, since the result is more than 15 significant digits. The result would be 1.

Following are examples of the consolidation process.

The first example shows the process when the entity currency and the parent currency are different.

The following example shows the process when the entity currency and the parent currency are the same.

Translation Process

Currency translation converts account data from one currency to another. The data in the local currency of the dependent entity is translated to the currency of the parent using the local currency exchange rate.

You can enter currency rates by entity for base entities. If you enter currency rates by entity, during translation, the system uses the current entity for the direct translation rate. For example, if the entity currency rate is Euro, and the parent currency rate is USD, the system uses Rate.Euro.USD in the entity that is being translated. If you do not enter currency rates by entity, the system derives the direct rate from the indirect rate in the current entity. For example, it reverses the amount stored in Rate.USD.Euro to obtain Euro/USD.

If the currency rate is not found in the current entity, the system uses the direct rate in the None entity. If the rate is not found, the system derives the direct rate from the indirect rate in the None entity. For example, the system reverses the amount stored in Rate.USD.Euro to obtain Euro/USD. See the Oracle Hyperion Financial Management Administrator's Guide.

After the translation rule is run, the translated currency dimension is stored. You can make adjustments to the translated amounts in each currency through journals.

The total of these two levels (Translated and Adjusted data) represents the starting point of the consolidation process. The translation process does not take place if the entity and the parent have the same default currency. In this case, the system moves directly to the consolidation process.

As a dependent entity's values roll up into its parent during consolidation, the system can store consolidation detail, such as Proportion and Elimination detail. Proportion detail contains the balances resulting from the execution of consolidation rules. It also reflects the results of the percent consolidation on the base values. Elimination detail contains any eliminating balances that result during consolidation based on elimination rules.

The system derives as aggregation the contribution (before adjustment) values. It is still possible to adjust this data through journals. The system runs calculation rules for adjustments to contribution after you post the journals.

The total of the contribution data (before adjustments) plus the adjustments represents the contribution of the base entity to its parent. The system adds the contribution to the contributions of the other immediate dependents of the parent to obtain the parent consolidated data. The intermediate contribution level aggregations are not stored during calculation. However, the parent consolidated data is stored by the system.

Calculation Process

When you calculate data, the system runs calculation rules for the scenario, year, period, entity, and value that you specify. For example, you can calculate the current month’s opening balances by using the prior month’s closing balances.

Calculation rules for all prior time periods within the same year are also run if they have not been run previously. Because calculation rules do not consolidate source entities or run translation, the status (for example, needs translation or consolidation) is not removed from the cell. Even if the input accounts are not current, calculation uses that data to derive calculated accounts.