Managing Consolidation Methods

In order to provide for advanced consolidations and eliminations, various parameters must be established for each entity in the Entity dimension, in relation to its parent(s). Multiple consolidation methods are established to facilitate consolidation and elimination rules, each with preset or configurable parameters including:

  • Ownership %

  • Consolidation %

  • Minority (Non controlling) Interest %

A Control setting is also available to help determine the other settings for the methods.

The consolidation methods are then applied to the consolidating parent entity and its hierarchical descendants during the execution of consolidation, adjustment and elimination rules.

Financial Consolidation and Close Cloud provides several system methods:

  • Holding

  • Subsidiary

  • Proportional

  • Equity

  • Not Consolidated

  • Inactive

  • Discontinued

Holding method

The Holding method is applied to the legal entity for which its immediate parent represents the consolidated results of that legal entity. The Holding method always applies an Ownership % of 100% and a Consolidation % of 100%. Control is Yes. There can be only one Holding method entity for each parent entity.

Subsidiary method

The Subsidiary method is applied to legal entities owned by the holding company and for which the holding company exercises control. The Ownership % of a Subsidiary company generally ranges from 50% to 100%. Control is Yes and the Consolidation % is therefore 100%. Minority (Non-controlling) Interest equals 100% minus the Ownership %.

Proportional method

The Proportional method is applied to legal entities owned but not controlled by the holding company but requiring proportional consolidation. This generally applies to Joint Ventures. Control is No and the Consolidation % is equal to the Ownership %.

Equity method

The Equity method is applied to legal entities owned by the holding company and for which the holding company exercises significant influence but not control. The Ownership % of an Equity company generally ranges from 20% to 50%. Control is No and the Consolidation % is therefore 0%. Minority (Non-controlling) Interest also equals 0%.

Not Consolidated method

The Not Consolidated method is applied to legal entities owned by the holding company and for which the holding company exercises neither control nor significant influence. The Ownership % of a Not Consolidated company generally ranges from 0% to 20%. Control is No and the Consolidation % is therefore 0%. Minority (Non-controlling) Interest also equals 0%.

Inactive method

The Inactive method is reserved.

Discontinued method

The Discontinued method is reserved for future use when system consolidation rules are created for discontinued operations.

Ownership Range

Each of the methods can be assigned an Ownership % range that is used to populate the method for an Entity parent/child combination based on the entered Ownership % for each Scenario, Year and Period. The range across the applicable methods must be a continuous range from 0% to 100%. Methods not assigned a range will not be applied to an Entity parent/child combination by the system, but can be selected as required, overriding the range-based system-assigned entry.

The system methods comprising the 0% to 100% range are:

  • Not Consolidated >= 0% to <=20%

  • Equity >20% to <=50%

  • Subsidiary >50% to <=100%

All other system methods have no range assigned.