For the consolidation of equity companies you need three consolidation parameters for each subgroup, period and fact:
The parameters have to be defined only once. In the following years they are carried forward within the group carry-forward. For being able to present several periods it is necessary to also enter the parameters in the previous period before starting the equity consolidation.
An account must only be defined once in all three parameters, otherwise the values cannot be prepared correctly.
Signification of the individual accounts:
[Difference amount]: The account for the difference amount is used for posting the difference amount determined in the capital consolidation. Here it is irrelevant whether the summation of the investment book value and the prorated capital results in an active or passive difference amount. This field allows only assets or liability accounts (B/S, P+L-flag. = 1 or 2).
[Capitalise goodwill]: In case the investment book value and the prorated capital are summed up to an active difference amount, it might, among other possibilities, be capitalised as goodwill. In IDL Konsis you require a separate account for posting this process. This field allows only assets accounts (B/S, P+L-flag = 1) with the account flag 2=A (fixed assets account)
[Compensation difference amount in local currency]: According to IFRS goodwill, which is created by the consolidation of foreign companies, has to be capitalised in their local currency and adjusted in the subsequent years according to the market trend. Equally it is possible to capitalise an emerging goodwill with another, third company. If you want to use this functionality, you need to enter an account in this field, which is used as clearing account in order to adjust the individual vouchers at the different companies. You have to enter a capital account in this field. For further information about Reverse goodwill IFRS, in particular about the possibility of posting currency conversion differences, please see chapter Goodwill local currency in the GUIDE Capital consolidation
[Clearing badwill]: If a badwill remains, it can be posted with the corresponding action in the application <Compensation diff.fr.first consol.(VUB)> to the account entered here. Different from the consolidation parameter (KK) for fully consolidated companies, here you can enter a fixed assets account, because a negative goodwill is accounted for on the asset side within the "Investment associated company". In order to be able to display this position in the development fixed assets, the account has to be defined as a fixed assets account.
[Retained earnings clearing]: If you want to compensate a difference amount, which remains after detecting hidden reserves, without affecting net income, you use this account.
[Depreciations]: Fixed assets objects resulting from the capital consolidation of equity companies are depreciated via this account.
[Depreciations goodwill]: If you want to post depreciations for goodwill on another account than the one mentioned above, you have to enter this one.
[Depreciations participation]: If the participation is depreciated in the parent company, you have to eliminate this depreciation with a consolidation posting. If you enter the depreciation account in this field, the posting is automatically performed contra this account.
[Currency conversion effect participation]: If there are participations in a foreign currency, each period creates currency conversion differences. If those are to be eliminated via the capital consolidation, you need to enter the respective account in this field.
[Currency conversion participations]: If participations are held by a foreign holding company, the currency conversion will produce differences in each period. If those are to be eliminated via the capital consolidation, you need to enter the respective account in this field
[Reposting participation]: For at Equity companies the respective participation from the group view has to be recorded as investment in associated companies. The usually separately created account has to be entered here.
[Carry-forward]: Postings affecting net income from the equity consolidation are reposted to this account during the carry-forward. We recommend the use of a separate account, which differs from the companies’ financial statement and from the statement/II. In this field you can only enter a liability account.
[Accounts for neutralisation]: If effects from postings between holding and subsidiary have to be neutralised, two separate accounts (allocated to fixed assets) have to be entered here.
The consolidation parameter EF is used for the update of Equity companies. You have to define it for each subgroup, period and fact. During the group carry-forward it is carried forward to the subsequent periods. Just like the EK parameter this parameter has also to be created in the previous period before starting the equity consolidation.
Signification of the individual accounts:
[Prorated net income]: On this P/L-account is posted the prorated net income of the subsidiary.
[Prorated net loss]: If you want to post the prorated net loss to a separate account, you need to enter it in this field. Otherwise both net income and loss are posted together on the previous account.
[Effect for elimination of IC-profit]: If the equity company sells fixed assets, thus creating IC-profits, these have to be eliminated. For these cases you can enter a separate P+L account in this field.
[Deferred taxes on IC-profits]: The deferred taxes on the above mentioned IC-profits have to be posted via this P+L account.
[Collected dividend]: This field is provided for the account the parent company posts the shareholding results of equity companies to. It has to be an intercompany account with the respective IC details. If one period contains an account balance, it is cancelled with the update equity consolidation and the investment book value is reduced accordingly.
[Dissolution diff. amount as liability]: A difference amount of liabilities can only be dissolved via this account. An entry into the data entry sheet produces a posting on the account "Defer temporary diff. amount" from the EK parameter.
[Impairment / Appreciation goodwill]: At this point the account for the goodwill is copied and displayed by the parameter EK. In this field you need to enter the posting keys for the (manual) posting of the impairment or the appreciation goodwill on this account.
[Impairment / Appreciation of hidden reserves]: Here, too, you only need to enter the posting keys for the manual posting of the impairment or the appreciation of hidden reserves.
[Currency translation effect goodwill]: If a foreign company creates goodwill there may emerge currency conversion differences. If those are to be posted via the Update equity, you need to enter a respective account in this field.
[Currency translation effect capital / income]: Equally currency translation effects can be generated in the capital and in particular in the income, for which you can enter accounts in this field.
[Other income / expenses]: For other income / expenses affecting net income, which do not belong to the items mentioned above, you have to enter P+L accounts (required fields).
[Corporate action]: In case of capital transactions in a subsidiary, which cannot be allocated in the shareholding/participations and thus cannot be eliminated with the first consolidation, they can be included with this account.
[Necessary adjustments revaluation reserves]: If the capital in the equity company changes through facts not affecting net income, in particular by, e.g., generating and changing the adjustment revaluation reserves, these changes have to be reflected in the book value of the equity participations. In these fields you have to enter the corresponding accounts for these facts.
The EN parameter is also used for the update equity consolidation, especially if a negative book value has to be adjusted to 0,00.
Signification of the individual accounts:
[Devaluation of postulation]: If a negative book value has to be adjusted in form of a devaluation of postulation, enter the account here
[Accumulation of reserves]: If a reserve hast to be build as correction of the negative book value the respeptive account has to be entered here
[Clearing of changes net income]:
[Clearing of changes not net income]:
Moreover you need a valid data record in the shareholdings for the first consolidation of an equity company. For this purpose you can use the same posting keys you use for the full and quota consolidations. With all posting keys for addition you can either perform the manual or the automatic consolidation. With the equity companies you will almost never use the automatic one, because it requires the account balances and sometimes the capital transactions of the company.
The capital consolidation requires the following posting keys:
[BSL 02 = Addition of participation]: In case of transactions with this posting key you have to enter a local currency value and investment capital percentages. The transaction can be processed using either the manual or the automatic capital consolidation. If the subsidiary shows capital transactions, they have to be prorated up to the transaction date of the addition for the consolidation. Here addition posting keys are used for the consolidation postings on fixed assets accounts.
[BSL 04 = Setting for begin of period]: First of all this posting key is used at the first implementation of IDL Konsis. Here carry-forward keys are used for the consolidation postings on fixed assets accounts.
[BSL 05 und 07 = Allowances and accumulated allowances]: If the KTKPAREK contains an account for "Depreciation participations", shareholding transactions with this posting key are automatically posted. With posting key = 05, allowances, directly on this account, and with posting key 07 = accumulated allowances on the carry forward account.
[BSL 08 = Addition of capital]: Unlike the shareholding addition you only need to enter a local currency value and if necessary a group currency value for the addition of capital and you do not have to enter investment capital percentages. If the equity company has account balances and capital transactions, the shareholdings/participations are posted contra capital transactions (posting key '02') with the same transaction date.
[BSL 10 = Disposal of capital]: Equivalent to the posting key 08 = capital increase here you only need to enter a local currency value without considering the fields for the investment capital percentages. The processing is performed just as in the capital increase, with the exception that all postings have a corresponding negative sign. The reduction entered in the shareholding/participations is posted contra (as far as existing) capital disposals (KAPBEW with posting key '03') with the same transaction data in a KK voucher.
In the subsequent years the company carry-forward includes the carry-forward of these transactions; only current transactions have to be updated. For further information about the topic shareholding/participations (GESGES) please see chapter Shareholding / participations (GESGES) in the GUIDE for transactions in companies 'financial statements'.
All companies scheduled for a capital consolidation have to be allocated to the respective group companies. The following table displays the allocation of an at equity company to the group “world”. It is important to set the consolidation type to "E" for equity consolidation.
The first consolidation automatic or forms can be reached via the menu -> capital consolidation in the group companies + monitor. The automatic first consolidation is performed in the background and is rarely used for equity companies, because for a correct result it requires account balances or capital transactions. The function "first consolidation forms" leads to the formular I-ERSTKON where the prorated capital can be filled in.
In the formular I-ERSTKON the investment book value is opposed to the prorated capital. The coloumn "comp.financ.stmts.Trans.devel." shows the considered capital transactions if available. Postings are shown in the coloumn "Group.financ.stmts.equ.ratio" and can be changed. New lines can be added by pressing ENTER in the last field of a line. Postings can be deleted by entering 0,00 in the concerning field.
The postings are registered with the posting record number 01 in an EK voucher. It is particular about the EK voucher that the capital is eliminated "for information only" and is again cancelled in the same voucher. The determined difference amount is posted on the one hand and the difference between the original investment book value and the difference amount on the other hand. An emerged difference amount is distributed by the application "Compensation diff.fr.first consol.".
For further information about the topic first consolidation please see GUIDE Capital consolidation
A red status in the column "EF" shows that the update equity consolidation for a company has not yet been carried out. After performing the update the application creates an EF voucher and the status is changed to green. If there is no current result for a certain period, you still have to open the application and enter the zero value into the line "prorated result". Then the application creates an EF voucher with two zero lines.
You open the forms data entry "Update equity consolidation" via the group companies + monitor via <Action> <Capital consolidation> <Update equity consolidation EF> or by double clicking in the column "EF" of the equity company. First you get to the application "FORTEQ", which displays the possible relations between parent company and subsidiaries (where required for different business areas). By double clicking once again on the desired company pair you open the actual forms data entry.
The forms data entry can not only display the current entry period, but also up to 3 annual financial statement periods (code 'J' in the master record ABR) next to each other, whereas you can only enter values in the current period. For this purpose you have to change the previous period according to the desired view in the tabel FORTEQ.
The form is structured dynamically in connection with KTKPAR. The more accounts are entered in the EF or EN parameter, the more lines are provided.
The sheet is subdivided into three entry and display areas:
[Transfer/Carry forward]: Basis for the sequent consolidation is the investment book value at the parent company. Usually the block is a display area, to which the actual modification or the clearing of a negative amount stated are copied from the previous period. The first period (for this subsidiary /parent company) does not yet contain a KF voucher, but you can enter a value in the line "other changes affecting net income", which is posted to the carry forward account according to KTKPAR.
[Actual modification]: The more accounts have been entered in KTKPAR EF, the more entry lines are displayed in this area. You have to enter the prorated values in group currency from the shareholding view (i.e. a net loss with a 'minus'). In "collected dividend" the application automatically displays the amount of the account for income from investments in KTKPAR at the parent company opposite to this subsidiary (IC balance). The thus resulting posting eliminates these incomes from investments and reduces the stake valuation. The lines "Depreciation / impairment / appreciation goodwill or hidden reserves are to be considered particularly. You cannot enter these values, but they rather display those postings, which have been posted either automatically (e.g. continued depreciation) or manually (e.g. impairment) in a KF or EK voucher. The actual modifications can be entered en bloc. By clicking on <save> they are written in an EF voucher. Already posted amounts can be deleted by entering a zero value. All subtotals and total sums are immediately updated during the data entry.
[Clearing of negative value]: If the actual modifications in the current period lead to a negative total sum , you have to clear the negative amount with the first part of this block until the total sum results in 0.00. Only positive values have to be entered here. A clearing carried forward from the previous period can be reopened by an entry in that part, in which the entry lines contain "unwind", provided that the actual modifications of the current period have changed to be positive again. Only negative values have to be entered here.
The following plausibilities are checked during the entry:
If the actual modifications result in a negative total sum, you have to enter such values in the lines for clearing of negative values, which lead to an exact total sum of 0.00.
If the actual modifications are positive and the final value of the previous period was negative, you first have to restore the carried forward clearing measures in the lines "Clearing of negative value". The entries in these lines, however, must not exceed the original clearing value, but only have to result in the respective balance of 0.00, thus leading to a positive result of possible remaining actual modifications.
If the total sum is positive both in the current and the previous period, you cannot enter any value in the last entry area. The same applies to negative actual modifications.
If one of these plausibilities is not adhered to, the entry cannot be saved.
Company 001 holds 40 % of company 015 ,which were acquired on 01.01.13 for 50,000.00 Euro. The first inclusion to the consolidation financial statement with the at-equity method is planned for the financial year 2013 with the 01.01.13 being the date for the first consolidation. As from the 01.01.13 the capital of the associated company is subdivided as follows:
| 100% | pror.40% | |
|---|---|---|
| Capital stock | 30.000,00 | 12.000,00 |
| Revenue reserves by law | 3,000.00 | 1,200.00 |
| Carry forward | 17,000.00 | 6,800.00 |
It is presumed that a possible goodwill, starting as from 2013, is linearly depreciated during 10 years. In the financial year 2013 the company has generated a net income of 20,000.00 Euro. In the following period the company 015 generates a net income of 30,000.00 Euro. In 2014 the parent company 001 obtains a dividend of Euro 5,000.00, which are contained in the account balances as shareholding results.
Our example contains the account balances for company 015. For display reasons, however, the first consolidation forms is presented here.
Figure: Clearing of the shareholding with the capital in the table I-ERSTKON
If the data for the first consolidation are correct and saved, you leave the application by clicking on "next" for getting back to KTKGES. The status has now changed to yellow, because a difference amount has been generated, which has to be compensated via the action ->Capital consolidation ->Compensation difference from first consolidation.
Capitalise goodwill
Via the application "Compensation diff.fr.first consol. VUB" you capitalise the generated difference amount as goodwill. According to the example the fixed asset is adjusted to a linear depreciation during 10 years. Here you have to enter the 01.01.2013 as the date of acquisition, because the complete annual depreciation has to be posted still in the same year. For further information about the application "VUB" please see GUIDE Compensation diff.fr.first consol.
Figure: Capitalisation of goodwill in the application VUB
Herewith the first consolidation is completed, the status has changed to green and the voucher is complete. The following consolidation postings have been generated:
Figure: Consolidation postings of the EK voucher
The capital is posted with the posting record no. 01 contra the investment book value and the difference amount is determined. It is particular about the EK voucher that it is eliminated for information only. The postings are cancelled again in the same voucher. On the one hand the difference amount and on the other hand the difference between the investment book value and the difference amount is posted, which is then posted to the account "Investment associated company" from KTKPAR.
The capitalisation of goodwill and the continued depreciation have been posted with the posting record no. 02. If you manually add postings, please keep the posting record no. system.
The investment book value of the equity company is changed in every period by the prorated annual result and the depreciation of the goodwill. The depreciation is automatically posted in the EK or KF voucher, but for the prorated annual result you have to use a further function: The Update Equity within the capital consolidation (it can also be opened by double clicking on the column "EF").
Figure: Opening of the Update equity EF
At using the function you open the application "FORTEQ". By double clicking on the correct relation between parent company and subsidiary you open the application "I-FORTEQ", which at the same time is an overview and posting mask in the form of a forms data entry.
The goodwill depreciation, which has already been posted in the EK voucher, is displayed at "depreciation goodwill". Now you only have to enter the 40% of the net income of 20,000 Euro = 8,000 Euro to the field "prorated net income" and save it.
Figure: The forms data entry for the Update equity EF
The entries have been posted in the EF voucher as follows:
Figure: Consolidation postings of the EF voucher
The individual partial amounts are summarized in the report as "Investment associated company".
Figure: Report for "Investment associated company"
With the group carry forward the group structure and the posting vouchers are carried forward to 12/2014. In this context the EK and EF voucher are carried forward to a KF voucher.
Figure: Consolidation postings of the KF voucher subsequent period
First the EF status is red; the update equity has to be carried out and displays the following:
Figure: Forms Update equity subsequent period
The values from 12/2013 are displayed 1:1 in the column for the previous year. In the subsequent period 12/2014 the actual modifications posted in 12/2013 are summarized in the line "other changes affecting net income" of the upper carry-forward block. The block "actual modification" shows the goodwill depreciation automatically posted in the KF voucher. Moreover the dividend of 5,000.00 is preset. They are to be found on the account in KTKPAREF for collected dividend in the IC balances of the parent company. You have to enter the prorated annual result of 12,000 Euro, which results in a current book value of 59,000 Euro.
Company 001 holds 30% of company 005, which were acquired on 01.01.2013 at a price of 32,365.11 Euro and are included via the at-equity method for the first time in the financial year 2013.
As from the 01.01.13 the capital of the associated company is subdivided as follows:
| 100% | pror.30% | |
|---|---|---|
| Capital stock | 100,000.00 | 30,000.00 |
| Carry forward | 74,500.37 | 22,365.11 |
The passive difference amount is dissolved in the subsequent years in the amount of 10,000 Euro in each case. In 2013 company 005 registers an annual loss of 40,000 Euro. In the financial year 2014 the company produces a net income of 20,000 Euro.
The first consolidation is started in the group companies + monitor via the pull-down menu "capital consolidation". For display reasons we choose the manual first consolidation. If the subsidiary has account balances or capital transactions, you can also apply the automatic first consolidation.
In the table I-ERSTKON the investment book value is copied from the shareholdings. The capital has to be entered manually, if there are no account balances available for the equity company (as it is usual).
Figure: Clearing of the shareholding with the capital in the table KONKTO
Compensation difference from first consolidation
The difference amount is cleared with the action "compensation difference from first consolidation" in the application VUB. The amount is posted to the account entered for EK in KTKPAR.
The following postings result from the two actions: the first consolidation with record no. 01 and the clearing of the difference amount with record no. 03.
Figure: Consolidation postings of the EK voucher
For entering the current prorated net income you open the update equity via the pull-down menu "capital consolidation" in the group monitor or by double clicking in the column "EF". For the year 2013 you have to enter 30% of 40,000 Euro = 12,000 Euro with a minus, which results in a new investment book value of 20,365.11. By clicking on "save" the posting is written in an EF voucher. The difference amount is only meant to be dissolved proportionately in the subsequent year.
Figure: The forms data entry for the Update equity EF
The following posting has been created:
Figure: Consolidation postings of the EF voucher
Since the KTKPAREF does not contain a separate account for prorated loss, here is used the account for income.
In the report the values are displayed as follows:
Figure: Report for "Investment associated company"
With the group carry forward the application automatically creates a KF voucher, which contains the postings of the EK and the EF voucher. For the current period you have to adjust the investment book value via the update equity. According to the task in this case you need to enter both the prorated net income of 6,000 Euro (30% of 20,000 Euro) and the dissolution of the difference amount as liability of 10,000 Euro.
Figure: The forms data entry for the Update equity EF in the subsequent period
Company 001 holds 30% of company 105, which were acquired for 1.00 Euro on 01.01.13. The first inclusion to the consolidation financial statement with the at-equity method is planned for the financial year 2013 with the 01.01.13 being the date for the first consolidation. The prorated capital amounts to:
Capital stock: 1.00 Euro
In the financial year 2013 company 105 shows a prorated net loss of 499.00 Euro, in the next period it generates a prorated net income of 300.00 Euro.
The first consolidation is started from the group companies + monitor and the capital of the subsidiary, which has to be eliminated, is entered in the table I-ERSTKON. Since here is not produced any difference amount, the status immediately becomes green at changing to the group companies + monitor.
Figure: Clearing of the shareholding with the prorated capital in the table I-ERSTKON
For entering the current prorated net loss of 499.00 Euro, you open the update equity via the pull-down menu "capital consolidation" in the group monitor or by double clicking in the column "EF". This loss creates a negative book value. This value, however, must not be less than zero in the balance. For this reason the button "save" is blocked (marked by a light grey). Now the lines in the lower block "clearing of negative value" are active and the clearing amount can be entered (as a positive value). The total sum of the clearing amounts has to adjust the final sum to 0.00. Only then the button "save" is reactivated for saving the postings.
Figure: The forms data entry for the Update equity EF -> saving not possible
With the group carry forward the application automatically creates a KF voucher, which contains the postings of the EK and the EF voucher. Here the posting of the current result is not united with the clearing of the negative book value of the previous year for always being able to keep in view the actual negative book value.
Figure: Consolidation postings of the KF voucher
In the second year you have to enter a prorated net income of 300.00 Euro. After entering these 300.00 Euro, the button "save" is blocked at first (marked with a light grey). This is due to the fact that the negative clearing of 498.00 in the upper block has been carried forward and first has to be dissolved, before being able to raise the book value. The lines with the addition (unwind) In the block "clearing of negative value" are now active. Here you have to enter the complete net income of 300.00 Euro (with a minus) thus leading to a total book value of 0.00 Euro. -198.00 Euros are carried forward to the next period as "clearing of changes affecting net income". Only after using them up, the book value can be changed again.
Figure: The forms data entry for the Update equity EF in the subsequent period