Automatic Cancelation of a Value Adjustment on Receivables from Affiliated Companies

1 Introduction

It is recalled that a value adjustment on loans or receivables related consolidated entities in the company financial statement must be canceled again in the group. Likewise, a resolution of the value adjustment or Enrollment from the company financial statement in the group can be canceled again.

2 Transferability of the example

The example shown in the next course of this document and the implementation in IDL Konsis are in principle also applicable to other technically comparable situations: Within a single company, a transaction is booked affecting net result, which is to be canceled in the same way in the group.

A next example might be: An intra-group provision is created in the company financial statement. This process also has an impact on results and is purely a single company financial statement.

3 basic idea of the consolidation posting to be generated

In the period in which a contribution to the value adjustment of receivable is posted to related enterprises in the company financial statement, the corresponding amount is visible in the balance sheet account 25100 in the credit and in the profit and loss account 67011 in the debit. In addition to the account balance, a corresponding IC balance is recorded on both accounts, the two IC balances totaling 0.00. Assuming that there is no change in the value adjustment in the following year, no new posting is required in the group, since the event is already contained in the presentation document.

However, the IC balance creates a new debt consolidation posting in the balance sheet account which, due to the absence of counterparts, will not be absorbed. Since this posting—as already described above—is not necessary at all, since all necessary consolidation postings are already contained in the presentation document, this posting is simply canceled again—that is to say with the same amount on the same account company, on the same value and if applicable. Business unit - only with the opposite sign.

4 Special feature in foreign currency

If the company financial statement is booked in foreign currency, it is advisable to convert the balance sheet account 25100 historically (ADR.: FDK). The two profit and loss accounts are usually translated at currency rate average per period. Balance sheet The conversion difference between the resulting account and the profit and loss account is the account specified in the currency conversion parameter for the profit and loss account. This exchange difference shall also be recorded in the consolidation.

Assuming that there is no change in the value adjustment in the following year, no new posting is required in the group, since the event is already contained in the presentation document. Since the converted euro amount on the balance sheet account does not change, since the account is converted historically, the carry forward posting still fits in terms of amount. However, it is advisable to have the postings on the FXCN profit and loss account transferred to the FXCN balance sheet account during the period carried forward, since in the following period the currency conversion effect no longer occurs on a profit and loss account, but on the retained earnings account, i.e. on a balance sheet account.

In this case, the user records only a single IC balance sheet on the value allowance account. The IC balances in this CNSFNC do not add up and a difference report is first drawn up. Since, as already described above, no new posting balance sheet is required at all, the difference is compensated to the value allowance account itself, so that the newly generated consolidation posting is only recorded "in a circle" once.

5 Implementation in IDL Konsis

The following conversion into IDL KONSIS is possible from release 23.1.

For the implementation according to the following example, it is absolutely necessary that the value adjustment balance sheet is booked on a separate account (gross method), i.e. not already netted with the receivables, because the value adjustment account is to be assigned to a separate consolidation function (CNSFNC).

Furthermore, in the following example, separate income statement accounts have been created which have not been previously recorded in any other CNSFNC and on which the expenses from the transfer to the value adjustment and the income from the dissolution of a value adjustment are recorded.

5.1 Definition of next CNSFNC

The allowance account from the balance sheet, as well as the expense and income account, are assigned to a previously unused CNSFNC CDxx. For this purpose, a new CNSFNC CDxx is first created in the overview CNSFNC a new CNSFNC CDxx. It is important to ensure that the carry forward is made with the booking type WU (and not with WX). Consequently, that CNSFNC CDxx must also be produced separately from the other CNSFNC CDxx.

Picture 1: Create a new CNSFNC (Wizard page 1)

Picture 2: Create a new CNSFNC (Wizard page 3)

Picture 3: Overview of CNSFNC

5.2 Definition of accounts

As already mentioned, it is imperative that the value adjustment is booked "gross" and shown that the balance sheet account concerned and also the profit and loss accounts concerned are individually visible and that these accounts have not yet been assigned to any other CNSFNC.

Picture 4: Summary of accounts that will be assigned to the new CNSFNC

5.3 Definition of the consolidation parameters

Picture 5: Consolidation parameters of the new CNSFNC

If necessary, a sufficiently high threshold value can be entered in the consolidation parameters so that, if possible, any difference falls below the threshold value and is thus automatically posted to the corresponding threshold value account.

Also important to note: Please checkthe accumulate difference, otherwise the income statement will be posted with the partner company (with the subsidiary).

5.4 The situation in the company financial statement

The 002 Company value adjustment has generated USD 100,000.

Picture 6: In account balances, the value adjustment on receivables is recorded by affiliated companies

The IC balances show that the value adjustment company is directed against the 001 edition. It is imperative that the cost or income with a partner, i.e. recognized as an IC balance. To ensure that the euro difference of 1,860 is automatically recorded as a conversion difference in the group, both IC balances have been manually cleared.

Picture 7: Expenditure and value adjustment with the partner company 003 are booked in the IC balances

Development transactions should be maintained accordingly. In this example, the Transaction development is set to auto-compute.

The daughter has no knowledge of the value adjustment. It therefore does not show corresponding balances.

5.5 Situation in the group

After performing Check/Update Status Values, the Corporate Monitor is expected to indicate that a consolidation of debts needs to be performed.

Picture 8: The consolidation of debts must be carried out in the group monitor

After CD and RD have been carried out, both processes also go up immediately and therefore show green.

Picture 9: Consolidation postings produced under consolidation of debts CD01

5.6 Carry forward into next year

After the period carried forward, the CD01 is carried forward using the WU logic as indicated in the CNSFNC. Balance sheet This means that the original earnings effect is transferred to the retained earnings account and the amounts on the accounts remain on those accounts.

Picture 10: Carry-forward booking CD01 F

Let's assume that the value adjustment to the claim remains unchanged. This is converted historically, i.e. entered into the total balance sheet with the same amount of euro as in the previous year. Consequently, no new posting is required at all, since the presentation document has already correctly booked the entire facts. However, the IC balances will generate a new debt consolidation journal that is easy to reverse.

Picture 11: New ongoing debt consolidation transaction CD01, which must be canceled immediately.

Please note the following sequence in connection with the difference booking: The account 25100 is an IC account and is simultaneously entered as a non-cash account in the consolidation parameters CD01. Consequently, the Non-cash difference must be posted first, and then the development reposting (RD) must be performed.

5.7 Note on release level 23.1

The functionality shown here will be contained in release 23.1. However, in release 23.1 there will still be an inadequacy with the determined counter-business unit . The counterbusiness unit found is already incorrect for the IC posting in the first year, consequently also incorrect for the carry-forward document and also incorrect for all next periods.

We still consider the functionality to be sufficient, that is why we did not want to hold back the whole feature. The deficiency still present in connection with the determination of the counter-business unit is corrected in a fixed pack to the release 23.1.

6 Note on foreign currency

In principle, the above-described program-oriented implementation works for LC=GC and also for LC <> GC. LC <> GC may have the following features:

6.1 currency conversion discrepancy

Since the income statement account is usually converted with currency rate average per period (PAV), but the balance sheet account is converted with closing rate (CR), a currency conversion difference already arises in the company financial statement, which must also be eliminated in the group. There are different approaches to this:

One could come up with the idea of giving the LC amount as a TC amount to the IC balances on the two accounts in order to automatically eliminate the currency conversion effect in the consolidation posting. Basically, this also works, but the currency conversion effect company is bizarrely booked at the IC-level instead of at the reporting level. If, on the other hand, the option of manually deciphering instead of the TC amounts is used, IDL Konsis also identifies the difference amount in GC as a currency conversion effect company and correctly records it at the reporting value.

6.2 Currency conversion effect on the balance sheet account

If the balance sheet account is converted to closing rate, there will be a different amount in GC (with no change in the LC amount) in the following period, since the account will be converted again to the current closing rate. The difference posting may then not be completely posted to the allowance account, but only the amount from the voucher may be posted to the allowance account, the remainder to the AGP FXCN.

Company The method used here to convert the balance sheet account historically could have undesirable consequences if minority interests are recorded on this balance sheet account. As is known, a foreign share in the AGP FXCN is also booked as part of the foreign share booking (IMI). Of course, this foreign share booking has no knowledge of the posting on this account within the framework of the CD01. In this case, minority interests make a posting would have to be left on the currency conversion effect within the framework of the CD01.