Consolidation of Income and Expenses

1 General Information About AE Consolidation

According to § 305 HGB, all expenses and income between consolidated companies are to be eliminated.

IDL Konsis supports the offsetting of expenses and income towards affiliated companies in different levels of detail. This fulfills the rules required by the legislator.

The process of consolidating expenses and income is basically no different from that of consolidation of debts. Since this is the same program, this documentation basically only describes the specifics of IE consolidation that differ from the consolidation of debts.

2 Requirements for AE Consolidation

2.1 Presence of IC Data

The prerequisite for consolidation of income and expenses is that the intercompany accounts (ACBAL) and corresponding IC account balances (ICACBAL) for the current period exist. The balances must be on the fact that is designated for consolidation. In the case of foreign currency companies, the currency conversion must have been carried out so that the IC account balances are also in group currency.

The IC accounts are defined in the account master (application COADFN). There must be in the fields on the 2nd. Wizard page (mandatory information) in the IC tear-off type a "I" and in the IC tear-off test a "A" (proportional test) or an "X" (complete test) can be entered. An entry is also available on the 3. Wizard page (IC information) under consolidation function is required. These settings make it possible to specify the account balance (ACBAL) in next, i.e. to divide it into the corresponding counterparties in the ICACBAL application.

IC account balances can be captured either directly in the IC account balance application (ICACBAL) or in the corresponding form entry (F-ICACBAL), or imported via the IDL.KONSIS.FORECAST interface application IMPT (KPICSALD.DSCTXT). The entry is carried out separately according to the subsidiaries concerned as a details of the corresponding IC account.

2.2 Definition of Consolidation Function

The application of document sequences/consolidation functions (CNSFNC) makes it possible to define customer-specific, subject-related reconciliation groups, e.g. for interest, profit and loss transfer, allocations etc. towards affiliated companies. This differentiation leads to smaller viewing units and thus to greater transparency in the consolidation run. The keys IE01 to IE99 are available for these customer-specific voting groups. These keys are not overwritten by new release levels.

The consolidation flag "IE" shall be set for all accounts to be included in the consolidation of expenses and income. All G+V accounts that contain an "I X" or "I A" in the IC account identifier and are to be included in the AE consolidation are additionally given the entry "IE00" (or IE00 ... IE99) in the field "consolidation function" (CNSFNC) s.o.

For both IE Consolidation and IE development reposting (IR): Accounts that are assigned to a CNSFNC without consolidation parameters are not processed.

Due to the next procedure, reference is made to the explanations in the consolidation of debts documentation in the chapter Defining the consolidation function.

2.3 Definition of Consolidation Parameters

In the consolidation parameters application (CNSPAR), certain basic data must be defined for the consolidation function IE. This consolidation parameter is user

• per group/sub-group
• per consolidation data type (Ist, Plan, usw.)
• per accounting period; and
• per voting group (z. B. IE00, IE01, etc)

setup. Once the parameter has been defined, it is carried forward to the following period as part of the Group's carryforward. The entry of how the manual postings are to be handled in the event of a repetition of the consolidation function shall be compulsory. Filling next fields is optional.

Important: If a change of the CNSPAR set is made after the IE consolidation has taken place, all previous IE postings of the corresponding reconciliation group are deleted. The user will address this effect of a change by asking "Delete Consolidation IE? KON0139W" and can respond by: "delete and Resume" or "Cancel". If the action is canceled, the original state of the CNSPAR set is automatically restored. Complete resetting of effort and revenue consolidation may be necessary, for example, if a first pass without a threshold is to determine the amount of differences first and then set a threshold.

Threshold group currency (SchwWertKW)

A threshold can be defined per tuning group (e.g. IE00, IE01 et seq.). This information ensures that Non-cash differences below this threshold are automatically posted to the threshold account also created in CNSPAR. Threshold value must be expressed as an absolute value in group currencies.

Threshold percentage group currency (Sch%WertKW)

Instead of choosing an absolute amount which may be too high or too low per company pair, it is also possible to indicate a percentage by which the IC balances of the respective company pairs may differ. The deviation is calculated using the following formula:

• percentage deviation = 100 - (smaller value / larger value) * 100

The two values are the sum of all the debit and credit values of a voting group. Warning: These are not the two sums shown in the "IC-Clearing Overview" (CNSLST) per company!

Summary carry forward (VortrZusam)

If consolidation postings are to be combined during carry forward, this option must be activated. If IE postings are not to be carried forward to the following period, the switch must be set here, next to next settings (see below).

Threshold transaction currency (SchwWertTW)

As with consolidation of debts, you can set a transaction currency threshold for expense and revenue consolidation.

If the IC balances to be processed are maintained with a transaction currency (TC), these values may also be different. In principle, the total difference would then be recorded in group currencies as a Non-cash difference. However, if the difference in TCS is below a threshold, it is recorded as a difference in exchange rates.

It is recommended that you use transaction currency to perform the IC balances throughout. This can be achieved by a switch in the master record of the consolidation function (application CNSFNC).

If the program finds transaction currency values in a pair of companies, the next processing depends on whether the transaction currency values match.

• If the expenses and income in TCS are consistent, then a difference in group currencies is settled through one of the currency difference accounts entered in the CNSPAR IE.
• If there is a difference in the transaction currency, but it is below a TC threshold entered in the CNSPAR IE, then the compensation is also carried out automatically via the price difference accounts.
• If the transaction currency is missing or if there are differences greater than the TW threshold, then the option "AusrichtAE" takes precedence. The program will act as if there are no transaction currency values.

Threshold Percent transaction currency (Sch%WertTW)

You can also specify a transaction currency threshold as a percentage. The same calculation rule applies as for the threshold percentage group currency (see above).

Differential treatment transaction currency (TW-Diff)

Activation of the switch makes it possible to divide a difference from the data in transaction currencies into a price difference and a Non-cash difference.

If the "Treatment TW Difference as Non-cash difference" switch is set and a difference in transaction currency is present above the TW threshold specified in the consolidation parameters, this difference is converted into the group currency. For this purpose, on the one hand, a FXCN header record must be defined for at least one of the two companies, from which it is determined whether profit and loss values are to be converted at the reporting date (CR) or at the average rate (PAV). Balance sheet values are always translated at the closing rate. In addition, exchange rates (FXRTE) for the respective transaction currency must be maintained.

The group currency value resulting from translation is treated as a Non-cash difference and compared to the consolidation parameters' group currency threshold. If it is below the threshold value, the posting of this value is carried out on the threshold clearing account and the transaction status becomes '3' (cleared by machine via transaction currency). If it is above the threshold value, the posting of this value will be done on the difference amount suspense account, if specified, or will remain open as the difference and the transaction status will be '4' (machine created, manual change required).

The remaining difference (total difference in group currencies minus this Non-cash difference) is posted as the difference in rate to the difference in rate account specified in the consolidation parameters, just as it is for matching values in transaction currencies.

If the switch is set to "Treatment TW difference as Non-cash difference", the Non-cash differences calculated from the TW differences are not booked per transaction currency but per company. The previous division into debit and credit values per company leads to the formation of up to four postings for a Non-cash difference.

In this procedure, if IC balances are reported without TW information, the group currency is simply used as the transaction currency.

Treatment of TW difference as Non-cash difference shall not be specified simultaneously with a TW threshold.

If the switch is set to "Treatment TW Difference as Non-cash difference", IE Consolidation performs a conversion of the transaction currency values into the group currency. This is done using the settings in the currency conversion headers (FXCN) of the two companies. However, in the case of two group currency companies, FXCN header rates may not be defined at all. The conversion of profit and loss data is carried out at currency rate average per period ('PAV') and balance sheet items at CR.

Accumulate Difference (DiffKumul)

In principle, reciprocal differences within a posting are separately identified and recorded as unnetted, i.e. a threshold for yield and expense may occur simultaneously. If the DiffKumul option is used, the total difference is calculated and posted as either expense or income.

If clearing is via a transaction currency, it shall take precedence; cumulation shall not be applied even if the ‘X' is set.

Handling of manual postings (ManBuchung)

There are three expressions that control how postings manually added to the automatically created IE voucher should be used to repeat effort and revenue consolidation:

• 0 = Manual postings are deleted: both the postings for manually eliminated differences and other postings are deleted, the differences must be re-posted
• 1 = Manual difference bookings are retained: the postings used to settle differences are retained. If, however, next postings are detected in a voucher which actually already rises by machine, these are erased. If other differences arise during the repetition of the IE, the postings obtained may have to be adjusted.
• 2 = All manual postings are retained: adjustments may be necessary if the size of the differences has changed

Alignment by expense/income (AlignAE)

This option is available only for expenditure and revenue consolidation, not for consolidation of debts. The CNSLST does not set a specific state to indicate the use of this option.

Company The alignment determines on which side and at which offset posting takes place, irrespective of the size of the values. This control is useful if, for example, only the expenses are reported in the group company, broken down by IC-type, and not the income.

While simultaneous use of the AlignAE and Threshold options is excluded, the AlignAE and TW Threshold options can be set in parallel.

All examples are based on Intercompany balances where no transaction currency was used.

a) Company 007 reports an expense, company 001 reports nothing.

Expense Alignment (A)

Alignment by yield (E)

b) Company 007 reports income, company 002 reports nothing.

Expense Alignment (A)

Alignment by yield (E)

c) both companies report revenue

Expense Alignment (A)

Alignment by yield (E)

d) company 007 indicates an income, while company 004 indicates an expense where the reported income is greater than the reported expense.

Expense Alignment (A)

Alignment by yield (E)

e) company 007 reports an income, company 005 reports an expense where the reported income is less than the reported expense.

Expense Alignment (A)

Alignment by yield (E)

Note: Since both the use of the threshold and the use of the expense or income orientation respectively use the accounts from the fields "threshold clearing expense" and "threshold clearing income", this can lead to misunderstandings in the assessment of the consolidation postings if the accounts entered there contain the indication of threshold clearing in the account name.

Accounts to be deposited:

Threshold Effort/Revenue

If a threshold is used, then it is mandatory to specify the accounts for margin clearing. If the differences are to be treated on the balance sheet, profit and loss accounts must be entered.

Exchange differences expense or income

In two cases, a difference can be automatically recognized as a price difference and posted. 1: The IC balances are maintained with a transaction currency value and the TC values match in the IC balances. 2: If two companies have the same local currency and the IC balances are the same in LC, a difference in group currencies is automatically recorded as a price difference, even without specifying transaction currency. Just because the second. If it is not foreseeable and the absence of price difference accounts would lead to an error, we recommend that you always record price difference accounts for expense and income.

Company If exchange rate differences are identified in the consolidation of income and expenses, the value at which exchange rate differences are recorded shall be determined according to the following rules:

• If the transaction currency corresponds to the local currency of one of the two companies, then the currency conversion effect is at the other respective company make a posting.
• If the group currency corresponds to the local currency of one of the two companies, then the currency conversion effect is at the other respective company make a posting.
• Otherwise, the choice is made according to the previous company rule. Company This is the total amount that has reported the smaller amount in group currencies.

Suspense account

If there is a difference above the threshold when offsetting receivables and liabilities, a voucher is generated which initially does not add up (debit <> credit). The difference must be clarified by the user and the missing posting must be completed. If all vouchers are to be absorbed immediately, an account with the account flag 'T' can be stored here, on which the difference is initially posted. The user must then use manual postings to ensure that the posting on the suspense account is canceled and the difference is posted to the correct account. As long as the account specified here does not balance to 0.00, the AE state remains yellow.

Retained earnings

If the carry forward company per affecting net result consolidation of expenses and income are to be carried forward to a separate retained earnings account, this account must be entered here. If the field remains blank, IDL.KONSIS.FORECAST will use the retained earnings account entered in the KK consolidation parameters for the carry-forward posting.

Neutralization

If the shifts between the postings contained in the voucher are to be neutralized, a clearing account with the account identifier 'N' must be stored here. The account should be a profit and loss account. If necessary, a separate clearing account must be filed per reconciliation group (AE00, AE01, etc.) if the processing operations concern different profit and loss areas. The clearing account replaces the otherwise used JÜ account per company. If AE consolidation documents are not to be carried forward to the following period, an account with BILGUV number 3 or 4 must be filed here. (see below)

By taking this account into account in the Group Report, it can be achieved that the company listing of the result corresponds exactly to the individual financial statements results.

Posting keys and/or controlling objects can be stored for all specified accounts, which are then used by default for automatically created postings.

2.4 IC Data in Group Currencies

The balances of companies with currency codes other than the group currency are initially set in IDL Konsis in company currency (e.g. USD). Consequently, Intercompany balances are also recorded/imported in company currency. For AE consolidation, however, it is a prerequisite that the IC information is available in group currency. Therefore, the currency conversion must be carried out for foreign currency companies before the start of the AE consolidation. If the currency conversion company has not yet been carried out at an option prior to an AE consolidation run, the state for the currency conversion company is red in the CFSMNR monitor, the expenditure and revenue consolidation for this option does not take place. This is displayed in the IC clearing summary with the message ‘FXCN missing'. Before performing the Repeat Expense and Earnings Consolidation (group Monitor) and Repeat IC Clearing (CFSMNR Monitor) actions, it is verified that the currency conversion has been successfully performed for all involved companies. Only then will previous data be deleted and re-created if necessary.

3 AE Consolidation Process

3.1 AE Consolidation Call

As with all other consolidation measures, the starting point for the consolidation function "Consolidation of expenses and income" is the group Monitor (GRPMNR). There, the AE consolidation for all or selectively for specific companies (desired companies are to be marked beforehand) is initiated via the pull-down menu "Action" or alternatively via the "right mouse button". Sub-groups that have been closed by the tree structure must first be opened so that the "hidden" companies there can also be marked.

AE consolidation must be carried out separately for all companies at each group and subgroup level, the sequence being freely selectable. Per sub-group, only the pairs of societies present at the respective level are always taken into account. We recommend starting with the lowest sub-group consolidation. If the companies are already contained in a child group with the consolidation method "V" or "Q" (for equal percentages), you will receive the state "T = sub-group" in the IC clearing overview.

If the AE consolidation is performed for the first time for the selected financial statements, the Role make a posting "Expense and income consolidation at the end" shall be selected. If there are already AE vouchers and an IC clearing summary (see below) and the AE consolidation is to be performed again due to changes in the IC balances, the Role ‘Repeat expense and income consolidation' must be selected.

3.2 Automatic AE Consolidation Run

In the case of automatic AE consolidation, the system reconciles the expenses and income per company pair. If the user has defined individual tuning groups in CNSFNC and attributed accounts (e.g. with AE00, AE01, etc.), one consolidation posting per CNSFNC is generated.

If the application has run properly for all selected companies, a status indication is given in the 'AE' column of the Group Monitor. The following statuses are distinguished:

-/-

Company No AE consolidation relationships could be found for the respective CFSMNR (white background)

yellow/ exclamation point

Company The AE consolidation was carried out for this period, but there are still differences that need to be clarified

green/green hook

Complete all AE consolidation relationships of the company with consistent consolidation postings

blank/ white

Company AE consolidation has not yet been initiated for this purpose

red/stop sign

The AE consolidation is to be carried out because there is at least one ICACBAL set that has no voucher entry, i.e. has not yet been processed. The state is also red when an IC clearing set (CNSLST) has been manually deleted by the user

The AE consolidation in the variants with and without previous delete as well as the associated development reposting AU are also available as global applications. This means that the applications can be called up directly from the action menu of the group companies + monitor (GRPMNR) without selecting rows and then process all group companies in a single pass. In the case of the AE, the global action has the advantage over the individual impetus per company that the corporate pairs are processed only once. The global Role company can be invoked in an automatic sequence controller by leaving the parameter for the auction blank.

Quota companies

In Consolidation of Income and Expenditure (AE), rounding differences are offset for proportionate companies. A posting key for changes in the current period (usage tag 'L' or 'N') is used.

For next versions, see Call for consolidation of debts.

3.3 Manual Editing - Group Company Relations (CNSLST)

Comments that were recorded in the IC Clearing Summary (ICREC) after an AE balance reconciliation in the company financial statement on an upstream fact are now automatically transferred to the IC Clearing Summary of the Consolidation Data Type (CNSLST) as Comments of Expense/Income Consolidation (AE). The prerequisite is that the IC account balances have been transferred directly from the relevant upstream fact to the consolidation data type (entry of the upstream facts in the "ICACBAL" processing control set).

It is possible to repeat the consolidation of income and expenses for individual company pairs and consolidation functions or reconciliation groups. The corresponding Role is started from the "IC-Clearing Overview" (ICREC or CNSLST) by the line action "IC-Clearing Repeat". Only this one consolidation document will be updated. Depending on the type of IC clearing previously carried out, the AE balance reconciliation is repeated in the company financial statement (start from the CFSMNR company financial statements + monitor) or the AE consolidation (start from the GRPMNR group companies + monitor) in relation to the selected pair of companies.

After the AE consolidation process has been completed automatically, the user can branch to the IC Clearing Summary (CNSLST) using the Group Monitor with a double click. Company Here you can see all the pairs with the selected value. The total differences determined are divided according to material and exchange rate differences and displayed in separate columns. In the column 'D' (difference in transaction currencies) such a difference is marked with an 'X'. The IC balance columns show the amounts taken into account per company and per IC-value. The overview is initially limited to the company through which the group monitor was branched into the application. In order to be able to display all relevant expenditure and income consolidation relationships, the company from the selection is too remove.

In the column "B" = Processing status, the result is distinguished from the respective consolidation of debts with the following identifiers:

• 1 = Machine created: The IC balances match and have been automatically eliminated
• 2 = Machine created with threshold: the Non-cash difference created is below the threshold and has been automatically posted to the threshold account
• 3 = Machine generated via transaction currency: TW values have been stored in the IC balances and a currency conversion effect has been created
• 4 = Machine created, change required: The resulting difference is above a threshold and must be compensated manually
• 5 = Manually created/modified by typing: A state 4 changes in the state 5 when the difference which has arisen has been compensated
• T = Created in child sub-group: Elimination has already occurred in the sub-group

The flag 4 leads to a red state in the column 'S', all the others to a green one.

In the overview, the user can select all companies with state "4" (=manual intervention required) via the Booking Status field, since only the CNSLST sets with state "4" require post-processing.

The accounting voucher numbers generated by IDL Konsis are composed of the company pair and the abbreviation corresponding to the consolidation processing method (e.g. AE00, AE01 et seq.), the alphanumeric smaller being the first.

Differences above the threshold value set in the consolidation parameters can also be booked automatically. To this end, the action "Post Non-cash difference" has been added to the "IC-Clearing Overview" (CNSLST). If you select this Role, the amount previously displayed in the Non-cash difference column and not yet posted is transferred to the threshold account specified in the consolidation parameters. Differences on the suspense account and open differences must be distinguished. In the first case, a transfer is made from the suspense account to the specified account; in the second case, the open difference is posted to the specified account on one side.

Consolidation postings generated by the Role "Non-cash difference make a posting Eat" are assigned the booking status "5" (generated manually) and can be changed manually.

4 Delete of AE Postings

For reasons of traceability, it is not possible to delete consolidation vouchers or consolidation entries of the AE consolidation without special permissions. If you still want to delete all automatically generated vouchers, you can do the following:

4.1 Consolidation Parameters Delete (CNSPAR)

Save Any change of parameters (usually the threshold) before the final request results in whether the AE consolidation postings for the selected CNSFNC should be deleted. If the request is confirmed, only the consolidation postings of the selected CNSFNC will be completely deleted and the status indication in the "AE" column will be reset in the corresponding group monitor. The AE Consolidation can then be re-initiated via the group Monitor.

4.2 IC Clearing Summary Delete (CNSLST)

As an alternative to these global deletions, the postings in CNSLST can be deleted selectively for individual company pairs. This possibility will always be used when the AE consolidation is actually already finished, but then a change of the IC balances is still required for one or a few companies. If the selection is extended accordingly, all AE pairs can also be deleted.

ATTENTION: Both deletions result in the loss of manual additional entries or comments stored in the IC clearing overview and may have to be inserted again manually.

5 Carry Forward in the Following Year

Vouchers from consolidation of income and expenses ('AE00', 'AE01' ff) are carried forward. The carry forward is necessary because the AE vouchers result in a result shift which is reflected in a JÜ line for each company. To ensure that the retained earnings is displayed correctly for each company, the postings are presented on the JU account and transferred to the account for the retained earnings. The document sequence abbreviation for these carries forward is 'AE 00 V'. 'AE 00 V' vouchers are given the transaction type 'WU' like 'AE' vouchers.

If a detailed carry forward per company is not desired, since these are only displacements between the companies, the user can suppress the carry forward of the 'AE 00 V' vouchers by using neutralization accounts. To do this, the following settings are required in the AE consolidation parameters:

• The "Combine carry forward" field switch must be set (see above)
• A clearing account must be recorded (see above)
• The clearing account receives an account identifier N (clearing account balance sheet) in the account master, and an allowance/income identifier 3 or 4 (income or expense)

With this setting, the AE postings of the current period receive, instead of one JÜ line per company, one posting per company on the clearing account, which turns back the result shift between the two document companies. Consequently, a carry-forward booking is not required.