Capital Consolidation
Table of contents
- 1 Prerequisites
- 1.1 Consolidation Parameter KK (CNSPAR KK and FK)
- 1.2 Updating of Shareholding (SHRPAR)
- 1.3 Allocation of Companies to the Group (GRPMNR)
- 2 Creating Capital Consolidation Postings
- 2.1 Procedure 'First consolidation automatic'
- 2.2 Form Entry First Consolidation (I-ERSTKON)
- 2.3 Consolidation Postings
- 2.4 Offset Difference Amount (FSTCNSDF)
- 2.5 Error Sources
- 3 Currency Conversion Effects on Goodwill in Local Currency under IFRS
- 4 Difference Amount from Carry Forward Capital Consolidation (KB)
- 5 First Consolidation Development Reposting (KU)
1 Prerequisites
1.1 Consolidation Parameter KK (CNSPAR KK and FK)
In the CNSPAR application, a consolidation parameter (KK) must be created for each sub-group, period and fact. If there are companies in the group that are partially owned by third parties then an additional consolidation parameter (FK) has to be set up. It only has to be defined once because, in subsequent years, the consolidation parameters will be carried forward as part of the group carry-forward. The KK parameter is used for the capital consolidation of companies that are consolidated both fully and pro rata.
- Accumulation of carry forward
- If the button is enabled with an - X - then the capital consolidation postings will be combined as far as possible for the carry forward. This provides clarity in the subsequent periods.
- Difference amount
- The so-called difference amount suspense account (suspense account) is used for the posting of the difference amount that is calculated when the capital consolidation is performed. In this case, it is of no importance if, when offsetting the book value of a participation against its pro-rata equity, a positive or a negative consolidation difference arises. You are only allowed to enter an account here with the T account flag (difference amount).
- Net income elimination
- In the event of full or partial inclusion of the annual profit or loss in the first consolidation of a subsidiary an offset has to be created for this amount in the group profit and loss. The amount that has been determined is posted to this group account.
- Capitalise goodwill
- If the result of offsetting the book value of a participation against its pro-rata equity is a positive difference amount then there is the option, in particular, of capitalising this as goodwill. In IDL Konsis you will need a separate account for the positing of this transaction. In the selection of accounts only fixed asset accounts have been designated (balance sheet profit and loss code 1, transaction development A), however, other accounts can be entered.
- Compens. diff. amount in local curr.
- Entering a reserve account for goodwill in accordance with IFRS is always necessary if the aim is to post goodwill in accordance with IFRS. The account that has to be entered here must be a capital account.
- Clearing badwill
- At this point you can define an account that will be used for the offsetting of a negative difference amount.
- Assets+liab. diff, counterbalanced
- If you wish to use the function in the Offset Difference Amount FSTCNSDF application then you have to define an offsetting account here.
- Retained earnings clearing
- If a negative difference amount remains then this can be offset against retained earnings. In such a case, an account has to be defined at this point. For better reconcilability, we recommend using a separate account where no account balances in the company financial statements are managed. You are only allowed to enter a capital account here.
- Depreciation
- Fixed asset objects that are identified in consolidation postings can be automatically depreciated with IDL Konsis. To this end, a depreciation account is required at this point, (balance sheet/profit and loss code 4, account flag transaction development/profit and loss check = D for depreciation).
- Depreciation goodwill
- If the amortisation of goodwill is supposed to be posted to a separate account then this account can be specified here, unlike the account for "depreciation".
- Depreciation participations
- If the aim is to eliminate the write-down on a participation via the capital consolidation then the profit and loss account to which the parent company had posted this write-down should be entered here.
- Appreciation participation
- If the aim is to eliminate the appreciation of a participation via the capital consolidation then the profit and loss account to which the parent company had posted this appreciation should be entered here.
- Currency conversion effect participation
- If participations are held in a foreign currency then currency conversion effects will arise in every period. If the aim is to eliminate these via the capital consolidation then the respective account has to be defined here.
- Currency Conversion participation
- If participations are held in a foreign currency then currency conversion effects will arise in every period. If an account is entered at this stage then the currency conversion effects for the capital consolidation are reposted to the capital account for the subsidiary that is entered here.
- Carry-forward
- This account is required in order to be able to carry forward consolidation postings from the previous accounting period. E.g. the depreciation on fixed asset objects is reposted to this account. We recommend using a group retained earnings account that differs from the company financial statements and the HBII financial accounts. You are only allowed to enter a liability account here with the account flag +X" or +C".
- Account for neutralisation subsid.
- If the aim is to work with clearing accounts then an appropriate account has to be defined here with the account flag +N".
- Account for neutralisation holding
- If the aim is to work with clearing accounts then an appropriate account has to be defined here with the account flag +N".
1.2 Updating of Shareholding (SHRPAR)
The basic prerequisite for executing a capital consolidation in IDL Konsis is a change/transaction in the shareholding in the SHRPAR application. The following posting key usage tag (BSL usage tag) for the participation transaction development are used for the capital consolidation:
- BSL usage tag B02 Cost additions: A posting key with this usage tag is intended solely for "real" additions to participations where there is a change in the percentage shares. For consolidation postings to fixed assets accounts, here, addition posting keys are used.
- BSL usage tag B03 Cost disposals with decrease of %: Only if there has been no update of the disposal date in the group financial statements + monitor GRPMNR, i.e. if there has been a partial disposal, will this posting key be processed by the KK. If a disposal date is entered in the GRPMNR and there has been a full disposal of a company then the processing is carried out by the deconsolidation KS. (GUIDE Deconsolidation)
- BSL usage tag B04 Cost Carry forward: A posting key with this usage tag is primarily used for the first-time implementation of IDL Konsis. For a transaction with this key the user should select manual first consolidation so that the capital can potentially be adjusted manually at the time of first consolidation. For consolidation postings to fixed assets accounts, here, carry forward posting keys are used.
- BSL usage tag B05 Acc.amortization Additions: If, in the absence of changes to participation percentages, valuation allowances are updated in SHRPAR using a posting key with this usage tag and if, at the same time, the "Write-downs on Participations" account in KTKPARKK is updated then the write-down can be eliminated manually or automatically via a capital consolidation. Both postings are made at the parent company.
- BSL usage tag B06 Acc.amortization Reversals: If, in the absence of changes to participation percentages, appreciations are updated in SHRPAR using the posting key with this usage tag and if, at the same time, the "Appreciation of Participations" account in KTKPARKK is updated then the appreciation can be eliminated manually or automatically via a capital consolidation. Both postings are made at the parent company.
- BSL usage tag B07 Acc.amortization Carry forward: If, e.g., when mapping the historic development of participations, a posting key with this usage tag is used then the accumulated depreciation can likewise be eliminated via a capital consolidation. As in the case of a BSL with the usage tag B05, the prerequisite for this is an update of the account for "Write-down of a Participation" in KTKPARKK. However, in contrast to the elimination of current year depreciation, the posting is made against the retained earnings account that is defined in KTKPARKK.
- BSL usage tag B08 Cost capital increase (proportionate subscription): As the name suggests, this concerns pure capital increases without a change in the percentages (entering percentages in the shareholding transactions is prohibited in the case of a BSL with this usage tag). A capital consolidation eliminates this transaction using the corresponding capital transaction of the subsidiary provided that this has been updated using a posting key with the usage tag B08 and the same transaction date as for the shareholding.
- BSL usage tag B09 Cost capital increase with increase of %: This is the additions posting key for the simultaneous addition of capital and participations (one-sided capital increase by the parent company).
- BSL usage tag B10 Cost Pay back of capital: These are processed similarly to a capital increase (BSL usage tag 08) with reversed debit/credit indicators. A shareholding reduction is posted against capital reductions using a posting key with the usage tag B10 on the same transaction date.
- BSL usage tag B13 Cost Exchange rate differences: If participations are held in foreign currencies then currency conversion effects will arise in every period when the shareholdings account is converted at the closing rate. If the aim is to eliminate these currency differences via a capital consolidation then the transaction must be entered with this posting key. An alternative option is to convert the shareholdings account using the updated average exchange rate (FDK). A separate shareholdings account should be set up for this. In so doing, the exchange rate is specified in the course of the conversion in the first period and retained for the subsequent accounting periods. Exchange rate differences that arise are posted to the adjustment item for currency conversion. The advantage of this is that currency differences do not have to be permanently offset via a capital consolidation.
- (Exception: BSL usage tag V carry forward: Normally, no shareholding transactions that have a BSL usage tag V are processed by the capital consolidation. Processing happens solely in the situation of an +addition with no effect on liquidity" If the respective tag (NLZ) is enabled in the KTKGESE application then the status of the KK of the company in the GRPMNR will turn red and the SHRPAR transaction will be processed via the KK and it will get a voucher entry.)
In subsequent years, these transactions will be carried forward via the company carry forward and, in each case, only the current transactions have to be updated. You can find further information on the topic of shareholdings (SHRPAR) in the chapter SHRPAR under GUIDE Company Financial Statements -> Company Development Transactions.
1.3 Allocation of Companies to the Group (GRPMNR)
Companies for which a capital consolidation should be executed must be allocated to the respective group companies. The capital consolidation 'KK' processes companies where the consolidation method is set to 'V' (full consolidation) or 'Q' (partial consolidation). Following the allocation, if the "Participation Identification and Status Identification" is started then the book values and percentages of the participations are calculated from the 'SHRPAR'-application and then entered. The KK status of a subsidiary will turn red when there are transactions in the 'SHRPAR' of the parent company (companies) that have no corresponding voucher entry (an exception here is usually the carry forward posting key with the usage tag 'V', see above).
2 Creating Capital Consolidation Postings
The Capital consolidation can be started via the menu (folder symbol/Action), or the right mouse button +capital consolidation". When the first consolidation starts automatically then a consolidation posting is generated immediately. An overview of the data used is provided by the form entry, which you can also call up by double-clicking on the red KK status.
When determining the data that has to be processed, the period that is taken into account is the one between the current period and the last preceding annual financial statements period (indicator = ‘J' in the CLSDTE application). The previous period specified in the group financial statements + monitor GRPMNR is not evaluated.
For the first consolidation you have to enter the current group and the voucher number of the consolidation voucher that has been generated for the processed shareholding transaction (SHRPAR). If there is another shareholding transaction for which a capital consolidation has to be executed and where no voucher number has been entered then the respective KK status in the group financial statements + monitor will remain red.
In the event that, over the course of the year, the capital consolidation vouchers have been carried forward from preceding interim financial statements these vouchers are then retained. Therefore, only those changes to participations are newly consolidated that have not yet been processed in a preceding interim period and where no voucher number has been entered. In the event that the aim is to recreate these vouchers that had been carried forward then they will first have to be manually deleted.
In order to be able to distinguish between several processes within a period, if required, further consolidation functions 'K0', 'K1', etc. can be automatically generated. In this way, separate vouchers will be generated, for example, if there is an addition on 01.06 and another one on 01.07. A maximum of 11 shareholding transactions can be processed in one year. Otherwise, you will have to work with the +net shareholding"function (button in the form entry).
2.1 Procedure 'First consolidation automatic'
'First consolidation automatic' should be used if the current reporting date matches the first consolidation date and, thus, the capital drawn via account balances or capital transactions corresponds to the amount that is supposed to be eliminated. This method is likewise suitable for the first consolidation of pure capital increases. 'First consolidation automatic' runs automatically in the background without any further input having to be made. Each posting that is created using 'First consolidation automatic' can be changed with the help of ''First consolidation forms'.
If the shareholding percentages are below 100% then, at the same time, a FK-voucher is created for the elimination of the minority interests.
2.2 Form Entry First Consolidation (I-ERSTKON)
Form entry first consolidation should be selected if you want to get an overview of the amounts used, or if changes still have to be made to the amounts drawn via account balances or capital transactions, for example, if the first consolidation date differs from the current reporting date.
The "Company Financial Statements Development Transactions" column draws on the shareholding transactions of the parent company, on the one hand, and the capital transactions of the subsidiary, on the other hand. In the columns with the heading "Group Financial Statements" these amounts are divided into own share of the interests, potentially for different parent companies and minority interests if the overall participation is < 100%. These columns constitute the subsequent consolidation postings. In the totals line, the difference amount that has to be offset is displayed in the +own share of interests- column.
The data in the "Company Financial Statements Development Transactions" column cannot be changed because, depending on the fact and period settings, these data are read from the development transactions or the account balances of the companies. In the course of an elimination due to capital transactions it is also possible that there might be several rows for one account because the elimination happens for each transaction. In the "Group Financial Statements" columns the amounts from the elimination view are adjusted so that, in the case of full elimination, the residual value is shown as 0.00. They can be amended as required. An additional empty row is displayed both for the participation as well as for the capital where additional postings can be entered. More empty rows can be obtained by pressing the ENTER key in the respective last field of a row. If a proposed amount is not supposed to be posted at all then this can be overwritten with 0.00. This row will then not be transferred as a consolidation posting. The posting texts (separate in each case for the KK or the FK voucher) and the required fixed assets objects are defined in the Additional Data column.
In the event that, in one period, there are several issues that have to be processed via the capital consolidation then these will be shown in individual blocs one below the other. For each bloc, one totals line will be displayed for the respective difference amount.
If the postings displayed in the "Group Financial Statements" columns are correct then they can be posted using the SAVE button.
If, after performing a first consolidation, the basic data have changed then these will be reread and an updated version displayed. However, the postings will not be immediately replaced so that, potentially, values might be displayed in the "Residual Value" column. Depending on whether you had adjusted the values during the first-time consolidation or had saved the values proposed by the system, you will either be able to enter the changes again or, via the Action menu "First Consolidation Automatic" have the system newly calculate the postings.
2.3 Consolidation Postings
IDL Konsis creates vouchers for the consolidation method 'KK' with the naming convention subsidiary -> parent company -> KK. The postings generated through the actions described above are given the posting record number 01. These automatic postings cannot be modified or deleted in the KONBUCHE application, only amendments are possible.
2.4 Offset Difference Amount (FSTCNSDF)
The amount posted to the Difference Amount Suspense Account (suspense account) has to be distributed via the Offset Difference Amount (FSTCNSDF) application. The status display for the KK column in GRPMNR will remain yellow until the full amount of the suspense account has been distributed. Please refer to GUIDE Offset Difference Amount FSTCNSDF for information about the options that are available to you for this purpose.
2.5 Error Sources
Error: Only the shareholding transaction is drawn upon but not the capital of the subsidiary
Check:
- The posting key for the shareholding transaction in the SHRPAR application
- The transaction date in SHRPAR, on the one hand, and the capital transaction (CAPTRN application) of the subsidiary, on the other hand. Transactions that belong together must have the same transaction date. This strict audit of the transaction data is necessary in order to enable a correct capital consolidation for a successive acquisition of a shareholding, too.
- Is this a capital increase? If yes then it is essential for you to use the BSL with the usage tag B08 in the shareholding and not the BSL with the usage tag B02 with 0% in the fields for the percentage of capital, voting rights and profits because 0% of the capital is 0.00. The posting key for a capital transaction must likewise have the usage tag B08.
Error: Something was changed in the shareholding transactions or capital transactions after the execution of the first consolidation. Nevertheless, in the Form Entry First Consolidation (I-ERSTKON) the old values are displayed in the Group Financial Statements columns.
The I-ERSTKON application is not only an input mask but also serves as an overview of the current postings. Especially when manual changes have been made to postings it would not be practical if the values updated immediately when the overview was called up and thus the existing postings would be overwritten. If the aim is to draw on the new values for the capital consolidation then, in the I-ERSTKON application, you should call up the follow-on application "First Consolidation Automatic KK, EK" via the Action menu. In doing so, all the previous vouchers with the consolidation processing KK for this company will be deleted. Difference amounts that have possibly already been distributed must be offset once again via the FSTCNSDF application. Alternatively, you can overwrite the changed values for the consolidation posting and SAVE them once again. In that case, only these values in the voucher concerned will be overwritten. The difference amount for this voucher, potentially, would then nevertheless have to be offset once again.
3 Currency Conversion Effects on Goodwill in Local Currency under IFRS
If, in the course of the capital consolidation, goodwill is capitalised in the local currency in accordance with IFRS then, in subsequent years, the currency conversion effects from the goodwill have to be taken into consideration. Therefore, the amount of goodwill must be entered and saved in the local currency. When capitalising the goodwill the entry is made in the ‘Compensation temporary difference amount from first consolidation' (FSTCNSDF) function and it is saved in an attribute of the fixed assets object master (FAOBJ).
The amortisation of goodwill is not provided for under IFRS and, thus, the fixed assets object is always set up with the depreciation method 'K' (no depreciation).
Furthermore, there is the option of capitalising the goodwill at a different company from the acquired subsidiary. It is thus possible to enter a company and also a currency in "Capitalise Goodwill". The consolidated subsidiary and its local currency company are however preassigned to the company so that, normally, no additional entries are necessary.
3.1 Pre-requisites for Calculation
In order for the vouchers and posting records to be able to merge with each other it is necessary to have an offsetting account that has to be set up in the COADFN application. You must ensure that this is a capital account. The account must be included in the consolidation parameter KK for the
'Compens. diff. amount in local curr.' (see above).
3.2 Calculation of Carry Forward and Currency Conversion Effects
The currency conversion effects that have been calculated are carried forward, in the subsequent year, in a KF voucher or combined with one that already exists. If, in the subsequent year, the exchange rates have already been updated then the currency conversion effects would be immediately posted as part of creating the carry forward. The KLW status that belongs to this will then immediately turn green. If the exchange rates have not yet been defined then the corresponding KLW status will turn red and the processing will subsequently have to be triggered manually.
4 Difference Amount from Carry Forward Capital Consolidation (KB)
In the course of a company's group affiliation there are cases where differences exist between the equity accounts in the company financial statements (HBII) and the equity accounts used as a basis for the consolidation (e.g. through cumulative retained profits). This results in the capital transaction development for the respective capital account being carried forward with a balance even though this would actually have been eliminated via the capital consolidation.
With the help of the ‘Difference Amount from Carry Forward Capital Consolidation'(KB) function it is possible to arrive at a situation where the respective capital account is always "cleared" down to zero from a group perspective.
4.1 Pre-requisites and Calling Up the Function
The setup is carried out in the COADFN(E) application. The button for the +reposting to the carry forward capital consolidation account- can be enabled for each equity account. If the field is empty then no reposting will happen
Furthermore, a consolidation parameter KB must be created where the carry forward capital consolidation account has to be specified.
Calling up the function for the calculation and posting of the +difference from carry forward capital consolidation" happens for each company out of the "Group Companies + Monitor" (GRPMNR) application. The action is included in the sub-menu for the capital consolidation. If a correct voucher has been generated then a green +KB" status will appear in the GRPMNR for the respective company-
4.2 Carry Forward
The 'KB' vouchers are taken into account in the general group carry forward and also in the sub-function "Carry Forward Capital Consolidation". They are carried forward in a ‘KF' voucher.
5 First Consolidation Development Reposting (KU)
When companies are added to the consolidation group then repostings are necessary in the transaction development area with carry forwards. This display of transaction development data in accordance with the column structure for additions to the consolidation group is supported by the ‘First Consolidation Development Reposting' (KU) function. The function is only initiated automatically as part of the first consolidation (KK), although this function can be repeated separately (e.g. on account of a change to the transaction development data).
Prior to executing development repostings all the consolidation postings (KU) that potentially already exist are deleted beforehand. Development repostings take place in consolidation vouchers with the company number of the subsidiary and the consolidation processing KU in the voucher number.
5.1 Additions to the Consolidation Group
If a company is added in the current period then all the carry forwards that this company provides in its company financial statements data have to be reported, in the group, in the "Changes to Consolidation Group" column.
In order to make it possible for the respective reposting to happen in the group a posting key with the usage tag +E" must be created for each transaction development.
The KU voucher for each transaction development and transaction development area that have to be included per account and business unit contains a posting pair with elimination posting and reposting.
5.2 Inclusion of Net Fixed Assets
When a company is newly added to the group companies, frequently, there is a stipulation that the accumulated (historic) depreciation data provided by the company financial statements should be offset against the cost of acquisition shown in the group fixed assets schedule. Using the "Inclusion of Net Fixed Assets" button in 'GRPMNRE' allows you to control this so that these depreciation carry forwards are shown as changes to the consolidation group in the A/P cost area.
If, prior to the execution of the ‘First Consolidation' (KK) application, the 'X' was placed in the 'Inclusion of Net Fixed Assets' field then the development reposting of the accumulated depreciation to the cost of acquisition will be triggered automatically. If the 'X' was placed after the execution of the first consolidation then you can bring about a retroactive posting via the action 'First Consolidation Development Reposting' (KU).
In contrast to other development repostings, which only appear in one period, this voucher is carried forward within the scope of a group carry forward in the subsequent periods and is given the voucher number 'subsidiary + KLW'.