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Consolidating entries

While there may be situations that require you to report gross consolidations (combining business unit ledger balances without eliminations), in most cases, you want to eliminate or cancel out the effect of intercompany transactions.

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Rules determine which ledger entries are identified and eliminated by defining elimination and minority interest sets.Consolidated entity D is further consolidated with an additional operating business unit not directly related to business unit 3 and 4 to consolidated business entity C.Finally, the consolidated business entities B and C are combined in the overall consolidation business entity A.Data also includes specifying which ledger to use during Consolidations for each business unit.Detail ledgers, as well as summary ledgers, can be used as the basis for consolidation.Effectively, the combined result of the adjustments and eliminations entries is to express the value of the parent investment in terms of the assets and liabilities of the subsidiary offset by a minority interest liability.

The equity ownership for each subsidiary in the consolidation is eliminated, with only the parent company's equity accounts and minority interest account remaining.

In the case of the following intercompany receivable and payable relationship, you require only one elimination set if you use the Affiliate Chart Field: In consolidating the books of a subsidiary with those of the parent company, you credit the parent with the portion of the subsidiary that it actually owns and exclude what outside investors own.

The value of minority interests is reported in terms of the aggregate net assets (equity) rather than in terms of a fractional equity in each of the assets and liabilities of the subsidiary.

In the following example, Company B0001 sold services to Company B0002.

The Revenue and Expense accounts need to be eliminated in addition to the Due From and Due To accounts: The Affiliate Chart Field is specifically reserved to map transactions between business units when using a single intercompany account.

Consolidated capital stock and retained earnings is equal to the balances of the parent.