PC100NW IFRS Configuration

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SAP® BUSINESSOBJECTS™ PLANNING AND

CONSOLIDATION 10.0,

VERSION FOR SAP NETWEAVER

STARTER KIT FOR IFRS SP1

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Copyright

© 2011 SAP® BusinessObjects™. All rights reserved. SAP BusinessObjects and its logos, BusinessObjects, Crystal Reports®, SAP BusinessObjects Rapid Mart™, SAP BusinessObjects Data Insight™, SAP BusinessObjects Desktop Intelligence™, SAP BusinessObjects Rapid Marts®, SAP BusinessObjects Watchlist Security™, SAP BusinessObjects Web Intelligence®, and Xcelsius® are trademarks or registered trademarks of Business Objects, an SAP company and/or affiliated companies in the United States and/or other countries. SAP® is a registered trademark of SAP AG in Germany and/or other countries. All other names mentioned herein may be trademarks of their respective owners.

2012-03-16

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Introduction

1. Document Objective

This document describes how the SAP® BusinessObjects™ Planning and Consolidation 10.0 starter kit for IFRS on SAP Netweaver was designed. The first chapter is divided into business topics; for each topic the design principles are explained as a response to the related user requirements. The second chapter summarizes the configuration objects mentioned in the first chapter by product area. Appendices available in chapter 3 are screenshots and scripts referenced in the first two chapters, which provide more details about the contents of scripts, business rules, and dimensions. Specific operating processes are also explained in this chapter.

Before you attempt to change the configuration, we highly recommend that you read this document thoroughly, in order to understand how configuration objects interact in the solution, and how to enhance the starter kit in accordance with the way it was designed, when adapting the starter kit to project specific requirements.

2. Legend

Objectives / Requirements

Design principles

Consequences on the operating process

Warning

Database diagram

Accounting diagram

Blue italic Leveraged Planning and Consolidation product feature

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A. Design Principles by Business

Requirement

1. General Reporting Principles

1.1. Reporting Cycle

The starter kit for IFRS is designed to support a full consolidation scenario for actual data. The reporting cycle encompasses preparatory tasks, data entry tasks, consolidation tasks, and data retrieval through a library of reports.

For the successive consolidation reporting cycles, instances of the BPFs listed above are identified by the Actual Category ID.

1.2. Accounting Principles

1.2.1. Financial Standards

Reported data is consolidated according to IFRS. Local data can be collected following IFRS, or in local GAAP, and subsequently adjusted to IFRS in input forms.

The consolidation scenario is built for actuals and is divided into 4 main Business Process Flows (BPF):

− Preparatory tasks: Maintain exchange rates, consolidation scope, and run copy

opening balances

− Data entry: Load files or manual entry of balance sheet, income statement,

breakdown by movement and intercompany. Run data validation and data submission.

− Consolidation tasks: Run preliminary checks, post manual journal entries, run

consolidation, check the consolidation dashboard, view annual reports

− Reports library: Annual reports, analysis reports, breakdown reports, control

reports

The Data entry tasks BPF is designed for local users whereas Preparatory tasks and

Consolidation tasks BPFs are designed for central users. One consolidation process is

defined for all consolidation frequencies (monthly, quarterly…).

The consolidation data is stored in a consolidation-type model named CONSOLIDATION. An ‘ACTUAL’ category ID is created and used for that purpose.

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Local data is stored on the INPUT audit ID1 (audit-type dimension). Subsequent local adjustments in input forms are stored on the INPUT11 audit ID

The user can select the audit ID in the EPM context of input form. Thanks to a specific Data Access Profile, (named “Entry level”) only “Input” audit IDs (base members of “ALL_INPUT”) can be selected by local end users.

It is therefore possible to dynamically enhance the list of local restatement audit IDs available in input forms by assigning the same property value and hierarchical node to the new audit ID(s).

1.2.2. Income Statement

The Income Statement is disclosed by function.

1.3. Reporting Indicators

The chart of accounts is built in a way that makes it possible to map accounts with IFRS taxonomy items.

More details on publishing under the XBRL format with the starter kit is supplied in § Error! Reference source not found. page Error! Bookmark not defined..

1.3.1. Reference indicators

1.3.1.1. Financial Statement items

Reference indicators include balance sheet (BS) accounts and income statement accounts (IS).

• The Statement of Financial Position – or Balance Sheet (BS) - distinguishes between the following items:

− Non-current / current items2

− Gross values / depreciation and impairment / net values

• The Income Statement (IS) is composed of the following blocks of accounts: − Operating profit

− Financial result

− Tax (Current and deferred)

− Profit (loss) from discontinued operations

1

Audit IDs are described in § A.4.1.5 page 24

2

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The requirements regarding the Statement of Cash Flows, the Statement of Changes in Equity, and the Statement of Comprehensive Income are detailed in chapter 6 page 40.

Structure of the Chart of Accounts

The chart of accounts is organized into hierarchies. Accounts are always included in a parent member account by populating the PARENTH1 field in the ACCOUNT dimension. The following hierarchies are defined:

− Balance sheet: includes Asset accounts (Axxxx), Equity accounts (Exxxx) and Liability accounts (Lxxxx)

− Group Income: includes all P&L accounts (Pxxxx)

Codification

The codification principle allows the user to do the following:

− identify the account type (A = Assets, E = Equity, …) and subtype (for the second digit 1 = Non-current item and 2 = Current item).

− sort accounts in logical order in reports notably in the balance reports (assets base members, equity and liabilities base members)

In addition, for total accounts, the suffix T allows the user to distinguish between total accounts and leaf-level accounts.

1.3.1.2. Balance Sheet Movements

In order to be able to calculate the Statement of Cash Flows items and to produce the Statement of Changes in Equity, changes in the BS items are captured or calculated as follows:

− For current assets and liabilities (Gross value), the net variation is calculated and displayed in input forms

− For other BS accounts, a detailed analysis of movements is required

− Specific operations are identified separately for all BS accounts: Reclassification, Changes in accounting policies, Internal mergers (transfer of BS accounts from the acquired to the acquiring company in case of an internal merger)

− Opening balances are automatically calculated from the closing balance of the previous year.

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Using a FLOW Dimension

The FLOW dimension (Subtable type) is used to detail the value change between the opening balance (F00) and the closing balance (F99) for balance sheet accounts. All flows, excluding F99, are included in a parent member “Closing-Calculated” (END) in order to:

− Easily check that the sum of the opening balance and the period movements equal the closing position in reports (END = F99)

− Dynamically select the opening flow and the movement flows in reports

Account / Flow Combinations

• The following common flows are valid for all BS accounts: − Positions: F00-Opening, F99-Closing

− Specific flows (except for some equity accounts): F50-Reclassification, F09-Change in accounting policies, F70-Internal mergers

• Additional relevant flows depend on the account. This link is defined in the FLOWAN account property (See Appendix 3). This property is used to stripe cells that correspond to inconsistent account-flow crossovers in input forms.

• For P&L accounts, only flow PL99-Closing is used.

Flow Calculations and Controls

• For all BS accounts, the net variation (i.e. closing balance – [opening balance + specific flows]) is calculated in flow F15-Variation. This calculation is included in the default script logic, which enables a real time calculation as and when data is input / imported at local level. (See Appendix A.1).

• For non-current accounts, the net variation must be distributed on relevant flows in the corresponding input form. When saving new values, the variation flow (F15) is calculated again and must be zero in the form. The controls are performed during the data validation via specific controls rules. The flow F15 is then highlighted in input forms (see Appendix 2).

• For current accounts (excluding provision and allowance accounts) the net variation amount is not distributed on flows and remains on the net variation flow (F15).

• Two preventive data entry controls have been inserted in the NetWeaver backend through the UJ_validation transaction. They prevent the user from entering or importing data on the Profit and Loss flow (PL99) for Balance Sheet accounts on the one hand, and from entering or importing data on the Balance Sheet closing Flow (F99) for Profit and Loss accounts on the other hand (see AppendixError! Reference source not found.). For

more information on this feature please refer to the Planning and Consolidation on Netweaver documentation.

Opening Balances

For input data, the calculation of opening balances is executed centrally by using the “CopyOpening” Data Management Package with the Carry Forward Rules. (See § 4.1.1 page 20).

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Reminder – Input audit IDs: Input data is identified by the members of the audit ID

dimension with the property DATASRC_TYPE = I (Input). More information regarding this dimension is available in 4.1.5 page 23.

1.3.1.3. Focus on Equity Accounts and Equity Specific Movements

The Statement of Financial Position does not distinguish between accumulated retained earnings of prior periods and the net income of the current period.

At local level, the following equity movements are captured:

− Net income of the period: calculated from the P&L accounts − Total dividends paid (internal and external)

− Subscription to capital

The appropriation of retained earnings is disclosed on one single account: E1610 – Retained earnings. The following equity-specific flows are created:

− F10 – Net income of the period: is automatically calculated by the Default script logic (for audit IDs defined with DATA_SRC=I), or included in the Journal.lgf script for manual journal entries. Both scripts enable a real time calculation. (See

Appendix 1 and appendix 4)

− F06 – Dividends

− F40 – Subscription to capital

F20, F30 and F55 are also associated with relevant equity accounts such as Treasury shares to capture the increase or decrease in values or fair value adjustments.

F00 F99 F06 F10 F40

Opening position

Closing

position Dividends Net income

Subscription to capital

E1110 Issued capital E1210 Share premium E1310 Treasury shares

E1510 Revaluation surplus, before tax E1511 Income tax on revaluation surplus E1520 Actuarial G&L, before tax (suspense acc.) E1521 Income tax on actuarial G&L (suspense acc.) E1540 Hedging reserve, before tax

E1541 Income tax on hedging reserve E1550 Fair value reserve, before tax E1551 Income tax on fair value reserve E1570 Equity component of compound fin. Inst.

E1610 Retained earnings = P&L

E199T Equity attributable to owners of parent

Legend:

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1.4. Sign Convention

In order to fully leverage the software’s data storage engine as well as the calculation engine of total accounts, the following rules apply to closing balances:

• Assets: gross values are entered as positive amounts; amortization and depreciation are entered as negative amounts

• Equity and liabilities: amounts are entered as positive amounts

• Income Statement: revenues and expenses are entered as positive amounts. Assets Amortization &

Depreciation Equity & Liabilities* Income Expenses Entry + - + + + Display 100 (100) 100 100 (100)

In addition to the sign logic defined for accounts, flows use the following rules:

Assets Equity & Liabilities*

Gross values Amortization & Depreciation

Increase Decrease Increase Decrease Increase Decrease

Entry + - - + + -

Display 100 (100) (100) 100 100 (100)

*Except Treasury shares, for which the logic is reversed.

The account dimension is defined with the ACCTYPE property. Thanks to this property, values are automatically recorded with the appropriate sign for the account.

Accounts are defined with the following ACCTYPE values:

− AST: Asset accounts (gross value, depreciation, impairment). Default sign is positive (debit). Entry values must be negative for depreciation and impairment

− LEQ: Liability and equity accounts. Default sign is negative (credit) − INC: Income accounts. Default sign is negative (credit)

− EXP: Expense accounts. Default sign is positive (debit)

As explained before, income and expenses are entered as positive amounts. To ease the readability of the Income Statement, a particular value format applies to expense accounts: values are shown in negative though they are entered as positive.

To calculate values on parent members (total accounts), the ACCTYPE property is also taken into account. The calculated value will be displayed following the ACCTYPE property.

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2. Segment Reporting

Income Statement, Assets and Liabilities by Segment

Segment reporting is built by entity aggregation, which implies that each entity belongs to only one segment. The scenario where a legal company belongs to several segments is supported by splitting legal companies into operating entities which report IS items and operating assets and liabilities, and non-operating entities which report non-operating items such as equity, tax and investments.

In terms of data entry, one BPF instance is created per entity, i.e. business unit. In order to balance BS and IS for all entities (operating and non-operating) that compose a company, two balancing accounts have been defined:

− L26BL-Balancing account - Balance sheet − P22BL-Balancing account - Income statement Example:

Intragroup/Intergroup intercompany eliminations

In the starter kit, segment reporting is built by entity aggregation. The starter kit does not provide intragroup/intergroup intercompany elimination feature.

Non Operating Operating Segment A Operating Segment B Total company (no intra elimination) Assets Fixed assets 500 100 200 800 Cash 200 200 700 100 200 1000

Equity & Liabilities 0

Equity 300 300 Net Income 40 60 100 Net Income-Balancing 100 -40 -60 0 Debts 100 400 100 600 B/S-Balancing 200 -300 100 0 700 100 200 1000 Income Statement 0

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3. Consolidation Principles

3.1. Foreign Currency Conversion

The Income Statement accounts are converted using the average rate of the reporting period.

Accounts in the Statement of Financial Position are converted using the period-end rate, excepted investments and equity accounts which are maintained at their historical acquisition value. BS movements are translated using average rate.

For equity accounts, the currency translation differences are recorded in a dedicated account in the reserves.

As some transaction values need to be converted at a specific rate, such as dividends distribution and the balance sheet position of incoming units, the definition of currency rate per company is required.

All values are translated “cumulated”, meaning that the “year to date” value for the closing period is translated using the rate of the same closing period.

The above currency conversion rules also apply to accounts for additional analyses.

Rates Definition and Rate Input form

The following RATES are defined and must be entered in the RATES model:

− AVG: average rate

− END: closing rate

− DIV: dividends rate

The RATES model includes the RATEENTITY dimension which allows the consolidation manager to input specific currency rates for a given company. This dimension is initialized in the Rate web input form. It contains the following members:

− GLOBAL member, against which the default rates by input currency must be input; it is therefore initialized in the context of the input form.

− Members that correspond to entities to which a specific rate must be applied and which therefore have identical identifiers (IDs). These members can be inserted as appropriate by the central user in the input form.

The currency conversion rules apply the specific rate for one entity if such a rate exists. If not, it will default to the general currency rate input on the GLOBAL member.

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Reminder: Entering Specific Rates by Entity

In order for the conversion engine to apply specific rates by entity, it is necessary to input the specific rate for the entity (RATEENTITY dimension) not only against its respective local currency (INPUTCURRENCY dimension) but also against the consolidation currency, for example EUR or USD (INPUTCURRENCY dimension). This is because the conversion engine will not refer to the default rate stored on the GLOBAL RATEENTITY member in the case of a specific rate for one entity.

Example:

Rule definition

• The currency conversion rules are configured by using the RATETYPE property of the

ACCOUNT dimension in order to associate groups of accounts to identical conversion

behaviors.

Accounts General translation rule RATETYPE Property

IS accounts Average rate (AVG) AVER

BS accounts (closing balance) translated using the closing rate

Closing balance: closing rate (END) Movements: average rate (AVG)

CTA calculation on flow F80 account by account

AVNEND

Equity accounts Maintained at their historical value: opening balance is not changed (AS_IS formula), other movements are translated using their respective rate (AVG, DIV, END, OPEND). The “ForceClosing” Option is used so that the converted closing position equals the sum of converted flows.

CTA calculation on flow F80 of the currency conversion reserve account E1560.

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Currency translation account (E1560)

The opening balance is maintained at the converted value of the prior year end (AS_IS formula)

HIST_EQ6

Investment accounts Closing balance: closing rate (END) Movements: average rate (AVG) CTA calculation on flow F80

Consequently, the general principle applied to investments is identical to the one used for other BS accounts. In addition, this conversion rule populates the YA1810C off balance account which stores the cumulated value of the currency translation effect on investments over time.

HIST_INV

Off balance Goodwill declaration accounts: Bargain purchase

Closing balance: closing rate (END) Movements: average rate (AVG)

HIST_GW

Off balance Goodwill declaration accounts: - Goodwill Gross Value - Goodwill Impairment (Partial and Full Goodwill)

The same principle as the one defined for the investment accounts is applied to the goodwill.

HIST_GWGV HIST_GWGVN HIST_GWIM HIST_GWIMN

• The FLOW dimension DIMLIST_CONV_SEL property is also leveraged in the currency conversion rules in order to dynamically associate groups of flows to one given conversion behavior within one account set associated with one RATETYPE property.

Flows Property

SUBTABLES_ORIG

Flows translated using the closing rate of the previous period S_CONV_OP Flows translated using the average rate S_CONV_AV Flows translated using the dividends rate S_CONV_DIV Flows translated using the closing rate S_CONV_END

Currency Translation Differences

For equity accounts, the currency difference resulting from the translation of movements at specific rate (historical, average, opening) is recorded in a dedicated equity account E1560 on flow F80-Foreign exchange gain/loss.

For other BS accounts, the currency difference resulting from the translation of movements at average rate, and the translation of closing balance at closing rate, is recorded in the original account on flow F80-Foreign exchange gain/loss.

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Audit ID behavior Regarding Conversion

The currency translation process applies only to audit IDs identified by the ’Y’ value of the

IS_CONVERTED property. Consequently this value has been assigned to audit IDs intended for input and adjustments in the starter kit.

Technical Accounts for CTA Cumulative Value

For investment and goodwill accounts, technical accounts are used to store the cumulated conversion differences as a source amount to be subsequently reclassified from consolidation reserves to conversion reserves as part of the CTA automatic entry. (See § A. 4.3.6, Currency Translation Adjustment (CTA))

First consolidation: conversion and cumulative CTA

As explained above, equity accounts are translated using the historical value method (AS_IS formula). When running the consolidation for one given consolidation scope for the first time in the application, the historical values of these accounts must be recorded as well as the cumulated amount of the conversion reserves as part of the preparatory tasks. This can be done in either following ways:

− By importing the converted opening balance on the opening flow directly at converted level on a technical prior year-end time period used for opening data, and defining entity-specific exchange rates for this technical consolidation; the opening rate, the average rate and the closing rate should be identical so that no currency conversion difference is computed on this time period;

− By posting a journal entry to return to the historical translation amount.

The detailed procedure is available in the starter kit operating guide and in appendix (see 10.2, Equity Conversion and CTA on page 63).

3.2. Consolidation Type

The starter kit follows the direct consolidation approach where entities are attached directly to the main parent company of the consolidation perimeter.

A sub-consolidation input framework is defined for entities consolidated with the equity method.

In the CONSOLIDATION model, consolidation accounts (such as Goodwill, or Non-controlling interests), and consolidation flows (such as Change in consolidation method, Change in consolidation rate) are not available in input forms associated with the standard data entry BPF intended for standard reporting entities.

• Consolidation accounts are filtered by using the UPROFILE property in the Member selector: accounts having the value 2CONSO for the UPROFILE property will not be available in input forms.

• Consolidation flows are assigned with the EQM value for the FLOW_DOC property. This value is not initialized in forms intended for standard reporting entities.

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Sub-scope Management

The Planning and Consolidation consolidation engine natively handles sub-consolidations, that is consolidations of groups hierarchically organized into scopes and sub-scopes. The prerequisites are as follows:

− Consolidation perimeters organized hierarchically via the PARENT_GROUP property − Entities attached to sub-scopes or directly to the top scope in the Ownership

Manager

The following options must be activated so that the aggregated amounts of possible sub-consolidations are stored in the fact table:

− STORE_ENTITY property set to ‘Y’ (Yes)

− ENTITY property set to a dedicated entity ID which the aggregated value of the scope and sub-scopes should be recorded onto

An example is given in the starter kit with the ALL_ZONES top consolidation perimeter. However no consolidation was executed and validated for this perimeter.

3.3. Consolidation Methods and Rates

The following consolidation methods are supported in the starter kit: − Full method (purchase method)

− Proportional method − Equity method

The consolidation process uses the following rates: − Consolidation rate

− Ownership rate

The consolidation perimeter is entered manually. The starter kit does not include any process for determining the consolidation method by entity automatically, nor calculating the consolidation rate and financial interest rate.

OWNERSHIP Model

Consolidation methods and perimeter rates are stored in the OWNERSHIP Model. They are used to define the consolidation perimeter via the Ownership Manage.

The list of available consolidation perimeters is maintained in the group-type dimension named ConsoScope.

Methods

The consolidation methods defined in the starter kit are the following: − Holding (Main Parent). [Method ID=111]

This method must be assigned to the consolidating company for which no equity elimination is booked.

− Full (Purchase method) [Method ID = 100] − Proportional [Method ID = 50] − Equity [Method ID = 20]

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Rates

The rates used correspond to the following ownership accounts (OWNACCOUNT) in the OWNERSHIP model:

− PCON Consolidation rate

− POWN Financial interest rate (group share) These rates are defined with the property IS_INPUT=Y.

Proportional Method

All amounts reported by companies consolidated using the proportional method are reduced to correspond to the consolidation rate.

Example:

A company reports “Revenues” for 1000 €. This company is consolidated using proportional method and a consolidation rate of 40%.

Amount Audit ID Reported value 1000 INPUT Apportionment -600 MTH_PRO Apportioned value 400 PROPORT

The MTH_PROP Method-based Multiplier is defined to proportionate the reported values by cancelling the “non-group” amount (formula: 1-PCON). This apportionment is identified by the MTH_PROP audit ID which is populated by the MTH_PROP Elimination and adjustments rule associated with the “Proportional” adjustment type. As a consequence no rule detail is required and the consolidation engine applies this apportionment to all accounts for entities consolidated with the proportional method.

Equity Method

All amounts reported by companies consolidated with the equity method must be cancelled at group level. The case of equity accounts is explained in § 4.3.5 below, Consolidated Equity Calculation.

The MTH_EQ consolidation rule is defined to cancel out all of the reported values (factor 1 used as formula). This cancellation is identified by the MTH_EQU audit ID which is populated by the MTH_EQUITY Elimination and Adjustment rule associated with the “Equity” adjustment type. As a consequence no rule detail is required and the consolidation engine applies this cancellation to all accounts for entities consolidated with the equity method.

Example:

Amount Audit ID Reported value 1000 INPUT Elim. Equity method -1000 MTH_EQU Apportioned value 0 PROPORT

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3.4. Perimeter Changes

To produce the Statement of Cash Flows and the Statement of Changes in Equity, the impacts of status changes for entities in the scope such as incoming and leaving companies, and internal merger are tracked separately from other changes.

Defining dedicated Flows and Audit IDs

• With an adapted configuration, the consolidation engine is able to automatically populate distinct flows with the amount of scope change effects, depending on the changes in the entity’s and/or the Interco’s status in the consolidation scope. These flows are identified using the FLOW_TYPE property.

• This process is triggered on automatic-type audit IDs.

− As for the incoming unit flow and outgoing unit flow, 2 dedicated audit IDs, SCO_INC and SCO_OUT, are created and associated with 2 specific Elimination and Adjustment rules with identical IDs. These rules are associated with the New and Leaving Adjustment type in order for the consolidation engine to be able to identify the audit ID to populate depending on the scope change

− As for changes in consolidation method, the difference is posted on the audit ID that is used for the apportionment explained in 3.3 above

− As for changes in consolidation rate, the difference is posted on the audit ID populated by the automatic consolidation entry rule (Eliminations, NCI,…)

• The connection between the specific Flows and the specific Audit IDs defined to identify and distinguish between effects of scope change is summarized in the following table: Flow FLOW_TYPE Property Audit ID Adjustment type Entity Identification process by the consolidation engine F01-Incoming units

VARSCPNEW SCO_INC New Entity not included in the prior scope F03-Change in consolidation method VARSCPMETH MTH_PRO MTH_EQU No dedicated rule Current consolidation method is different from prior scope F92-Change in

interest / consolidation rate

VARSCPPERC Audit ID of the corresponding automatic consolidation entry No dedicated rule Current consolidation rate / interest rate is different from prior scope

F98-Outgoing units

VARSCPLEAV SCO_OUT Leaving Appropriate leaving method assigned to the entity (see below)

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Outgoing units – General Case

For all outgoing units, the reversal of the closing position is identified to show and calculate the impact of outgoing balance sheet items. For entities leaving the consolidation scope at the beginning of the period, possible reported balance sheet movements and income statement items have no impact on the financial statements.

The following consolidation methods are created in the Business Rule and associated with the appropriate Method type in order to trigger the built-in process :

− 800 – Divested last year end − 888 – Leaving during current year

These methods are associated with the Leaving method type. Thus the closing position of all outgoing units is cancelled out from flow F99 and reversed via flow F98. In addition for entities leaving the consolidation scope at the beginning of the period, the “800-divested last year end” method cancels out balance sheet flows and income statement items.

Product Warning

In the early 10.0 release of the software, the native consolidation engine’s behaviors corresponding to the Leaving (During the Year) Method type and the Leaving (End of Year) Method type are inverted. As a consequence the method “800” - Divested last year end is in fact associated with the Leaving (During the Year) Method type. The same applies to method “700” – Acquired last year.

Internal merger

Acquiring entities are able to report the increase in assets, liabilities and equity resulting from the internal merger.

The starter kit allows the consolidation manager to match the transfer of assets, liabilities and equity items from the acquired entity into the acquiring entity.

The F70-Internal Mergers flow is created for the acquiring entities to record the increase in assets, liabilities and equity resulting from the internal merger.

Moreover at the acquired company, the SCO_OUT specific elimination and adjustment rule reclassifies the reversal of the closing position, which is triggered by default on F98 for outgoing entities associated with one of both Leaving-Method types, onto F70.

The following consolidation methods are created for that purpose: − 700 – Acquired last year end

− 777 – Acquired during current year

These methods are used in the AM_99_X1 Consolidation Rule which is in turn used in the SCO_OUT adjustment rule.

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Distinguishing the Original Method for Divested / Merged Entities During the Year

Consolidation entries booked in entities leaving the consolidation scope or against group partner leaving the consolidation scope must be reversed in a consistent way with the reversal of input data.

For entities leaving the scope during the period, the balance sheet movements are maintained and the closing position must be reversed.

The status as leaving entity in the scope is the second criteria, combined with the “business” consolidation method, which makes it possible to book relevant automatic entries on the appropriate scope changes flows.

The following consolidation methods are consequently created: − 850 – Proportional leaving during current year

− 820 – Equity leaving during current year

− 750 - Proportional acquired during current year (internal merger) − 720 – Equity acquired during current year (internal merger)

These methods are used in Method-based Multipliers used in turn in several elimination and adjustment rules when needed. Thus the closing position is reversed onto the appropriate flow by automatic entry type.

4. Journal Entries

4.1. Best Practices

4.1.1. Balance Carry Forward

The starter kit allows the user to populate the opening balance of the current period from the prior year-end closing balance in order to ensure the flow consistency over time periods. This applies to the various amount types: Input data, manual journal entries (MJE) and automatic journal entries (AJE).

Opening balances of the current year result from the carry forward of closing balances from the previous year. This calculation is defined and executed in the following steps:

Balance Carry Forward of Manual Entries

For all audit IDs with the property DATASRC_TYPE = M, opening balances are calculated using the data manager package “CopyOpening” with the carry forward rules defined as follow:

• Source account: TBS (all BS accounts) • Source flow: F99-Closing balance • Destination flow: F00-Opening balance

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Calculation of the Consolidated Opening Balances (Automatic Entries)

The carry forward rules do not apply to automatic entries (audit IDs with property

DATASRC_TYPE = A). Instead, the consolidation engine calculates the consolidated opening

balances (flow F00) of the current year by copying the closing balance (flow F99) of the previous year.

4.1.2. Flow-Based Consolidation

For manual and automatic journal entries, the closing position is always calculated from movements. This contributes to the consistency of the closing position and movements over time periods, notably for the calculation accuracy of the Statement of Cash Flows and the Statement of Changes in Equity.

Automatic and Manual Journal Entries

Automatic and manual journal entries must be booked on movement flows. The impact on the closing balance (flow F99) is calculated automatically.

This calculation is defined in one of three places:

− In the elimination and automatic adjustments rules (“Force closing” option) for all automatic entries that impact BS movement flows

− In the journal.lgf logicscript for manual journal entries (see Appendix 4)

− In the copyopening.lgf logic script for manual journal entries from the previous year (see Appendix 5)

Manual Journal Entries and the F99 closing flow

Because the impact on the closing balance is automatically calculated, the closing flow (flow F99) should not be booked in manual journal entries.

Reminder: Opening Data in Input forms

A different logic applies to data input in forms since the closing balance is not calculated. Instead it is used to calculate the variation flow (F15) as described in § 1.3.1.2 page 7 in this context.

4.1.3. Balanced Entries

In the consolidation, manual and automatic journal entries are booked by ENTITY according to a contributive approach, not in adjustment or elimination entities. This is because it must be possible to retrieve the net contribution to the group consolidated figures by entity. This principle also facilitates the audit trail since the origin entity of the elimination is identified.

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• Manual and automatic journal entries must be balanced by Entity and Audit ID.

• Elimination accounts are created in the Balance Sheet and the Income Statement. They are used as off-setting accounts to balance elimination postings by entity. Automatic journal entries will populate these elimination accounts as defined in the elimination and adjustment rules. It is also possible to use these elimination accounts for manual entries.

4.1.4. Using the Breakdown by Partner

The accounts for which intercompany values are possible (property ISINTERCO = Y) are used as follow:

• Company data is reported globally (Interco = I_NONE) and broken down by partner in dedicated input forms

• Elimination entries are booked both by partner and globally (Interco = I_NONE). This is done by using the ‘Force intco member’ option in theelimination and adjustments rules As a consequence the detail of eliminations by partner is available for audit trail purposes. This logic is illustrated in the table below.

Automatic adjustment rules are based on Method-based Mulipliers rules in which the

Interco method, in addition to the entity method is checked.

As a consequence, no elimination will occur when the INTERCO member corresponds to a non-consolidated entity.

Intercompany accounts are collected by Group partner so that it is possible to test the consolidation perimeter status of the partner in the elimination rules to trigger the elimination accordingly. The breakdown by partner is maintained in elimination entries for audit trail purposes, since it is then possible to explain the total amount eliminated.

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Elimination by partner and on the grand total

Account total

-Input data- Ent 1 Revenues F99 I_NONE INPUT 50 Partner breakdown (1)

-Input data- Ent 1 Revenues F99 I_Ent 2 INPUT 40 Partner breakdown 2

-Input data- Ent 1 Revenues F99 I_Ent 3 INPUT 10

… …

Elimination by partner Ent 1 Revenues F99 I_Ent2 ELIM10 -40

Elimination by partner Ent 1 Revenues F99 I_Ent3 ELIM10 -10

Total Elimination

Ent 1 Revenues F99 I_NONE ELIM10 -50

Comment ENTITY ACCOUNT FLOW INTERCO AUDIT ID … Amount

4.1.5. Analysis of Changes from Local to Consolidated Value

The preparation and validation of consolidated figures, including analysis of changes from local to consolidated values, is facilitated thanks to a business classification of all consolidation steps and calculations (manual entries, apportionments, automatic eliminations…).

A dedicated audit-type dimension called audit ID is defined to classify data from local to consolidated figures. This dimension is defined with a hierarchy in order to distinguish the different main transformation steps of amounts in the consolidation process and to retrieve these steps in reports.

4.1.6. Leveraging the Built-in Scope Change Calculation

Effect of perimeter changes on consolidated statements must be disclosed on specific flows depending on the type of the scope change (incoming, rate or method change,…).

For Balance Sheet accounts, Elimination and Adjustment Rules based on the current perimeter rates (financial interest rate and consolidation rate) apply not only to movement flows but also to the opening balance F00. This is because the consolidation engine is able to automatically identify and calculate the effect due to changes in the perimeter by the difference between the carry forward of the automatic entry from the prior year-end period on the one hand, and the newly calculated automatic entry elimination for the opening balance F00 on the other hand.

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Example:

December, Prior Year

Current Time Period

POWN 0.8 0.9 Audit IDs … F99-Closing F00-Opening Scope variation* F99-Closing

INPUT – Input data … 100 100 100

AJ_xxx – Automatic adjustment based on POWN … 80 80 10 90

* The scope variation flow member populated by the consolidation engine depends on the status of the entity and/or the partner (Interco) in the consolidation perimeter: incoming, leaving, change in consolidation rate or change in consolidation method.

4.2. Manual Journal Entries

Several elimination entries or consolidation entries are booked via manual journal entries in the starter kit: elimination of internal provisions, elimination of internal gain / loss on disposal of assets, reclassification of the incoming position of Other Comprehensive Income components in retained earnings for incoming entities.

Moreover it is possible to adjust the automatic entries with manual journal entries if needed.

Manual Journal Entry Audit IDs

Manual journal entries can be manually booked using predefined audit IDs with property DATASRC_TYPE = M. Some audit IDs have been created to allow the consolidation manager to book entries which are not automated in the starter kit. Other audit IDs are also available to complement automatic entries. For instance, the manual journal entry-type audit IDs DIV11 and DIV21 are available in addition to the automatic audit IDs DIV10 and DIV20.

Manual Journal Entry Related Calculations

The journal.lgf script logic calculates the following possible impacts related to manual journal entries:

− BS flows carry over to the F99-Closing balance flow

− Carry over of the P&L impact to the retained earnings (F10) The Journal.lgf script is described in § 4 page 58.

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Account Total and Interco Breakdown in Manual Journal Entries

If a manual journal entry should impact both the account total and one or several group partners, one journal row must be defined to record the impact on I_NONE in addition to the journal row(s) recording the impact on the group partner(s).

Account Property for the Elimination of Provisions

The PROV-xx values have been created for the TYPELIM property and assigned to the appropriate accounts to facilitate the setup of additional rules for the elimination of internal provisions. However, these rules are not implemented in the current release of the starter kit.

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4.3. Automatic Entries

4.3.1. Reciprocal Account Eliminations

Intercompany Accounts

Within the chart of accounts, only some accounts are open for recording intercompany transactions. However, these accounts are not dedicated solely to intercompany operations, transactions with third parties may also be recorded.

Several groups of reciprocal accounts are defined. In the Balance Sheet:

− Receivables and payables, non-current − Financial assets and liabilities, non-current − Receivables and payables, current

− Financial assets and liabilities, current In the Income Statement:

− Gross profit (Revenues / Cost of sales)

− Operating profit (Other income / Other operating expenses) − Financial result (Interests and other financial income/expenses)

Eliminations

The following automatic intercompany eliminations are defined: − Revenues / Cost of sales

− Other income / Other expenses − Finance income / Finance expenses − Trade & other receivables / payables − Non-current receivables / payables − Financial assets / liabilities

Intercompany reciprocal accounts are eliminated against dedicated elimination accounts (clearing accounts). As a consequence, these elimination accounts show the intercompany mismatch at group level.

Intercompany amounts are eliminated between entities consolidated using full or proportional methods, weighted with the lowest consolidation rate between both companies.

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Intercompany Accounts

To facilitate the maintenance of the chart of accounts and business rules, intercompany eliminations are defined using the following account dimension properties:

− ISINTERCO: property used to show in input forms that one account can be used in

the intercompany input form. This “IC” indicator is displayed in the Balance input form for P&L accounts, and in the flow analysis input forms for B/S accounts. − TYPELIM: property used to select accounts in the consolidation rules

Example: The accounts “Revenues” and “Cost of sales” have the property TYPELIM = S_ICIS

− ELIMACC: property used to define the respective elimination account to be

populated as counterpart of the journal entry (see 4.1.3).

Example: The account “P119CL” is defined in the property ELIMACC for the accounts “Revenues” and “Cost of sales”

The elimination accounts are part of the account hierarchy and consequently included in consolidated statements.

− At group level, elimination accounts show the intercompany differences, resulting from a mismatch in the intercompany amount reported by entities

− At entity level, elimination accounts balance the elimination postings

Business Rules

Intercompany eliminations are performed using the Consolidation Monitor, which triggers the Eliminations and Adjustments rules combined with the Method-based Multipliers. For intercompany eliminations, several Method-based Multipliers are defined:

− BA1_BA1_M1: consolidation methods for the ENTITY and INTERCO dimensions are: Holding (111), Full (100), Proportional (50), Leaving companies (888, 850), and Merged companies (777, 750)

− BA1_SM1_M1 and SM1_BA1_M1: rules defining when the company or the interco is merged

− BA1_SD1_M1 and SD1_BA1_M1: rules defining when the company or the interco is leaving

These consolidation rules are defined with consolidation formula which refers to the lowest rate between the entity’s consolidation rate and the partner’s consolidation rate at closing. Explanations regarding the naming convention of the Method-based multipliers are available in appendix (see C.8 - Naming Convention for Method-based Multipliers for Consolidation Rules)

The ICELIM Eliminations and Adjustment rule records intercompany eliminations on the audit ID ELIM10.

The corresponding processing rows of the ICELIM Elimination and Adjustment rules define

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Source account Source flow Destination flow Rule Id Applies to

S_ICBS All flow included in END

Same as the source flow

BA1_BA1_M1 Full and proportional methods

S_ICBS F99-Closing F98-Outgoing units

BA1_SD1_M1 and SD1_BA1_M1

Divested companies

S_ICBS F99-Closing F70-Internal mergers

BA1_SM1_M1 and SM1_BA1_M1

Merged companies

S_ICIS PL99 BA1_BA1_M1 IS

Formula for the Lowest Consolidation Rate

The formula used in the starter kit for returning the lowest consolidation rate between the Entity and the Intercompany defined in the consolidation perimeter is MIN(PCON,I_PCON) .

Automatic Interco Elimination: Example for Trade Receivables and Payables1

SELLER Company (S)

A2210 Trade receivables (Assets) L239CL Elimination account Interco B 130 Interco B 130 Interco B 130

BUYER Company (B)

BUYER

L2310 Current trade payables (Liabilities) L239CL Elimination account

Interco S 120 Interco S 120 Interco S 120

Input amounts

Elimination at the seller Elimination at the buyer

1

To keep the example easy to understand, only the journal entry by group partner is shown ( and ). As explained in A.4.1.4, the automatic journal entry is also posted against the I_NONE member.

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4.3.2. Elimination of Dividends

Dividends paid and received are automatically eliminated based on the payer’s declaration. The elimination journal entry is posted in the receiver’s accounts (P&L and equity).

The impact on reserves / net income is shared between the group and non-controlling interests, based on the ownership rate of the receiver company.

In case of differences (for instance due to exchange rates), an automatic journal entry reclassifies this difference to flow F80 of the receiver’s equity (account E1610-Retained earnings).

A manual adjustment journal entry can be posted if the difference is other than an exchange rate difference (if for instance declarations from the payer and the receiver do not match).

Dividends are eliminated based on the detail reported by the paying company. An additional detail, however, is collected in the receiver’s package to allow reconciliation of dividends.

In the equity, dividends paid can be reported by the subsidiary on accounts Share premium and Retained Earnings (with no partner detail) on flow F06-Dividends. An additional input by partner is required on a single statistical account – XE1610 - on flow F06.

The impact in group reserves or non-controlling reserves (accounts E1610 and E2010 respectively) is recorded by the DIV Elimination and adjustment Rule. The net result impact is therefore also posted in the Income Statement (P2140). Since the income of the period and the retained earnings are recorded on the same account (E1610), the elimination of dividends results in a reclassification from flow F06-Dividends to F10-Net Profit of the period.

Foreign Currency Conversion

On the payer’s side, the flow F06 is converted using the dedicated rate type, DIVR (see

Rate dimension in the RATES model). This rate can be populated in the rate table, and should be equal to the payer’s currency exchange rate at the date when the dividend was agreed by at the annual general meeting.

Using this rate will make the reconciliation of dividends paid/received easier, especially when the receiver’s reporting currency is the same as the consolidation currency.

Dedicated audit IDs, DIV20 (auto) and DIV21 (manual journal entry), have been created to post any possible conversion difference. The DIV20 audit ID is automatically populated at the receivers by the DIVCTA Elimination and Adjustment rule. The posted difference is calculated by using both the receiver’s and the payer’s converted declarations and using the “Swap entity-Intco” option for the payer so that the amount is populated at the receivers as well.

Dividends Paid by an Incoming Entity

Dividends paid by an incoming entity are reclassified from the dividend impact to the scope change effect in order to provide the consolidation manager with an accurate value of the incoming equity.

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In order to reclassify dividends paid by incoming entities during the consolidation process, the following Elimination and Adjustment Rules have been created:

− FVA10: in case of incoming payers, this rule reclassifies the total dividend distribution impact reported on flow F06 onto flow F01. The counterpart on the asset side is the account A2610–Cash on hand, whose movements are reclassified from F15 to F01. Consequently the incoming flow F01 remains balanced.

In order to select data only from incoming entities, the Ownership filter column is used to test that the prior period consolidation rate equals 0 (PPCON = 0). Moreover only the account total is selected so that the reclassification is not performed for the breakdown by group intercompany (INTERCO = I_NONE).

− DIV_INCP: in case of incoming payers, this rule reclassifies the dividend elimination that the DIV rule triggers by default for all payers on flow F06 onto flow F01, whatever the scope status. The destination audit ID is therefore the same as with the DIV rule, namely DIV10. In order to select data only from incoming entities, the Ownership filter column is used to test that the prior period consolidation rate equals 0 (PPCON = 0).

4.3.3. Elimination of Investments

The internal investments are automatically eliminated against equity during the consolidation.

The starter kit supports the automatic calculation of non-controlling interests in the investments when the owner entity is not 100% owned by the group.

Investments in consolidated subsidiaries, joint ventures or associates are collected and detailed by owned entities, using the Interco dimension.

The automatic elimination of group investments is triggered by the INV Elimination and Adjustment Rule. It is posted on a dedicated audit ID, INV10- Elimination of investments.

Distinguishing the Impact on Flows by Operation Type

− The case of purchase or disposal of investments is dealt with specifically by selecting F20 and F30 respectively and defining F00 as the destination flow. As a consequence, F01, F92 or F98 is impacted depending on whether the held entity enters the scope, remains in the scope or leaves the scope

− For other flows the destination is identical to the source (F40, F50, F70, F15)

− Processing rows are also defined on the opening flow F00 in order to calculate possible changes in the consolidation rates or financial interest rates (cf. 4.1.6 page 23).

Balanced Entries at Both the Owner Company and the Held Company

The elimination journal entry impacts both the owner and the held companies:

− Owner company (parent): the investment values are eliminated against the elimination account A181OC (owner company) at the consolidation rate (PCON).

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− Held company (subsidiary): the rule for elimination of investments triggers an entry on the group retained earnings against the elimination account A181HC (held company). In case there are indirect non-controlling interests in the owner company, the impact on the retained earnings is split between group and non-controlling interest, based on the group’s share of the owner, and therefore calculated respectively with the POWN and PCON-POWN formula used in the AY_AY_E2 Method-based Multipliers.

Automatic Elimination of Investments

Owner Company (O)

(owned at 80% by the group)

A1810 Investment in subs., JV & Assoc. A1810C Elim of investments - Owner comp

Flow=F20 Flow=F20

Interco H 100 100 Interco H 100

Held Company (H)

(incoming, owned at 100% by O) E1610 Retained earnings (Group)

Flow=F01

Interco O 80

A181HC Elim of investment - Held comp (shares)

Flow=F01

E2010 NCI - Reserves & Ret. earnings Interco O 100

Flow=F01

Interco O 20

Input amounts

Elimination of the H investment at O

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4.3.4. Goodwill Recognition

Goodwill values are declared centrally via a one-sided journal entry posted on an off-balance account at the held company.

Based on this information, an automatic journal entry impacts the goodwill (assets) against the equity. If needed, the impact on the equity is split between the group and non-controlling interests based on the group’s share in the owner company.

It is possible to apply the full goodwill method.

In the event of a bargain purchase, the off-balance journal entry triggers an automatic posting of the gain to the P&L.

Goodwill Conversion

In accordance with IFRS, the goodwill is accounted for using the held company’s currency. Due to this principle, the value of the goodwill may vary over time for subsidiaries reporting in a foreign currency. This variation of the goodwill’s converted value, however, should never impact the retained earnings but the foreign currency translation reserve.

Using Off-Balance Accounts

Goodwill (or bargain purchase) is declared by a manual journal entry posted on one of the following accounts:

− XA1300 - Declared bargain purchase analyzed by owner − XA1300NCI - Declared bargain purchase attributable to NCI − XA1310 - Declared Goodwill analyzed by owner (Gross) − XA1310NCI - Declared goodwill attributable to NCI, Gross

− XA1312- Declared Goodwill analyzed by owner (Impairment) − XA1312NCI - Declared goodwill attributable to NCI, Impair.

This single-sided journal entry is posted on a dedicated audit ID, GW01-Disclosure of goodwill and bargain purchase – Man.

Owner and held company are identified as follows:

o The off-balance journal entry is posted in the account of the held company, identified by the Entity dimension

o The intercompany detail provided using the Interco dimension corresponds to the owner company

The journal entry must be booked in local currency, LC.

When applying the full goodwill method, a journal entry should be posted on one of the 3 accounts with the “NCI” suffix listed above in order to book the share of bargain purchase, gross goodwill, or goodwill impairment attributable to the non-controlling interests.

Automatic Journal Entries

Based on the information entered in the technical accounts, automatic journal entries are posted at the held company using the GW10 and FGW10 audit IDs. Two types of Elimination and adjustment Rules are triggered for one consolidation event:

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• GW: Goodwill booking – Owner company’s share

This is the common case for subsidiaries consolidated using the full or proportionate method. The goodwill is booked on the account A1310-Goodwill against the account E1610-Retained earnings. If there are non-controlling interests in the owner company, the impact on the equity is shared between group (account: E1610) and non-controlling interests (account: E2010).

Some of the processing rows handle the case of entities consolidated with the equity method. In that case, the goodwill is not posted to the account A1310-Goodwill, but to the account A1500-Investments accounted for using equity method.

The Method-based Multipliers used in the goodwill adjustment rules refer to the closing consolidation rates of the Interco company (I_PCON and I_POWN formula) which represents the owner company in this case, in accordance with the requirements.

• FGW: Goodwill booking – Non-controlling interests (full goodwill method)

This automatic entry is triggered if you have declared goodwill in the XA1310NCI account with a breakdown by Interco (owner company). It impacts the goodwill (account: A1310) against the non-controlling interests (account: E2010).

The Method-based Multipliers used in the full goodwill adjustment rules simply apply factor 1 to the selected amount since the amount declared in the journal entry is fully attributable to the non-controlling interests in this case.

Goodwill Conversion

To comply with the requirement regarding goodwill conversion, the GWCTA and FGWCTA Elimination and Adjustment Rules book the currency translation adjustment by selecting the F80-Currency translation adjustment flow of the off-balance accounts XA1310, XA1310NCI, XA1312, and XA1312NCI. Note that the amounts stored on these accounts are recorded in the held company’s currency, so the flow F80 is automatically posted by the conversion rules.

Two dedicated audit IDs, GW20-Currency translation adjust. on goodwill – Auto and FGW20

-Currency translation adjust. on NCI goodwill -Auto have been created for the purpose of

handling goodwill conversion.

Bargain Purchase

If a business combination causes a bargain purchase, the dedicated account XA1300-Declared bargain purchase analyzed by owner must be used to declare the corresponding gain.

The automatic journal entry impacts the P&L on account P1640-Gain on bargain purchase or P3000-Share of profit (loss) of assoc. & JV in case the held company is consolidated using the equity method.

It is possible to check that the F01-Incoming units flow balances for this entry, by retrieving the A139CL-Clearing account-Bargain purchase account (flow F25 balances flow F01).

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Goodwill Recognition

Held Company (H) Owner entity O is owned at 80% by the group

(owned by O)

Held entity H is owned at less than 100% by the group: the full goodwill method can therefore be applied

XA1310 Declared GW XA1310NCI Declared GW attrib. NCI

Flow = F01 Flow = F01

Interco O 100 Interco O 50

A1310 Goodwill E1610 Retained earnings

Flow = F01 Flow = F01

100 80

50

E2010 NCI - Reserves & Ret. Earnings

Flow = F01

20 50

Amounts from manual entries on the off-balance accounts Automatic journal entry, including split group/NCI

Automatic journal entry, goodwill attributable to NCI

4.3.5. Consolidated Equity Calculation

The equity of consolidated companies are split between the group and non-controlling interests according to the following principle:

• The accounts E1110-Issued capital and E1210-Share premium are transferred to the group retained earnings and retained earnings of non-controlling interests for any entity except the parent company of the group

• For other equity accounts, the group share is maintained on the original account, and the non-controlling interest share is calculated on the related non-controlling interests account.

The relationship between source equity accounts and non-controlling interests equity accounts is summarized in the table below:

PC100NW IFRS Configuration

SAP® BUSINESSOBJECTS™ PLANNING AND

CONSOLIDATION 10.0,

VERSION FOR SAP NETWEAVER

STARTER KIT FOR IFRS SP1

Contents

Introduction

1.

Document Objective

2.

Legend

A.

Design Principles by Business

Requirement

1.

General Reporting Principles

1.1.

Reporting Cycle

1.2.

Accounting Principles

1.3.

Reporting Indicators

1.4.

Sign Convention

2.

Segment Reporting

3.

Consolidation Principles

3.1.

Foreign Currency Conversion

3.2.

Consolidation Type

3.3.

Consolidation Methods and Rates

3.4.

Perimeter Changes

4.

Journal Entries

4.1.

Best Practices

4.2.

Manual Journal Entries

4.3.

Automatic Entries