There is an old saying that “All that I make is hers, and all that she makes is hers”. If you want to maintain financial harmony in the household, this isn’t a bad way to run your consolidated household budget.
Consolidated Financial Statements
Things get a bit a more complicated when you are trying to prepare consolidated financial statements for a business entity that has both subsidiary and affiliate business entities. It gets really interesting when you’re dealing with a corporation that has thousands of entities of both flavors. Depending on whether you are using the equity method or the purchase method, all that they make may or may not belong the corporate parent. There are, of course, well defined GAAP. IFRS and other rules and standards that govern the rules for Equity Accounting.
Fixing Financial Differences
Experience shows that when you have large numbers of business entities to consolidate, you can spend considerable amounts of time ‘fixing’ financial differences. The SAP Financial Consolidation using SAP SEM BCS (Business Consolidation) solution does a great job with all the steps in the financial consolidation process. The problems, should they occur, frequently appear upstream, and your SAP BW based consolidated chart of accounts (COA), will be one of the places you see these problems, though not necessarily where you fix them.
Want to know what my own ‘Best Practice’ recommendation is to reduce or eliminate these data problems:
- Implement a SAP BW Naming Convention at the Corporate Parent Level
- For non-SAP source systems, define a naming convention and map it to your BW naming convention.
- When detected, data issues must be addressed at the source.
- Flat file data should be brought in using ASC II (Per SAP recommendation and validated experience)
- Pay close attention to highly variable exchange rates and the related time periods when doing eliminations.
- Assume special characters are present in any multinational enterprise and make sure you account for them in the BW system.
- As you work your way through the implementation and execution of the SEM BCS system, you will need to have the name and contact of the business process owner that is generating the data, not just the financial counterpart in any of the entities.
This can become very complex and naturally adds to the number of communication channels. How many channels does your project have. You can use this free Project Communication Channels to find out.
It is imperative that you set up your implementation team to cope with the many communication channels prior to starting your first consolidation. - When running eliminations, unless you are an exception to the rule, the system will generate a large number of error messages.
These are not to be ignored!
You must work each one until it disappears, and I can’t stress this enough, do a screen shot of each error, and what you did to fix it, and keep it in a document in the order you corrected them. You may never need them, but it turns out, both the content and the sequence are useful in diagnosing problems you may encounter. Again, do not ignore system generated errors..
As SAP now also has SAP BPC (with about 4000 BPC customers globally) and is constantly updating the system, another question that I frequently come across is how BPC functions can be migrated from BPC 7 to BPC 10. There is a built in function for this. With regards to running Business Consolidations, again, my advice is never to ignore the system errors. Those little differences that show up can mean any number of issues exist, not the least of which are issues that affect people’s bonus calculations!
In case you are not totally conversant with all BPC formulas, you can download a quick guide to them here.
Do you have any special advice you think people should have when doing SAP financial consolidations? Please leave us a comment and let the world know.
