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.
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.
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:
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.