AX2012 ENUS FINII 08

Chapter 8: Consolidations CHAPTER 8: CONSOLIDATIONS Objectives The objectives are: • Set up a consolidation company • Set up a subsidiary company • Perform a consolidation • View the consolidations inquiry • View and delete consolidation transactions • Describe intercompany eliminations Introduction This course demonstrates the functionality and flexibility of Microsoft Dynamics AX® in consolidating subsidiary companies into a single consolidated (parent) company Some key features include the ability to: • Consolidate companies whether they reside in the same database or in different databases • Map the Chart of Accounts and dimensions in a subsidiary to the consolidated company • Specify how the exchange rate should calculate for the consolidation • Designate the percentage of ownership that should roll into the consolidated company from the subsidiary Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-1 Financials II in Microsoft Dynamics® AX 2012 Set Up a Consolidation Company In Microsoft Dynamics AX, a consolidation (parent) company is set up to accumulate the activity from the subsidiaries Follow these steps to set up the consolidation company: Set up General ledger parameters Set up a system account Set up currency and exchange rates Set up the Chart of Accounts Overview In a consolidation, it is possible to gather transactions from several company accounts into a single set of company accounts It is possible to print reports, such as financial statements, from the consolidated company, but it is not possible to use this company for daily transactions It is possible to consolidate data from companies with databases that are external to the consolidated company database, or consolidate data from companies in the same database, a so-called "online" consolidation General Considerations Consolidations not necessarily require that you set up the consolidated company in advance But if you want to use the consolidation conversion principles to convert subsidiary data in foreign currencies, you must set up the consolidated company main accounts Procedure: Set Up Company Information and Accounts To prepare a consolidated company (the company that collects the results and balances of the subsidiaries) for a consolidation, perform at minimum the following steps: Click Organization administration, click Setup, click Organization, and click Legal entities Click the New button to create a new company to serve as the consolidation company Click the Use for financial consolidation process check box to define that this legal entity’s ledger combines the financial data of subsidiary legal entities Enter information about the consolidated company as you want it to appear on financial statements about the consolidated company Click General ledger, click Setup, click Currency, and then click Currencies Create the default currency of the consolidation company 8-2 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Click General ledger, click Setup, and then click Ledger Select the company currency of the consolidated company Click General ledger, click Setup, click Chart of accounts, and then click Chart of accounts Set up the main accounts of the consolidated company, if appropriate FIGURE 8.1 LEGAL ENTITIES Foreign Currency Consideration If some subsidiaries have foreign currencies as their company currencies, click General ledger, click Setup, click Currency, and then click Currencies and then create the foreign currencies Set up exchange rates in relevant periods for the subsidiary company currencies If you create the consolidated company early in the period, you can adjust the period exchange rates as the exchange rates change during the consolidation period Procedure: Set Up Automatic Posting Follow these steps to set up a system account to automatically post differences that result from consolidating subsidiaries with foreign currencies Click General ledger, click Setup, click Posting, and then click Accounts for automatic transactions Click the New button to add a line Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-3 Financials II in Microsoft Dynamics® AX 2012 In the Posting type field use the arrow to select one of the following: o Balance account for consolidation differences if you are consolidating an integrated foreign subsidiary o Profit & loss account for consolidation differences if you are consolidating a self-sustaining subsidiary or a company that contains the results of several self-sustaining subsidiaries and are using translation methods to consolidate the data Use the Ledger account arrow to select the appropriate account FIGURE 8.2 ACCOUNTS FOR AUTOMATIC TRANSACTION Set Up a Main Account and Consolidation Account Relationship Use a main account and associate a consolidated legal entity account for transactions This account is used when transactions or balances of the selected main account are added during consolidation To set the consolidated account relationship, click General ledger, click Setup, click Main Accounts, and then enter an account in the Consolidation account field 8-4 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Lab 8.1 - Set Up a Consolidation Company During this lab you will set up consolidation company information Scenario Contoso is expanding and has acquired an additional company To include the activity from both Contoso Entertainment USA (CEU) and the newly acquired subsidiary of Contoso Entertainment Europe (CEE), a new company called Contoso Entertainment Systems (CEC) has been created Sara, the Chief Financial Officer, sends Ken, the Controller, an e-mail with the following information to continue with the setup of CEC • Any differences from the consolidation should post to profit and loss account 618160 • The consolidation rate should use today's date and a rate of 149.25 • The consolidated company will use U.S dollars (USD) as the default currency, and the newly acquired subsidiary uses euros (EUR) as their currency Challenge Yourself! Help Ken complete Sara's request Need a Little Help? • Review the organization information for the consolidation company • Designate the main account in the consolidation company • Set up the consolidation exchange rate in the consolidation company • Designate that account 618160 will be used for consolidation purposes Step by Step Follow these steps to review the general ledger parameter Verify that you are in the CEC company If not, change to the CEC company Click Organization Administration, click Setup, click Organization, and click Legal entities Ensure that the Use for financial consolidation process check box is selected Close the form Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-5 Financials II in Microsoft Dynamics® AX 2012 Follow these steps to designate the system account Click General ledger, click Setup, click Posting, and then click Accounts for automatic transactions Click the New button to add a line Click the Posting Type arrow, and then click Profit and loss account for consolidation differences In the Main account field, click the arrow to select 618160 Close the form Follow these steps to define the consolidation exchange rates Click General ledger, click Setup, select Currency, and then click Currency exchange rates Use the drop down list and select CEC as the rate type Select the line for the EUR, Euro Click the Add button, click on the calendar, and then click the Today button In the Exchange rate field, enter 149.25 Close the form 8-6 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Set Up a Subsidiary Company After you complete the setup process in the consolidated company, you can focus on the subsidiary company The amount of setup needed in a subsidiary depends on how closely the Chart of Accounts and dimensions for the consolidated company and subsidiary are aligned Use the Same Chart of Accounts as Consolidated Entity If the subsidiary ledger accounts have the same account numbers and chart of account structure as the consolidated company ledger accounts, you not have to manually map the subsidiary main accounts to consolidated company accounts In the Consolidate Online form of the consolidated company, select the Use consolidation account check box before consolidation The transfer of transactions and balances to the correct account occurs automatically during consolidation If the account numbers not correspond during the consolidation process, the process will stop and the system generates an error message Blank Chart of Accounts You can perform a consolidation without creating a consolidated company chart of accounts in advance • If you have planned the structure that you want to use in the consolidated company, you can map the subsidiary accounts to this structure; when you perform the consolidation, the consolidated accounts that you indicated in the Consolidation account field are created automatically during consolidation • If you make no mappings on subsidiary accounts, the consolidated company accounts are created automatically when subsidiary data is transferred to the consolidated company Subsequent data, for example, from the second company being consolidated, is accumulated in consolidated company accounts with the same account number as the subsidiary account Regardless of whether you have done mapping or not, clear the Use consolidation account: check box in the Consolidate form of the consolidated company before running this type of consolidation Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-7 Financials II in Microsoft Dynamics® AX 2012 Mapping Subsidiary and Consolidated Chart of Accounts If the subsidiary chart of accounts does not follow the chart of accounts of the consolidated company, you can map the subsidiary accounts to the consolidated company accounts In the subsidiary company, click General ledger, click Common, and then click Main account Select each subsidiary ledger account that will be transferred to the consolidated company On the General FastTab, in the Consolidation account field, enter the account in the consolidated company to which the balance or transactions of the selected subsidiary ledger account will be transferred If the chart of accounts in the consolidated company is simpler than the subsidiary account structure, enter the same consolidated company ledger account on several subsidiary accounts To prepare reports and financial statements that are based on dimensions in the consolidated company, map the dimensions that are used in subsidiary accounts to consolidated company dimensions NOTE: If the Account types of the subsidiary accounts that are transferring differ from the consolidated company, the values of transaction accounts override the values of total and parent accounts during consolidation Dimensions If you are planning to prepare reports and financial statements using dimensions in the consolidated company, map the dimensions used in the subsidiary to the consolidated company dimensions During consolidation, balances and transactions transfer from the subsidiary company to the consolidated company, according to assigned dimensions For this transfer to occur, you must select the value Group dimensions in the Specifications field on the Financial dimensions tab in the Consolidation, Export, and Consolidation, Online forms, in which subsidiary accounts are added to the consolidated company To simplify the dimension structure of the consolidated company, the same consolidated company dimension must be assigned to several subsidiary dimensions 8-8 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Procedure: Set Up Dimensions Follow these steps to map a dimension in the subsidiary to the consolidated company Click General ledger, click Financial dimensions, then Financial dimensions Select a Dimension name, and then click the Financial dimension button In the Group dimension field on the General FastTab, enter the dimension Perform a Consolidation Microsoft Dynamics AX supports the following options to perform consolidations: • From the same database using the online option • From and, or to another database using the Import/Export option NOTE: Before you perform a consolidation at the close of a period, ensure that the period closing preparatory activities are performed, but not close the subsidiary accounts until the consolidation is completed Procedure: Consolidation, Online An online consolidation is a consolidation where the subsidiary companies are within the same database as the consolidated company If there are previous consolidation transactions for the company, date , and account range, the transactions will be removed and consolidated again Click General ledger, click Periodic, click Consolidate, and then click Consolidate [Online] In the Consolidate [Online] form, prepare the transfer of subsidiary data to the consolidated company Specify the details of the consolidation in the fields on the Criteria tab If the same criteria apply, you can transfer data from several subsidiaries to the consolidated company in one operation Click the Financial dimensions tab and specify the dimension information that is transferred from subsidiary account transactions to the transactions in the consolidated company Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-9 Financials II in Microsoft Dynamics® AX 2012 Click the Legal Entities tab, and create a line for each subsidiary company whose data are to be imported into the consolidated company On the line for each subsidiary: o If the consolidate company owns part of a subsidiary, indicate the share of the subsidiary accounts that is imported o If you are consolidating foreign currency subsidiaries, in the Account type of conversion differences field, specify whether consolidation exchange differences are posted to a Balance account or to a Profit & loss account in the consolidated company Click Batch to set up the consolidation to run as a batch job at the time you prefer, or click OK to run the consolidation immediately The transactions and balances that were specified for consolidation in the subsidiaries are added to the appropriate consolidated company accounts FIGURE 8.3 CONSOLIDATE ONLINE FORM 8-10 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Financials II in Microsoft Dynamics® AX 2012 11 12 13 14 15 16 17 18 8-14 Click the Description tab In the Description field, enter Initial Consolidation Click OK to process the consolidation Click General ledger, click Common, and then click Main accounts Click on the Main account 110110 Click Balance Note the balance Switch to the CEU company and repeat steps 14 through 17 Notice that the balance for the account in each company Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Consolidations Inquiry After performing a consolidation, it may be necessary to review the entries that are created Microsoft Dynamics AX has functionality to facilitate the review of the consolidation entries To review, click General ledger, click Inquiries, and then click Consolidations FIGURE 8.4 CONSOLIDATIONS INQUIRY The Overview tab provides a list of all the entries created through the consolidation process In addition to the information on the Overview tab, the General tab displays the time that the entry was created and the user ID of the person who created the entry The Transactions button has options of Actual or Budget This enables the display of the consolidation entries that are created Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-15 Financials II in Microsoft Dynamics® AX 2012 View and Delete Consolidation Transactions There may be times when it is necessary to remove consolidation transactions For example, a data entry error might be made when a user sets up the consolidation process Microsoft Dynamics AX has functionality to simplify the deletion of consolidation entries Procedure: Remove Consolidation Transactions Follow these steps to remove consolidation transactions Click General ledger, click Inquiries, and then click Consolidations Click the line for the transactions to remove Click Remove transactions A confirmation form opens Click OK to delete the transactions Intercompany Eliminations Elimination transactions are required when a parent company conducts business with one or more subsidiary companies and uses consolidated financial reporting Some transactions that occur between the companies must be eliminated because consolidated financial statements must only include transactions that occur between the consolidated entity and the other entities outside the consolidated group Because of this requirement, transactions between a parent company and its subsidiary companies must be removed or eliminated Predefined elimination rules create elimination transactions in a company specified as the destination company for eliminations You can generate the elimination journals during the consolidations process or by using an elimination journal proposal Scenario Phyllis, the Accounting Manager, is responsible for the period and fiscal year closing for Contoso and its subsidiary During the fiscal year, Contoso paid the payroll of its subsidiary During the fiscal year closing, Phyllis must eliminate the amounts in the associated payroll accounts 8-16 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Types of Companies Refer to the following table for descriptions of the types of companies that are associated with intercompany eliminations Term Description Consolidation Company A company created to report financial results for a group of companies The financial data from the companies is consolidated into this company, and then a financial report is created by using the combined data Elimination Company An elimination journal is valid only in companies that are designated as elimination companies A company can be both an elimination company and a consolidation company Source Company The company in which the amounts to eliminate reside Destination Company The company in which the elimination journal is created and posted Procedure: Set Up a Company for Elimination Transactions Follow these steps to allow elimination transactions to be created in the ledger of the legal entity Click Organization administration, click Setup, click Organization, and then click Legal entities Mark the Use for financial elimination process box Procedure: Create a Ledger Elimination Rule - Overview Elimination rules are the setup portion of creating system-generated elimination transactions, defining how to eliminate transactions between a parent company and a subsidiary company An elimination rule is stored based on each company and must be unique NOTE: You can set up elimination rules in any company, but you can process them only in an elimination company Follow these steps to create a ledger elimination rule Click General ledger, click Setup, click Posting, and then click Ledger elimination rule Click the New button to create a new rule Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-17 Financials II in Microsoft Dynamics® AX 2012 In the Rule field, enter a unique identification for the elimination rule This may default from the number sequence settings Enter a Description Select a Destination company, which is the company where the elimination journal will be created The Elimination option must be selected in the Legal entities form for the destination company NOTE: The currencies of the destination and source companies must be the same Enter or select the beginning date as the Effective start date Enter or select the ending date as the Effective end date Select the Active check box to indicate whether the elimination rule is available for processing In the Date last run field, view when the elimination rule last was last processed successfully 10 In the Journal settings section, select a journal Name with the type of elimination FIGURE 8.5 LEDGER ELIMINATION RULE FORM 8-18 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Procedure: Create a Ledger Elimination Rule - Lines Follow these steps to enter additional information, such as the elimination method, source and destination accounts, and dimension information, about the elimination rule From the Ledger elimination rule form, click the Lines button Click the New button From the drop-down list, select an Elimination method o Net change: eliminates an account's net change for a specified date range This is the most common elimination method o Fixed amount: eliminates a specified amount for an account With this method, a manual process determines the fixed amount to eliminate for an account FIGURE 8.6 LEDGER ELIMINATION RULE LINE FORM Procedure: Create a Ledger Elimination Rule - Lines with Net Change If the selected Elimination method is Net change, follow these steps to complete the ledger elimination rule line setup In the Source account field, enter the account that the amount will be eliminated from The source account is used together with the optional source dimensions to calculate the amount to eliminate In the Destination account field, select from the drop-down list: o Source: The respective account field will be disabled o User specified: Enter an account Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-19 Financials II in Microsoft Dynamics® AX 2012 If you select User specified, enter an Account In the Destination dimension field, select from the drop-down list: o Source: The respective dimension field will be disabled o User specified: Enter zero or one dimension codes for every dimension Select the Source dimensions, if desired, that the amount will be eliminated from In the Dimension fields, select dimensions that transactions will post to for the elimination rule HINT: You can use wildcard characters in the source account and source dimension fields Procedure: Create a Ledger Elimination Rule - Lines with Fixed Amounts If the selected elimination method is Fixed amount, follow these steps to complete the ledger elimination rule line setup The Destination account displays User specified Select the Account that the transaction will post to The destination dimensions displays User specified Enter an Amount In the Dimension fields, select dimensions that transactions will post to for the elimination rule Process an Elimination Rule There are two methods to process a ledger elimination rule: • The Elimination journal proposal creates a journal in the elimination company • During the Consolidate Online process in a consolidation company, a journal is created in the company, specified as the destination company Procedure: Create an Elimination Journal Proposal An Elimination Journal Proposal will create an elimination journal in the General Ledger The advantage of a journal is being able to preview and validate results This method of processing an elimination rule might be preferred if you first must consolidate data, confirm the data in the consolidation company is accurate, and then run a separate elimination journal proposal to create and approve the elimination transactions 8-20 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Follow these steps to create an elimination journal proposal 10 11 12 Click General Ledger, click Journals, and then click Elimination Press the New button to create a new journal Click the Lines button Click the Proposals button, and then click Elimination proposal In the Source company field, select the company to use to retrieve the amounts for elimination Select the elimination Rule The Description of the elimination rule displays The date that the elimination last processed and distributions were successfully created displays in the Date last run field Enter the beginning and ending dates by which ledger amounts will be retrieved for elimination in the Period and To fields, respectively Enter the posting date of the elimination journal to the general ledger in the GL posting date field Enter a release date in the Release date field to put the transaction on hold until a specified date, enter that date You still can modify the transaction, and it can be posted on or after this date If this field is blank, the transaction can be posted at any time This date can be removed at any time Enter a Reason code if desired FIGURE 8.7 ELIMINATION PROPOSAL FORM Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-21 Financials II in Microsoft Dynamics® AX 2012 Procedure: Process an Elimination During Consolidation You can process a ledger elimination rule during the consolidate online process The elimination rule runs against the consolidated company You can run elimination rules in a proposal mode to perform what-if analysis You can then navigate to journals to view the proposed results If the results are as desired, you then can post the elimination entries This method of processing an elimination rule is preferred if consolidations are simple and the ease of a one-step process is desirable Follow these steps to process a ledger elimination rule during the consolidation online process Click General ledger, click Periodic, click Consolidate, and then click Consolidation [Online] On the Criteria tab, enter the Period from and Period to date range, which determines the source data to eliminate Select the Elimination tab In the Proposal options field, select from the drop-down list o Proposal only: Journals are created o Post only: Journals are created and posted Enter the posting date of the elimination journal to the General Ledger in the GL posting date field Summary This section described the setting up and processing of a consolidation using Microsoft Dynamics AX Users who decide to apply the information provided can set up their system for consolidations 8-22 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Test Your Knowledge Test your knowledge with the following questions Ken, the Controller at Contoso Entertainment USA (CEU), discusses the Contoso Entertainment Consolidation (CEC) company with Sara, the Chief Financial Officer They agree that the same Chart of Accounts will be used in the CEC as in CEU Sara asks Ken whether a Chart of Accounts must be set up for CEC before they consolidate CEU Give your opinion and an explanation about Sara's request What three types of consolidation processes are available in Microsoft Dynamics AX? (Select all that apply) ( ) Offline ( ) Online ( ) Export ( ) Import When is using an intercompany elimination necessary? Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-23 Financials II in Microsoft Dynamics® AX 2012 What are two benefits of an elimination journal proposal? (Select all that apply) ( ) An elimination journal proposal lets users preview results ( ) An elimination journal proposal posts automatically ( ) An elimination journal proposal lets users validate results ( ) An elimination journal proposal can only be run once Should transactions other than the consolidation transactions be processed in a consolidated company? 8-24 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations Quick Interaction: Lessons Learned Take a moment and write down three key points you have learned from this chapter Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-25 Financials II in Microsoft Dynamics® AX 2012 Solutions Test Your Knowledge Ken, the Controller at Contoso Entertainment USA (CEU), discusses the Contoso Entertainment Consolidation (CEC) company with Sara, the Chief Financial Officer They agree that the same Chart of Accounts will be used in the CEC as in CEU Sara asks Ken whether a Chart of Accounts must be set up for CEC before they consolidate CEU Give your opinion and an explanation about Sara's request MODEL ANSWER: A Chart of Accounts will not need to be set up in CEC because the accounts can be created during the consolidation process If the subsidiary, CEU, used a default currency other than USD, the Chart of Accounts would need to be set up because currency conversion cannot be performed (the Consolidation account field cannot be selected) What three types of consolidation processes are available in Microsoft Dynamics AX? (Select all that apply) ( ) Offline (√) Online (√) Export (√) Import When is using an intercompany elimination necessary? MODEL ANSWER: Elimination transactions are required when a parent company conducts business with one or more subsidiary companies and uses consolidated financial reporting Some transactions that occur between the companies must be eliminated because consolidated financial statements must include only transactions that occur between the consolidated entity and the other entities outside the consolidated group Because of this requirement, transactions between a parent company and its subsidiary companies must be removed or eliminated 8-26 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement Chapter 8: Consolidations What are two benefits of an elimination journal proposal? (Select all that apply) (√) An elimination journal proposal lets users preview results ( ) An elimination journal proposal posts automatically (√) An elimination journal proposal lets users validate results ( ) An elimination journal proposal can only be run once Should transactions other than the consolidation transactions be processed in a consolidated company? MODEL ANSWER: No, the only transactions in the consolidated company should be those created by the consolidation process Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement 8-27 Financials II in Microsoft Dynamics® AX 2012 8-28 Microsoft Official Training Materials for Microsoft Dynamics® Your use of this content is subject to your current services agreement