EC-CS Consolidation for GMM

Workshop Result Prepared by WAY

August 2009

CONTENTS

Requirements The Solutions Controlling Process Consolidation Process

REQUIREMENTS
Business Unit Reporting Overhead cost allocation over business unit Currently overhead cost is posted to overhead cost center act as cost center pool, assigned under overhead profit center. In order to obtain the managerial report per business unit it is required to perform the overhead cost allocation. Profit center report which consider ex-allocation as well as ex-consolidation During consolidation process, an additional journal entries is carried out which will impact consolidation report. For the journal entries which involve P/L account it is required to be included also on the managerial report per profit center and only impact on the consolidation level.

REQUIREMENTS
Consolidated Financial Statement Generate consolidation report inside system There are three companies need to be consolidated in to one group. Currently, the consolidation is carried manually outside the system. Perform consolidation entries at the consolidation level Consolidation entries such as adjustment, elimination and reclassification need to be carried out at consolidation level only, no impact on company level. Any adjustment on consolidation level should be reflected on profit center as well Any posting at consolidation level that involve Profit/Loss account should be recorded also at profit center in order to generate consolidation report per Business Unit. Carry forward Account Balance as well as Retained Earning As the consolidation process is completely done, the balance of the account including retained earning need to be carry forward to the following year as the beginning balance of consolidation

THE HIGH LEVEL SOLUTION

Accounting / Logistic Process
Cons Unit A Cons Unit B Cons Unit C Real time Update Cons Unit A Cons Unit B Cons Unit C

Controlling Process
Cost Center Allocation ABAP #1 Profit Center Posting ABAP #2

Consolidation Process
Periodi c Rollup Cons Unit 1 Cons Unit 2 Cons Unit 3

Adjustmen t Elimination Reclassific Input ation Profit

Center in transaction

Company Consolida tion

Profit Center 1 Profit Center 2 Profit Center 3

Profit Center Consolida tion

The ABAP program #1 is used to retrieve sales data and post the data to SKF (Statistical Key Figure), this SKF data is used in cost center allocation The ABAP program #2 is used to retrieve consolidation adjustment

CONTROLING Overhead Cost Allocation : Overview

FI Posting MM Posting . . . .

Overhead Cost Center Overhead Cost Center

Cost Center Business Unit Cost Center Business Unit Cost Center Business Unit

Sender

The overhead cost allocation is performed trough cost center as the cost object and automatically recorded at the profit center The allocation is performed trough secondary cost element in order to keep the original transaction The allocation process must be performed each period

Receiv er

CONTROLING Overhead Cost Allocation : Allocation Cycle

Sender Receiver

Primary cost element Expense 1 Expense 2

5XXXX 6XXXX

Total Actual Cost Secondary cost element Expense A Expense B 9XXX1 9XXX2

XXXX XXXX --------XXXX Secondary cost element Expense A 9XXX1 Expense B 9XXX2 Total Allocated Cost

(XXXX) (XXXX) --------(XXX --------X) 0

Total Allocated Cost

XXXX XXXX --------XXXX --------XXXX

The allocation is performed trough secondary cost element in order to keep the original transaction

CONTROLING Overhead Cost Allocation : Allocation Cycle

Allocation Cycle Rule: There are rules regarding the overhead allocation process 1. Cost to be allocated The cost to be allocated is the total cost incurred in all overhead cost center 2. Allocation base The tracing factor is SKF (Statistical Key Figure) to store the Sales Revenue of the BU profit center as the allocation base. The ABAP program is needed to retrieve and posted this sales data automatically to SKF, otherwise we have to input manually using SAP standard transaction. 3. Sender The sender is the overhead cost center 4. Receiver The receiver is BU cost center that assigned to BU profit center 5. Allocation Structure The allocation structure is represent how the allocated cost be structured. It will use secondary cost element

CONTROLING Overhead Cost Allocation : Allocation Cycle

Allocation Cycle Rule (continued): 6. Allocation Cycle Name The allocation cycle is company code dependent, the name will follow the company code. MBINA will use allocation cycle name GMMXX. 7. Segment Name The segment represent sequence process in one cycle as part as the whole cycle. MBINA will breakdown the process of each sender group as a segment. MBINA will use segment name GMMXX-XXX

CONTROLING Overhead Cost Allocation : Allocation Process

CONTROLING Overhead Cost Allocation : Allocation Process

Description of the tasks: 1. Every end of period, accounting perform closing process. Once this process is done, the next step is to perform the controlling closing process. 2. Before run the cost allocation process as part of the controlling closing, the allocation cycle should be verify first. 3. If needed inform the master data person in charge to update the allocation cycle. 4. Update the SKF (Statistical Key Figure) as the parameter of the cost allocation. If the SKF data (in here sales data) will be retrieve and post automatically, ABAP program will be needed. 5. Execute the allocation cycle. When finished please check the data both for the sender as well as the receiver cost center using standard cost center or profit center report.

CONSOLIDATION Consolidation process

CONSOLIDATION Consolidation process

Description of the tasks legal consolidation: The consolidation process takes place after the FI (Accounting) in each subsidiary completely finish the closing process. 1. The first task of the consolidation is balance carry forward This process will ensure that all consolidated account balance from previous year is carried forward to the following year. 2. Data collection For legal consolidation, the data collection is in real time mode, the data automatically passed to consolidation during transaction in each origin module. 3. Data validation Perform data validation to ensure that all reported data from all consolidation unit (company) is transferred completely. We can set predefine validation by system, for example : Total Asset = Total Liability. 4. Standardizing financial data In this step, we create an adjustment / reclassification at the consolidation unit to ensure the data is correct prior to elimination process.

CONSOLIDATION Consolidation process

Description of the tasks Legal consolidation (continued): 5. Standardizing financial data validation To keep the adjustment entered correctly, we have to perform validation, a predefined validation is set to perform validation by system 6. Inter unit elimination This step is to eliminate inter unit transactions as the main part to produce consolidated financial statement 7. Reclassification At group level, we can perform reclassification /adjustment to move value from one FS item to another FS item 8. Consolidated financial data validation Similar with the two previous validations, this validation also check the validation transaction data at all level 9. Consolidation reporting The final step of the legal consolidation is to generate financial reporting which will developed using drill down reporting

CONSOLIDATION Consolidation process

CONSOLIDATION Consolidation process

Description of the tasks profit center consolidation: The profit center consolidation process takes place after the legal consolidation and controlling process. 1. Periodic roll up (Monthly) This step is to execute periodic roll up to collect data from profit center table (CO) to consolidation table (ECCS). Legal consolidation process Any adjustment created during consolidation process must be assigned to the proper profit center. This data will be used on profit center posting 2. Profit center posting In this step, ABAP program is needed in order to retrieve the adjustment data and post to profit center at the Controlling (CO) level. 3. Periodic roll up (Year end) This step is similar to the first step, the different is it executed after legal consolidation taken place. 4. Data collection This step is to monitor whether all the profit center data is

CONSOLIDATION Consolidation process

Description of the tasks profit center consolidation (continued): 5. Data validation Perform data validation to ensure that all reported data from all consolidation unit (profit center) is transferred completely. 6. Consolidation reporting Similar to legal consolidation, drill down reporting will be use to generate the consolidation report.

CONSOLIDATION Global Parameter Legal

Cons groups FS items Data monitor Cons monitor Info system Parameters Parameters
Global parameters Dimension Cons group Cons unit Version Year Period Cons C/A Ledger M1 MBINA1 __ MBINA Legal Dimension MBINA Legal Consolidation 100 2009 12 MBIN MB Actual data

MBINA Consolidation CoA MBINA Consolidation Leger

Global Parameters represents the works area, year 2009 period 12 means that user is working on the specified period.

CONSOLIDATION Global Parameter Profit Center

Cons groups FS items Data monitor Cons monitor Info system Parameters Parameters
Global parameters Dimension Cons group Cons unit Version Year Period Cons C/A Ledger M2 MBINA2 __ MBINA Profit Ctr Dimension MBINA Profit Ctr Cons 100 2009 12 MBIN MB Actual data

MBINA Consolidation CoA MBINA Consolidation Leger

Global Parameters represents the works area, year 2009 period 12 means that user is working on the specified period.

CONSOLIDATION Master Data : Global Setting

Dimension represents the type of consolidation There are two dimension used : M1 (MBINA Legal Dimension) and M2 (MBINA Profit Center Dimension) Group represents the organizational structure in which the company/unit need to be consolidated MBINA use legal consolidation group: MBINA1 (MBINA Legal Consolidation) and profit center consolidation group: MBIA2 (MBINA Profit Center Consolidation) Consolidation Chart of Account is required as the point of view of the consolidated Financial statement. Both Legal and Profit Center Consolidation will use MBIN (MBINA Consolidation COA) Ledger represents a set of database in certain currency that will be used in Consolidation Group MBINA use single ledger in USD for both type of consolidations

CONSOLIDATION Master Data : Hierarchy

Dimension

M1

Cons chart of accts

Version

Period

M1

Dimention M1 Hierarchy MBINA1 MBINA Legal Consolidation group Cons unit A Cons Unit B

The entire consolidation structure per consolidation type (dimension) is represented as hierarchy structure

CONSOLIDATION Master Data : Organization Structure

Legal Consolidation

Consolidatio n Group

Profit Center Consolidation

Consolidatio n Unit

CONSOLIDATION Master Data : Trading Partner

Company Name Consolidatio Company n Unit Code (ECCS) GMM Trading Partner GMM

1. GMM ..

2. SEN SEN SEN .. 3. Trading Partner is SAP terms representing the unit where it SMI SMI SMI becomes the key for eliminating inter company transaction. These trading partner is specified in the trading partner set. .. The trading partner code is made the same with company code (FI) and consolidation unit (ECCS) The trading partner is specified in the vendor and customer master record

CONSOLIDATION Master Data : Financial Statement Item

FI
Transactions Chart of Account Consolidation Chart of Account

EC-CS

10XXX Cash on Hand 11XXX Bank 12XXX Time Deposit 20XXX Equipment 60XXX Expense
Transactions Cost Element

10XX Cash and Cash Equivalent 20XX Equipment 60XX Expense

CO

60XXX Expense 90XXX Expense Other No one to many account mapping is allowed Cost Element need to be mapped as well to Consolidation COA for the profit center consolidation purpose The detailed FS item and corresponding assignment to G/L account and cost element will be collected from the user

CONSOLIDATION Task Status Monitor : Overview Task s ValidationStandardizing Balance Data Hierarchy
Carry Forward Collection Entries

M1 Legal Consolidation M1 Legal Consolidation + + MBINA2 Legal Cons Group + GMM + + + SEN + + SMI

The consolidation process is executed using consolidation task monitor in order to have comprehensive consolidation process.

CONSOLIDATION Data Collection : Methods

Real Time Update -Single document

Roll up ledger

Data entry layouts

On Line Off line

EC-CS

NonNonSAP SAP

Flexible File Upload

DB

MS Access

CONSOLIDATION Data Collection : Proposed Method

Consolidation Type Data Collection Method Real Time Update Frequency

1. Legal Consolidation 2. Profit Center Consolidation

Real time

Periodic Roll up Monthly

Real Time : Every document posted in FI will create be updated in ECCS on real time basis Periodic Roll up : Document posted in FI will update ECCS on batch mode in example : monthly or quarterly at summary level

CONSOLIDATION Data Collection Item Substitution

Balance Sheet
Assets Assets Cash and Cash Equivalent xxx Cash and Cash Equivalent xxx Fixed Asset xxx Fixed Asset xxx Acc.depreciation (xxx) .. .. .. .. .. Liability Liability A/P 3rd Party xxx A/P 3rd Party xxx Bank Loans xxx Bank Loans xxx .. .. Share Holders Equity Share Holders Equity Common Stock xxx Common Stock xxx Additional Paid in Capital xxx Additional Paid in Capital xxx Prior year Retained Earning xxx Prior year Retained Earning xxx Current Retained Earning YYY Current Retained Earning Total Liability Total Liability xxx xxx

Profit/Loss
Revenue Revenue Other Income Other Income xxx xxx xxx xxx

COGS COGS Expense Expense Depreciation Expense Depreciation ..

xxx xxx xxx xxx xxx xxx

Total Assets Total Assets

xxx xxx

Net Income Net Income

YYY

For the Legal Consolidation : Item Substitution is a function where the system move the net profit in the income statement to the current year earning in balance sheet.

CONSOLIDATION Standardizing Financial Data (SFD)

Standardizing Financial Data is basically a manual posting function where the end users post document in order to align the accounting standard according to the group policy. Since the function is manual entry, the function may also be used for any other adjustment posting. Documents resulted from Standardizing Financial Data are identified using Document Type and Posting Level. The detailed transaction of the SFD will be collected from the user

CONSOLIDATION SFD : Document Type and Posting Level

Document types Tasks Number ranges

Posting Totals records ECMC T ECMCA Docume nts

Totals reports

Document analysis

Posting level is for identifying the data as per standard SAP. Document type is for identifying more specific document using the same posting level i.e. the user needs to identify documents resulted from elimination of Account Payable and Receivable

CONSOLIDATION SFD : Document Type and Posting Level

Process / Task Posting Level Blank or 00 01 N/A 10 N/A 20 20 20 or 30 Documen t Type Blank DC N/A ST N/A IA - IE IM - IQ RC N/A Number Range N/A 100000 109999 N/A 200000 209999 N/A 300000 309999 310000 319999 400000 409999 N/A

1. Data Collection 2. Item Substitution 3. Validation of RFD 4. Standardizing Financial Data 5. Validation of RFD 6. Inter unit elimination (auto) 7. Inter unit elimination (manual) 8. Reclassification

9. Validation of N/A Consolidated Financial Data

CONSOLIDATION Inter Unit Elimination : Method

Interunit Elimination Method FS Item Sets Pair of sets Set 1
Further control options
Difference strategy

Set 2

Splitting of elimination differences

Items for other differences Debit Credit

Two-sided elimination One-sided elimination Post to initiating

Inter unit elimination works based on pair of Financial Statement Item containing the trading partner Differences arise from elimination is posted to items for other difference Elimination journal entries will be posted using posting level 20. One sided elimination for the sales/cogs elimination entry

cons unit

CONSOLIDATION Inter Unit Elimination : Process

Consolidated data before inter unit elimination
PL CU TP Investment in Subsidiaries 5.000.000.000 SEN GMM A/P Subsidiaries SEN GMM A/R Subsidiaries GMM 5.000.000.000 GMM SEN Common Stock (4.000.000.000) GMM SEN Paid in Capital (1.000.000.000) GMM SEN Value 00 00 (5.000.000.000) 00 00 00 SEN

Consolidated data after inter unit elimination

PL CU TP Investment in Subsidiaries 5.000.000.000 SEN GMM Common Stock (4.000.000.000) GMM SEN Paid in Capital (1.000.000.000) GMM SEN Value 00 00 00

CONSOLIDATION Inter Unit Elimination : Rule

Process / Task FS Item Post Document Posting Pair of Set Difference Type Level to 1XXXXXX 2XXXXXX 6XXXXXX 7XXXXXX 1XXXXXX 1XXXXXX 1XXXXXX N/A IA IB IC ID 20 20 20 20

1. Acc. Payable / Acc. Receivable 2. Rental Expense / Income

3. Management Fee / Expense 6XXXXXX 7XXXXXX 4. Sales / COGS 4XXXXXX 5XXXXXX

The detailed of the inter unit elimination FS Item (account) will be collected from the user

CONSOLIDATION Reclassification

Reclassification function move the value of certain FSI (Financial Statement Item) into another FSI. This only applicable if the reported financial data is consistent across the group The reclassification functions may mean netting off between 2 reported items. Common netting off of reclassification: Netting of Prepaid VAT and VAT Payable Netting of Interest expense and Interest income The document type and posting level setting of this function please refer to the document type section The detailed reclassification transactions will be collected from the user

CONSOLIDATION Validation
Process / Task 1. Data Collection 2. Item Substitution 3. Validation of RFD 4. Standardizing Financial Data 5. Validation of RFD 6. Inter unit elimination (auto) 7. Inter unit elimination (manual) 8. Reclassification Posting Level Blank or 00 01 N/A 10 N/A 20 20 20 or 30 At this posting level At this posting level At this posting level

9. Validation of N/A Consolidated Financial Data 10. Balance Carry Forward N/A

CONSOLIDATION Validation
Validation of RFD: this validation function is used to validate the Reported Financial Data based on the predefined rules. 1. Check if Assets Equal to Liabilities + Stock holder equity 2. Check if Current Year Retained Earning is equal to current net Profit Validation of SFD: this validation function is used to validate the Standardized Financial Data based on the predefined rules. 1. Check if Debit = Credit The validation of Consolidated Financial Data: this is similar to validation of Reported Financial Data and standardized financial data, only technically include all posting level.

CONSOLIDATION Balance Carry Forward Closing balance

Old fiscal year

Opening balance
New fiscal year

Balance sheet Assets 10,000 ... Liabilities 10,000 Income statement ANI 1,000

Balance sheet Assets 10,000 ... Liabilities 10,000 Income statement Balance carried forward 1,000

n+1

CONSOLIDATION : Information System

R/3

Consolidation

Report Writer

Report Painter

Journal entry reports

Reports master data control data financial data

Custom Report

Predefined/Standard Reports

CONSOLIDATION : Information System

In addition to the standard consolidation report, a custom report will be developed using report painter / writer. Customized report will be collected from the user and after investigate to the standard report in case the reports already provided by the standard. Existing customized report: 1. Consolidated profit / loss by Business Unit (Profit Center)

CONSOLIDATION : Legacy Data Scenario

As of Dec 08

Jan Nov 09

Start from 01 Dec 09

Opening balance upload

Subsequent posting of transaction /Rollup

Real time (online) /Rollup

Real time is used for company consolidation Roll up is used for profit center consolidation