CHAPTER 9: MULTICOMPANY OPERATIONS CONSOLIDATIONS

Chapter 9: Multicompany Operations - Consolidations

CHAPTER 9: MULTICOMPANY OPERATIONS - CONSOLIDATIONS

Objectives

The objectives are:

? Explain the capabilities of the consolidation feature and provide instructions for restoring the backup required to complete this section.

? Explain the set up required in the consolidated company and subsidiaries to perform consolidations.

? Explain the process of exporting data from business units located in other databases.

? Explain the processes of testing consolidation data from business units.

? Explain and run the batch jobs used to process consolidations. ? Explain and demonstrate the process of preparing and posting

consolidation elimination entries. ? Explain and run consolidation reports after the consolidation is

complete.

Introduction

Consolidation means combining the financial statements of two or more separate companies (subsidiaries) into a consolidated financial statement.

In Microsoft DynamicsTM NAV 5.0, each individual company involved in a consolidation is called a business unit. The combined company is called the consolidated company, and is usually a company set up for only this purpose, holding no normal business transactions.

In this section, the steps required to perform a consolidation are described, beginning with setting up the consolidated company and subsidiaries. Other consolidation processes, such as exporting and testing data, are described before the consolidation is performed. The final sections explain the need to process consolidation eliminations and provide a review of the consolidation reports available in Microsoft Dynamics NAV 5.0.

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Finance in Microsoft DynamicsTM NAV 5.0

Consolidation Overview and Backup Restoration

In Microsoft Dynamics NAV 5.0, consolidations can be performed:

? Across different charts of accounts. ? Companies with different fiscal years. ? Either the full amount or a specified percentage of a particular

company`'s financial information. ? Companies with different currency. ? Using different methods of translating individual G/L account.

Companies can be consolidated that are:

? In the same database as the consolidated company. ? In other Microsoft Dynamics NAV 5.0 databases. ? In other accounting and business management programs, assuming

that the data from the other programs can be exported to a file with the appropriate format. ? In either a TXT file with fixed length fields or from an XML format.

Restore the Consolidation Backup

A backup of the consolidation demo database is required to complete this section. The Consolidation.fbk file is available on the training manual download page of PartnerSource.

The Consolidation.fbk contains three companies used in this section:

? CRONUS Consolidated Company ? CRONUS International CONSOL ? CRONUS Subsidiary

NOTE: To avoid expanding the database because of the restoration, a clean Microsoft Dynamics NAV 5.0 database must be used.

To restore the backup, follow these steps:

1. Locate and save the Consolidation.fbk file to a drive accessible to the database.

2. Open the Microsoft Dynamics NAV 5.0 database. 3. On the Tools menu, click Restore. 4. In the Restore window, locate and select the Consolidation.fbk file

and click Open.

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Chapter 9: Multicompany Operations - Consolidations

5. In the Restore window, click OK. 6. Click OK to the message that the backup was restored.

Set up the Consolidation

Before performing a consolidation, the consolidated company must be set up. This company is set up the same way that other companies are set up, with its own chart of accounts and, if used, dimensions. The chart of accounts is independent of the chart of accounts in the other business units, and the chart of accounts in the individual business units may differ from one another.

In this section, Microsoft Dynamics NAV 5.0 is set up to use consolidations, including:

? Set up consolidation information on G/L accounts ? Set up subsidiaries as Business Units ? Set up dimensions to be included in consolidations

NOTE: If a new company is used to consolidate subsidiaries, the Setup Checklist in Microsoft Dynamics NAV 5.0 can be used to copy the Chart of Accounts and other setup information to the new company.

Consolidation Information on G/L Accounts

The chart of accounts in a subsidiary must specify accounts for consolidation. For each G/L account set up as a Posting account in a subsidiary, the G/L account of the consolidated company must be specified in the consolidation account fields. This mapping allows companies with different chart of accounts to be consolidated.

The consolidation information is set up on the Consolidation tab of the G/L Account Card. This tab includes the following fields:

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Field Consol. Debit Acc.

Consol. Credit Acc. Consol. Translation Method

Description

The account in the consolidated company which debit balances on this account are to be transferred to.

The account in the consolidated company which credit balances on this account are to be transferred to.

Identifies the currency translation rate to be applied to the account. The options are: Average Rate (Manual): The average rate for the period to be consolidated. The average is calculated either as an arithmetic average or as a best estimate and is entered for each business unit. Closing Rate: The rate which prevails in the foreign exchange market at the date for which the balance sheet or income statement is being prepared. The rate is entered for each business unit. Historical Rate: The rate of exchange for the foreign currency which prevailed when the transaction occurred. Composite Rate: The current period amounts are translated at the average rate and added to the previously recorded balance in the consolidated company. This method is typically used for retained earnings accounts because they include amounts from different periods and are thus a composite of amounts translated with different exchange rates.

Equity Rate: Similar to Composite. The posting of the differences are to separate G/L Accounts.

If the balance must be transferred daily, specify account numbers for both the Consol. Debit Acc. and Consol. Credit Acc. fields because:

? Although amounts equal to zero are not transferred, an account whose final balance is zero might have had a non-zero balance on some dates.

? There can be a debit or credit balance for some dates even though the final balance for the consolidation period is expected to be a credit or debit balance.

If it is not required to differentiate between debit and credit balances for a particular account, use the same account number in both the Consol. Debit Acc. and Consol. Credit Acc. fields.

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Chapter 9: Multicompany Operations - Consolidations

Set up Consolidation Information on G/L Accounts

To enter consolidation information on G/L accounts in a subsidiary company, follow these steps:

1. On the File menu, click Company > Open. 2. Click CRONUS Subsidiary and then click OK. 3. Click OK to the message regarding the demonstration company. 4. On the Navigation Pane, click Financial Management > General

Ledger > Chart of Accounts. 5. Locate and select a G/L account set with an Account Type of

Posting. 6. Click Account > Card. 7. Click the Consolidation tab. 8. In the Consol. Debit Acc. field, enter the relevant G/L account. 9. In the Consol. Credit Acc. field, enter the relevant G/L account. 10. In the Consol. Translation Method field, click the AssistButton

and select the relevant option for this account. 11. Repeat steps 8-10 for all Posting type accounts in this subsidiary. 12. Repeat steps 1-11 for each company subsidiary.

NOTE: Unless the consolidated company is a subsidiary of another company, it is not necessary to set up the consolidation debit and credit accounts in the consolidated company.

Business Unit Card Overview

To consolidate several companies' financial data in a consolidated company, the subsidiaries must be set up as business units in the consolidated company.

The business unit information is set up in the Business Unit Card window, accessed from the Navigation Pane by clicking Financial Management > General Ledger > Periodic Activities > Consolidation > Business Units.

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