8consolidation of Investments

Consolidation of Investments
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Table of content
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2014 SAP SE or an SAP affiliate company. All rights reserved.
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Table of content
1 Consolidation of Investments
1.1 Organizational Change
1.1.1 Customizing for Organizational Changes
1.1.1.1 Top Node for Organizational Change
1.1.1.2 Investment Data for Organizational Changes
1.1.1.3 Organizational Change Number
1.1.2 Example: Transfer with Organizational Change
1.2 Goodwill in Local Currency
1.2.1 Customizing for Goodwill in Local Currency
1.2.2 Goodwill Key Figures
1.2.3 Currency Translation for Goodwill
1.2.4 Example: Goodwill in Local Currency
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1 Consolidation of Investments
Note
Instead of the standard documentation, SAP offers a Knowledge Product for the Consolidation of Investments in EC-CS topic. This was developed in
cooperation with the institute for external audits at the university of Saarland.
The Knowledge Product explains both the business foundations of the consolidation of investments and the implementation of the consolidation of
investments in EC-CS. ScreenCams illustrate the process and activities to be performed for a model corporation.
Customers and partners can order a free electronic version of the Knowledge Product in English. For information on this, see SAP Note 0117253.
However, selected topics are covered in the following documentation.
1.1 Organizational Change

Use
Choose the function organizational change if you want to transfer an investment holding, without affecting net income, between two consolidation units on the
basis of management decisions. Instead of being recalculated, goodwill is simply transferred to the acquiring consolidation unit.
An organizational change has the following properties:
From the perspective of the consolidation group that contains both the divesting and acquiring upper units the top node the organizational change
does not affect net income. The Consolidation system treats the organizational change as a transfer.
The consolidation group that contains the divesting upper unit the sender group treats this as a transfer or a divestiture, both of which do not affect
net income (total divestiture, partial divestiture, or reduction in indirect investment).
The consolidation group that contains the receiving upper unit and does not contain the divesting upper unit the receiver group treats the
organizational change as a first consolidation, step acquisition, or increase in indirect investment.
The system transfers the data from the sender group for use in the receiver group. The acquisition of the investee unit does not create new goodwill - instead,
the goodwill treatment from the sender group is continued in the receiver group. The receiver group also adopts and processes the statistical information from
the sender group. To achieve this, you use the function Transfer with Organizational Change .
Also available is the function Restructuring of the Group Hierarchy , which lets you adopt already-consolidated investee units in new consolidation groups.
Using logic for organizational changes, this function can also transfer goodwill data and statistical data from a sender group that previously contained the
investee unit.
Prerequisites
Constraints
Organizational changes are only possible if you disclose appropriations of retained earnings in the balance sheet.
The system posts universal statistical entries for method changes and organizational changes only for acquisitions with direct shares.
Customizing
For the Customizing settings necessary for organizational changes, see the section Customizing for Organizational Changes .
Features
An organizational change enables "net income-neutral" treatment (which does not affect net income) of transfers, and of the associated consolidation activities
in lower-level subgroups that are derived from (triggered by) such transfers.
In the receiver group , the system performs an acquisition with organizational change. In contrast to a normal acquisition (in which a first consolidation or
step acquisition takes place), this activity requires the information about goodwill and statistical entries at the investee unit from the sender group. This
information from the sender group (sender data) is initially posted during the acquisition with organizational change, and processed later in subsequent
activities in the receiver group.
In the sender group , the system performs a transfer or a divestiture, both without an effect on net income. The system "reroutes" the journal entries that
would have been posted to the income statement during a normal transfer or divestiture to selected item Net Income Organizational Change . The entries
posted to Net Income Organizational Change are also transferred as sender data to the receiver group.
Transfers with organizational change automatically search the matching sender group for a receiver group. If the sender group cannot be determined, you
need to provide the information about the desired sender/receiver relationship by means of an Organizational Change Number .
Independent of transfers, you achieve a final divestiture or a first consolidation with organizational change that has no effect on net income by entering an
organizational change number (when assigning the consolidation units to a consolidation group). You always need to enter an organizational change number to
enable the system to provide the sender data; the system is not able to determine the sender/receiver relationship automatically.
Example
For an example of an organizational change, see section Example: Transfer with Organizational Change .

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Purpose
You make the Customizing settings discussed here to enable the organizational change function.
Process Flow
Recommendation
Make sure you perform the following steps in the order they appear in.
Note
All path names are based on the Implementation Guide for Consolidation.
A. Selected Items, Equity Method, Migrations

1. In Customizing for Consolidation, define the selected items for consolidation of investments. Make sure you activate the item Net Income Method
Change (
Selected Items
Specify Miscellaneous Selected Items
).
2. Make the settings for the equity method .
The universal statistical items for the equity method are posted only if you have activated the equity method in system utilization of consolidation of
investments. Thus, if you intend to deploy the equity method at a later time, you should activate the equity method right from the beginning to ensure
that the necessary statistical information is available when a method change occurs.
1. In system utilization of consolidation of investments, set the indicator for the equity method (
Determine
System Utilization for C/I
).
2. Define the scopes of reported data for the equity method, including the statistical scopes (
Specify Scope of
Reported Data for Equity Method
).
3. Define the posting items for the equity method (
Selected Items
Specify Items for Equity Method Postings
).
4. Define the reported items for equity holdings adjustments (
Activities
Reported Items for Automatic Activity
Recognition Specify Reported Items for Equity Holdings Adjustments
).
3. Migration:
Recommendation
We recommend that you run the migrations at the end of a fiscal year, after finishing the usual closing activities, but before carrying forward
balances.
Caution
First, run the migrations in test mode and make sure the test runs are complete and produce no errors. This is important because once a migration
has begun, it needs to run through completely because it cannot be reversed.
1. Run the migration of statistical postings of consolidation of investments (transaction CXSTPMIG ).
2. Run the migration of goodwill entries (transaction CXGWMIG ).
The system transfers the existing goodwill entries into a new goodwill table. We recommend that you back up the original goodwill entries in a local
data file.
B. Customizing of the Dimension (Master DataDefine Dimensions)

1. Select the indicator for universal statistical postings .
2. For reporting, specify the starting year for the level logic. (If you run the migrations at the end of the old fiscal year, specify the new fiscal year.)
C. Organizational Change Indicator

Select the indicator for organizational changes in system utilization of consolidation of investments. (This can be done only after you have performed the
previous steps.)
D. Top Nodes
Enter one or more top nodes in the master data for organizational changes.
E. Additional Financial Data for Investments

To perform a transfer with organizational change that occurs underneath the top node, collect or enter the additional financial data for investments .
F. Organizational Change Number

In the master record of a given consolidation group that appears below a top node, specify that the first consolidation or final divestiture of a consolidation unit
is to use the organizational change logic. When doing this, enter an organizational change number that determines the sender group.

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Definition
Consolidation group that circumscribes an area of the consolidation group hierarchy. The posting logic of organizational changes can be applied to the top node
and all of the lower-level consolidation groups assigned to it.
Use
When the function Organizational Change is activated in system utilization for consolidation of investments, you can define the top groups for organizational
changes in the Implementation Guide for Consolidation at
Master Data Organizational Units
Organizational Change Define Consolidation Groups for
Organizational Changes
.
Here you need to specify at least one top node to enable the use of organizational changes.
1.1.1.2 Investment Data for Organizational Changes

Use
A transfer with organizational change is triggered by additional financial data for investments that contains specific information about the organizational change
(see the section about features below).
Prerequisites
You have activated the organizational change function in Consolidation Customizing, in system utilization of consolidation of investments.
Features
Organizational Change Indicator
You can set the organizational change indicator for the activities partial transfer or total transfer during data entry of additional financial data for
investments. When the indicator is set, the system performs (a) the transfer you entered as well as (b) the transfer that is reinterpreted as an acquisition or
divestiture in subgroups, using the posting logic for organizational changes.
Organizational Change Number

In the receiver group, the transfer turns into an acquisition with organizational change . The system automatically determines the sender group. If the system
cannot determine a unique sender group, an error is displayed during execution of consolidation of investments. In this case, you have to set the
organizational change indicator for the transfer activity in the additional financial data for investments, and you have to specify an
organizational change number . (You will have previously defined this number in the master data, where you also will have specified the desired
sender/receiver relationships.)
1.1.1.3 Organizational Change Number

Definition
Uniquely identifies a sender/receiver relationship in an organizational change.
For each organizational change number, you can assign each sender group to multiple receiver groups. The assignment is not reversible: Each receiver group
requires one unique sender group. However, one sender group provides its sender data to any number of potential receiver groups.
Use
When the function Organizational Change is activated in system utilization for consolidation of investments, you can define the organizational change
numbers in the Implementation Guide for Consolidation at
Master Data Organizational Units
Organizational Change Define Organizational Change
Numbers and Sender/Receiver Relationships
.
When you use the activity Transfer with Organizational Change , the definition of organizational change numbers is not needed at first because the system
performs an automatic search for the sender/receiver relationship. If the system cannot determine a unique sender group for a receiver group, the system
displays an error message during execution of consolidation of investments. If this occurs, you need to define an organizational change number in the master
data and specify this number in the investment data for the transfer.
In contrast, for a Restructuring of a Group Hierarchy you always need to explicitly specify the sender/receiver relationship by entering an organizational
change number.
1.1.2 Example: Transfer with Organizational Change

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Initial Situation
Customizing Settings
The examples below use the following Customizing settings:
Quarterly consolidation
Goodwill is carried in group currency.
Goodwill is posted at the upper unit.
Goodwill is amortized over 15 periods.
The starting date of goodwill amortization is the beginning of the current consolidation period.
Initial Data
The figure below helps illustrate the initial data.
Consolidation group TOP contains partner unit P, the divesting upper unit A, the acquiring upper unit B, and investee unit U.
The head office performs first consolidation for all consolidation units in period 3, but does not perform any final divestitures for now.
Consolidation group SEND belongs to consolidation group TOP. It has ownership in partner unit P, the divesting upper unit A, and investee unit U.
All consolidation units are first-consolidated in period 3.
Consolidation group RECEIVE belongs to consolidation group TOP and is at the same hierarchy level as consolidation group SEND. It has ownership in
partner unit P, the acquiring upper unit B, and investee unit U.
Partner unit P and upper unit B are first-consolidated in period 3.
Investee unit U is first-consolidated at the beginning of period 6.
Partner unit P has 75% ownership in each of the upper units A and B. Thus, the group shares of these two upper units are identical.
Reported financial data for the firstconsolidationof U in period 3:
Ownership of A in U = 80%, book value 1000
Common stock of U = book value -1000
Reported financial data for the subsequentconsolidationof U in period 3:
Retained earnings of U = book value -100
Currency translation difference (CTD) of U = book value -100
The total documents in period 3 in consolidation groups TOP and SEND are identical.
No documents are posted in period 3 in consolidation group RECEIVE.
Reported financial data for the partial transfer of U with organizational change in period 6:
Decrease in ownership of A in U = -40%, book value -500
Increase in ownership of B in U = 40%, book value 500
The system determines SEND as the sender group for receiver group RECEIVE.
Activities
The system triggers the following activities in period 3 based on the settings for the first consolidation period and the reported financial data:
First consolidations of consolidation units P, A, B, and U. The system posts only one document for investee unit U because no investment book
values or equity were reported by the other investee units.
Amortization of goodwill for the goodwill incurred during first consolidation of investee unit U.
Subsequent consolidation for investee unit U.
Transfer with Organizational Change
Purchase Method with Direct Shares

Partial Transfer with Organizational Change in Consolidation Group TOP
The reported transfer of the investment is eliminated (lines 1 and 2). The original value of goodwill and the accumulated amortization of goodwill, including
minority interests, are proportionately transferred (lines 2-8).
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The partner information in statistical equity is proportionately transferred (lines 9 and 10).
The statistical net income amounts and scopes of reported data are proportionately transferred (lines 11-30).
The system uses the transfer of adjusted statistical net income amounts to calculate the gain or loss, including minority interest, that results from a normal
transfer (that is, without an organizational change), which reflects an effect on net income (financial statement imbalance). However, a transfer with
organizational change does not post the gain or loss, including minority interest, to the income statement. Instead, it reroutes it to selected item Net Income
Organizational Change , without an effect on net income (lines 33 and 34).
Cons Unit
Partner Unit
Financial Statement Item
Value
Investment
500
Investment
500-
Goodwill
100-
Amortization of Goodwill
20
MI-Retained Earnings
5-
Goodwill
100
20-
Statistical Common Stock
400
10
400-
11
Statistical Net Income
20-
12
20
13

Offsetting Item
20
14

Offsetting Item
20-
15
MI-Statistical Net Income
5-
16
17
Offsetting Item
18

Offsetting Item
5-
19
Adjusted Statistical Net Income

20-
20
40
Equity Method
21
20
22

Equity Method
40-
23
MI-Adjusted Statistical Net

Income Amortization of
5-
Goodwill
24

Income Equity Method
10
25

Goodwill
26

10-
27
Statistical Scope of Reported
40
Data Retained Earnings

28
40
Data Currency Translation

Differences
29

40-
30

40-
31
Statistical Offsetting Item
105-
32
105
33
Net Income Organizational
15-
Differences
Change
34
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Change
Partial Divestiture with Organizational Change in Consolidation Group SEND

The reported reduction of the investment book value is cleared (line 1). The original value of goodwill and the accumulated amortization of goodwill are
proportionately reduced (rows 2 and 3); minority interests in the amortization of goodwill are recorded according to the group share of the upper unit (line 4).
The group share and minority share in equity are adjusted to the modified percentages of ownership. However, the equity of first consolidation and that of
subsequent consolidation are treated differently (lines 5-9).
The statistical net income amounts and scopes of reported data are proportionately reduced (lines 10-25).
The system uses the reduction of adjusted statistical net income amounts to compute the gain or loss, including minority interest, that results from a normal
partial divestiture (that is, without an organizational change), which reflects an effect on net income (financial statement imbalance). However, a partial
divestiture with organizational change does not post the gain or loss, including minority interest, to the income statement. Instead, it reroutes it to selected
item Net Income Organizational Change , without an effect on net income (lines 28 and 29).
Cons Unit
Partner Unit
Value
Investment
500
Goodwill
100-
20
5-
Currency Translation
30
Differences
6
MI-Common Stock
400-
30-
MI-Currency Translation
30-
Difference
9
10
11
12
400
20-
50
20
Offsetting Item
13
50-
Offsetting Item
14
5-
15
20
16
Offsetting Item
17
20-
Offsetting Item
18
20-
19
Adjusted Statistical Net Income Subsequent Consolidation
50
20

Equity Method
40
21
5-
Goodwill
22
20
Income -Subsequent
Consolidation
23

10
24
40

25
40

Differences
26
105-
27
470-
28
15-
Change
29
30
Change
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Sender Data for Organizational Change from Sender Group SEND

A first consolidation with organizational change is performed in consolidation group RECEIVE. This activity requires the retrieval of the sender data from
consolidation group SEND that corresponds to the partial divestiture at that consolidation group.
Cons Unit
Partner Unit
Goodwill
100-
20
400
20-
Value
U
Adjusted Statistical Net Income -
50
Subsequent Consolidation
A
Adjusted Statistical Net Income Equity

Method
40
MI-Adjusted Statistical Net Income

5-
MI-Adjusted Statistical Net Income -
20
A
MI-Adjusted Statistical Net Income
10
Equity Method
A
Statistical Scope of Reported Data
40
Retained Earnings
A
Statistical Scope of Reported Data
40
Currency Translation Differences

A
Net Income Organizational Change
15-
Net Income Organizational Change
30
First Consolidation with Organizational Change in Consolidation Group RECEIVE

The entire reported investment that is relevant for consolidation group RECEIVE is eliminated (line 1). Goodwill is not recalculated. Instead, the original value
of goodwill and the accumulated amortization of goodwill is read from the sender data and posted to the acquiring upper unit (of the transfer) (lines 2 and 3).
Minority interest in the accumulated amortization of goodwill is recorded according to the group share of the acquiring upper unit (line 4).
The total historical reported equity is eliminated (rows 5-7); the reported retained earnings is revoked from selected item Net Income Prior To First
Consolidation (line 6).
The group share and minority share in equity are disclosed (lines 8-11). However, the reported equity is treated differently depending on whether it was
processed in first consolidation or subsequent consolidation at the sender group. The statistical equity from the sender data is posted with the acquiring upper
unit as the partner unit (line 12).
The statistical net income amounts and scopes of reported data are read from the sender data, and the divesting upper unit is substituted with the acquiring
upper unit (lines 13-28).
The postings at selected item Net Income Organizational Change that do not affect net income are also read from the sender data, and are posted to the
investee unit and the acquiring upper unit (lines 31 and 32).
Cons Unit
Partner Unit
Value
Investment
500-
Goodwill
100
20-
Common Stock
1000
Net Income Prior to First
100
Consolidation
7
Currency Translation Difference
100
Currency Translation Difference
30-
MI-Common Stock
600-
10
70-
11
MI-Currency Translation
70-
Difference
12
400-
13
20
14
50-
15
20-
Offsetting Item
16
50
Offsetting Item
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17
18
20-
19
5-
Offsetting Item
U
20
20
Offsetting Item
B
21
20
U
22
Adjusted Statistical Net Income -
50-
23

Equity Method
40-
24
Goodwill
U
25
20-
Income -Subsequent
Consolidation
26

10-
27

40-
28
40-

Differences
29
105-
30
470
31
15
Change
U
32
30-
Change
1.2 Goodwill in Local Currency

Use
When goodwill is incurred from an acquisition (for example, in first consolidation or step acquisition), you want to disclose the goodwillin the investeeunitin the
local currency of that investee unit. The local currency of the investee unit has the highest priority, which means that the initial calculation of ordinary
amortization uses the local currency instead of the group currency. The system adjusts the original cost and valuation allowances of the goodwill in group
currency so that the accumulated values reflect the current exchange rate. Hence, goodwill is able to react to currency fluctuations.
Prerequisites
If applicable, you have migrated the statistical postings of consolidation of investments and the goodwill entries, and afterwards you have activated
universal statistical posting in the master data for the dimension.
You have activated the goodwill in local currency function in system utilization of consolidation of investments.
You use a consolidation of investments (C/I) method that carries goodwill in the local currency of the investee unit.
In the global settings for consolidation of investments or within the consolidation of investments method itself, you have defined the control options for
currency translation, and the subitems and statistical items for currency translation differences.
In the selected items for consolidation of investments, you have specified the items for posting goodwill in local currency.
Features
The goodwill in local currency function computes goodwill of a new acquisition primarily in the local currency of the investee unit. The local currency is
predominant during the life of the goodwill. The group currency values are adjusted according to the current exchange rates for each period. This is
documented in a detailed statement of the currency translation differences due to exchange rate fluctuations, with respect to both the original cost of
acquisition or production (or simply, original value or APC value) and with respect to the valuation allowances. These currency translation differences also
appear in the documents of the consolidation of investments activities. For all details, see the key figures for goodwill in the additional financial data.
As in conventional treatment of goodwill, the system first calculates the goodwill in group currency when an acquisition activity is run (this can be first
consolidation, step acquisition, increase in indirect investment, or increase/reduction in capitalization). The system also translates the original value of goodwill
into the local currency of the investee unit. When doing this, the system uses the exchange rate as per the date of acquisition. For this to work, the additional
financial data for investments must also contain the book values in the local currency of the investee unit.
From here on, the original value in the local currency of the investee unit is used for ordinary amortization. (However, you can still post extraordinary valuation
allowances in both the local currency and the group currency.) The activity Amortization of Goodwill (in Local Currency) posts the adjustment in local
currency in accordance with the settings in the C/I (consolidation of investments) method (amortizable life, start date of amortization). To determine the values
in group currency for amortization expense (in the income statement) and adjustments (in the balance sheet), the system uses the exchange rates of the
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exchange rate indicators specified in the global settings. Differences caused by different translations of balance sheet and income statement are recorded on a
separate subitem of the valuation item in the balance sheet, and the offsetting entry is posted to the selected item Currency Translation Goodwill .
If the current or average exchange rate changes, consolidation of investments needs to adjust the accumulated values of goodwill according to the new
exchange rates. This is done in the separate activity Currency Translation of Goodwill . This activity computes the currency translation differences for the
original values and the valuation allowances (which are the two types of goodwill key figures ).
The original value is always translated with the exchange rate for the balance sheet; currency translation differences are distinguished between acquisitions
and divestitures.
In contrast, the valuation allowance figures in the balance sheet and those in the income statement are translated with different exchange rates: typically, with
the current rate for the balance sheet, and with the average rate for the income statement. Thus, the system distinguishes between (a) currency translation
differences for amortization expenses in the income statement, and (b) the differences that arise between translation of the balance sheet and translation of
the income statement. The details of the various currency translation differences are recorded on several goodwill key figures in the additional financial data.
The posting document for the currency translation of goodwill activity contains only group currency values. Currency translation differences that exclusively
arise from the balance sheet are posted to a separate subitem on the original value item or the valuation allowance item, and the offsetting entry is posted to
the selected item Currency Translation Goodwill .
The currency translation of goodwill activity is automatically created by the system and cannot be entered by the user. In the global settings for consolidation
of investments you decide whether the activity is executed at the beginning, or at the end of the period. The activity adjusts all goodwill entries of the investee
unit for the exchange rates of the current period.
If beginning of period is chosen, a new currency translation of goodwill activity follows each type of acquisition activity (first consolidation, step
acquisition, increase in indirect investment). This additional activity adjusts the goodwill incurred in the preceding acquisition for the current exchange
rates.
If end of period is chosen, currency translation from local currency to group currency needs to take place for all goodwill amortization activities for the
investee unit, still using the exchange rates of the prior period. This is because the system can only switch to the current exchange rates at the end of
the period.
In addition to reducing or transferring goodwill's original value and valuation allowances, the activities partial divestiture and transfer also need to reduce or
transfer the associated currency translation differences. Goodwill key figures exist in the additional financial data for this purpose.
Indirect activities for the treatment of acquisitions with direct shares adjust minority interests for the Currency Translation Goodwill item according to the
group share of the immediate upper unit.
Feature Constraints
The goodwill in local currency feature is supported only for the goodwill treatment amortization . Local currency values and currency translation differences
cannot be recorded for direct eliminations or periodic reductions .
The goodwill in local currency feature is not supported for organizational changes or methodchanges. These two functions can change the accounting
technique, but not the treatment of goodwill. The system cannot guarantee consistent treatment of goodwill after an organizational change or a method change.
Activities
For the Customizing settings that need to be made, see the section Customizing for Goodwill in Local Currency .
To carry the goodwill for an investee unit in its local currency, you need to also specify the book values of the parent unit investments in the local
currency of the investee unit as well. (This is recorded in the additional financial data for investments.)The differences between the book values in the
local currency of the investee unit and the book values in group currency should be reflected by the exchange rate as per the date of the acquisition. The
system needs this relationship for translating the original value of goodwill when an acquisition occurs.
Example
You can see a posting example at Example: Goodwill in Local Currency .
1.2.1 Customizing for Goodwill in Local Currency

Use
Customizing for the goodwill in local currency feature involves the following settings:
Master data for the view
System utilization for consolidation of investments
Global settings for consolidation of investments
Consolidation of investments method
Other selected items for consolidation of investments
Document type
Activities
1. Master data for the view
You activate the Universal Statistical Postings here. The requirement for this is that you have previously performed the migration of statistical postings for
consolidation of investments and goodwill entries. (For more information about these migrations, see the Customizing Settings for Organizational Changes
section).
You also enter the fiscal year as of which the data selection is to be performed according to the new level logic. The activation is the requirement for the
Goodwill in Local Currency function being offered as an option in the system utilization for consolidation of investments.
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2. System Utilization for Consolidation of Investments

You activate the Goodwill in Local Currency function here. Activation makes the settings for goodwill in local currency ready for configuration in consolidation
of investments.
3. Global Settings for Consolidation of Investments

You make the following settings in the Goodwill in Local Currency group box:
You use the Goodwill Currency Translation at Beginning of Period indicator to specify whether the adjustment of the goodwill key figures to the current
exchange rates is to take place at the beginning or end of the period.
E/R Ind. Bal.Sheet / Income Stmt : Here you specify which indicators are used for translating the balance sheet values and the income statement
values. These indicators are set up in Customizing for currency translation. Typically, you would choose the current rate (for the balance sheet) or the
average rate (for the income statement).
C/T Key - Income Stmt : Here you specify whether the currency translation of goodwill activity is to compute translation differences only in the balance
sheet (periodic) or also in the income statement (cumulative).
Separate subitems are used to report currency translation differences for the original value and valuation allowances. You enter these as global consolidation
chart-of-accounts-dependent settings in the group box Goodwill Amortization or Negative Goodwill Amortization . You can use different subitems for currency
translation differences of prior years and the current year for both the original value and the valuation allowances.
Statistical items are needed for the goodwill translation difference incurred when minority interests are adjusted for the Goodwill Currency Translation item
in indirect activities for the treatment of acquisitions with direct shares. These items need to be broken down by partners; and you need to choose different
statistical items for currency translation differences for positive and negative goodwill.
If you select the "per Method" or "with Exceptions" indicators in system utilization as the goodwill treatment for amortization, you either can or must make
these entries in the consolidation of investments method.
4. Consolidation of Investments Method

You select the corresponding indicator here to define that goodwill values are to be carried in the local currency of the investee unit. You can set the Goodwill
in Local Currency property for a consolidation group and consolidation unit by assigning the consolidation of investments (C/I) method; this is because the
method assignment to an investee unit is dependent on the consolidation group. If the Carry Goodwill in Local Currency indicator is set, the goodwill
treatment direct elimination or periodic reduction cannot be used in this consolidation of investments method.
When goodwill is carried in local currency, the system automatically posts all effects on goodwill to the investee unit, and not to the direct investor units.
However, if goodwill is not carried in local currency, you can still post the goodwill value to the investee unit. To do this, you select a second indicator, Post
Goodwill to Investee Unit .
If the consolidation of investments method is defined for the equity method accounting technique, the goodwill cannot be carried in local currency, since in the
case of the equity method, no effects on the investee unit may be shown.
5. Other Selected Items

For the following items to be entered in the Statistical Items group box, note that these require an optional breakdown by partner unit if the Goodwill in Local
Currency function has been activated in the system utilization for consolidation of investments:
Adjusted Net Income - Goodwill
Minority Interest in Adjusted Net Income - Goodwill
The net income effects from amortization of goodwill in local currency are recorded statistically for the investee unit. In this case, the partner field is required
to store the information about the investor unit.
You make the following settings in the Goodwill in Local Currency group box:
Appropriations for Goodwill : Here you specify the item (and any subitems) that is posted with the offsetting entry for the disclosure of the original
goodwill value in local currency if the consolidation of investments task has a document type that also posts in local currency. Only local currency is
posted to Appropriations for Goodwill .
Goodwill Currency Translation : Here you specify the item and any subitems for posting the offsetting entries for the currency translation differences in
original goodwill value and valuation allowances. Since the system makes adjustments to minority interests on this item, you need to assign a minority
interests item in Customizing for consolidation of investments, under
Selected Items
Determine Items for Minority Interest .
6. Document Type
As an option, you can specify that the document type is also posted in local currency. Documents show the postings in local currency only if the document
type also posts in local currency (for example, for postings to the Appropriations for Goodwill item).
1.2.2 Goodwill Key Figures

Definition
Key figures in the goodwill additional financial data that the system reports for the original value and the valuation allowances of goodwill, as well as for the
currency translation differences.
Structure
Original Value (Acquisition Cost)
With regard to the original value, the report distinguishes between translation differences for acquisitions or divestitures, as well as divestitures from the
original acquisition cost and divestitures of translation differences.
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The effects from the previous year are reported in separate key figures for the original value.
Original Value Without Currency Translation Differences

Key figure
Meaning
AP
Original value acquisition (in LC and GC)
DA
Original value divestiture in current period (in LC and GC)
DP
Original value divestiture in prior periods (in LC and GC)
K0
Original value acquisition of a goodwill from prior years (in LC and GC)
K1
Original value divestiture of a goodwill from prior years (in LC and GC)
Currency Translation Differences in Original Value

Key figure
Meaning
K4
Translation difference in original value from prior years, in current period (in
GC)
K3
Translation difference in original value from prior years, in prior periods of

current fiscal year (in GC)
K2
Translation difference in original value from prior years, in current period (in
GC)
L4
Translation difference in original value from current year, in current period (in
GC)
L3
Translation difference in original value from current year, in prior periods of

T2
Translation difference in original value divestiture, in current period (in GC)
T1
Translation difference in original value divestiture, in prior periods of current

fiscal year (in GC)
T4
Divestiture of translation differences in original value, in current period (in

GC)
T3
Divestiture of translation differences in original value, in prior periods of

Valuation Allowance
In valuation allowance, the system distinguishes between translation differences resulting from adjustments of the amortization in the income statement, and
translation differences that are caused by different exchange rates in the balance sheet and income statement.
As for the original value, the effects from the previous year are reported in separate key figures for the valuation allowance.
Valuation Allowance Without Currency Translation Differences

Key figure
Meaning
N1
Income statement amortization in prior years (in LC and GC)
DN
Ordinary amortization in current period (in LC and GC)
DE
Extraordinary amortization in current period (in LC and GC)
CT
Extraordinary writeup in current period (in LC and GC)
DD
Divestiture of the valuation allowances in current period (in LC and GC)
Currency Translation Differences in Valuation Allowance

Key figure
Meaning
N4
Difference between the balance sheet and income statement translation of

the amortization in prior years, in current period (in GC)
N3

the amortization in prior years, in prior periods of current fiscal year (in GC)
N2

the amortization in prior years, in prior years (in GC)
V2
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Difference from the income statement translation of the current amortization,
Page 13 of 20
in current period (in GC)

V4

the current amortization, in current period (in GC)
V1
Amortization (including income statement translation) in prior periods of the

current fiscal year (in LC and GC)
V3

the amortization in prior periods of current fiscal year (in GC)
D2
Divestiture of the valuation allowances of the current fiscal year, in current

period (in LC and GC)
D0
Divestiture of the valuation allowances of the prior year, in prior periods of the
current fiscal year (in LC and GC)
D1
Divestiture of the valuation allowances of the current fiscal year, in prior

periods of the current fiscal year (in LC and GC)
D4

the divestiture of the valuation allowances, in current period (in GC)
D3

the divestiture of the valuation allowances, in prior periods of current fiscal
year (in GC)
1.2.3 Currency Translation for Goodwill

Use
The consolidation of investments (C/I) activity Currency Translation for Goodwill adjusts the group currency values of goodwill entries to the exchange rates
of the current period. The activity is automatically triggered in the system. Currency translation for goodwill appears either at the beginning or at the end of
the period, depending on the global settings for consolidation of investments. The activity translates the values of all goodwill entries of the investee unit that
are carried in that investee's local currency.
If currency translation is set to beginning of period, an additional currency translation for goodwill activity follows each acquisition. The new activity then
translates the new goodwill entries incurred in the preceding acquisition with the current exchange rates.
Features
The currency translation for goodwill activity adjusts all relevant goodwill entries to the exchange rates of the current period. Internal logic is based on the
key figures for goodwill . When computing the individual key figures, the activity uses different exchange rates for those on the balance sheet (typically, the
current rate) and for those on the income statement (typically, the average rate). The activity also takes into consideration various other key figures when
calculating the currency translation differences. This results in modifications for the translation key figures of the current period, which the activity records in
group currency in the document.
Item
Subitem
Value
Original Value of Goodwill
Opening balance
K4
Current year
L4
Current year
M2
Currency Translation for Goodwill
(from Customizing settings)
-K4 -L4 -M2
Opening balance
-N4
Current year
-V2
Current year
(D2)
Amortization (expense) in the income statement
N4 +V2 - (D2)
Current year
-V4
Current year
(D4)
Currency Translation for Goodwill
V4 - (D4)
If the treatment of an acquisition uses direct shares, the system discloses the minority interests in the amortization in the income statement and in the
postings to the currency translation for goodwill item on the basis of the group share of the upper unit.
Example
For an example, see Example: Goodwill in Local Currency .
1.2.4 Example: Goodwill in Local Currency

This example uses the following assumptions and settings:
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Frequency: quarterly consolidation

Useful life of goodwill: 15 periods; amortization begins in the current consolidation period.
The consolidation group consists of parent unit P, immediate upper unit A, and investee unit U.
The head office performs first consolidation for all consolidation units in period 3, but does not perform any final divestitures for now.
The local currencies of P and A are the same as the group currency (GC); unit U has a different local currency (LC).
Investee unit U carries goodwill in its local currency.
Currency translation of goodwill is run at the beginning of the period.
Currency translation key for the income statement: cumulative
Parent unit P owns 80% of immediate upper unit A.
The exchange rates for translating local currency to group currency in period 03 ( directquotation):
Current rate: 4.0
Average rate: 3.0
Additional financial data for the firstconsolidationof U in period 03:
Ownership of A in U is 75%; book value in local currency: 200; book value in group currency: 1000 (calculated with the average rate of 5.0 at the
date of acquisition)
Common stock of U; book value in local currency: 250-; book value in group currency: 1000- (calculated with the current rate of 4.0)
Translation of local currency to group currency in period 06:
Current rate: 8.0
Average rate: 4.0
Additional financial data for the subsequentconsolidationof U in period 06:
Currency translation difference (CTD) of common stock, book value in group currency: 1000-; this adjusts the reported equity to the new exchange rate
of 8.0.
Purchase Method with Direct Shares

First Consolidation (Period 3)
The reported investment in GC and the reported common stock in GC are eliminated (lines 1 and 2). When based on the direct share, common stock is divided
into a group share and a minority (interests) share (lines 3 and 4). Clearing the group shares in the investment holding and the common stock results in an
original value of goodwill in group currency (line 6). For the relationship between the LC and GC book values, the system reads the exchange rate (5.0) as of
the date of acquisition from the additional financial data for investments. This exchange rate is used to translate the original value from group currency to local
currency and to record the original value in local currency in the document at the investee unit, as well (line 6). The offsetting entry (in LC only) is posted to the
Appropriations for Goodwill item (line 7).
Cons Unit
Partner Unit
Item
Investment
1000-
Common Stock
1000
MI-Common Stock
250-
750-
Value in LC

U
Value in GC
750
50
250
Appropriations for
Goodwill
50-
In addition to the document, the activity creates an entry in the additional financial data for goodwill for period 03. Of the key figures written there, these are the
ones relevant in this example:
Key Figure
Value in LC
Value in GC
AP (original value)
50
250
L3 (currency translation difference/CTD in original

value, in prior periods)
V1 (amortization/write-off, including CTD in income

statement, in prior periods)
V3 (balance sheet and income statement difference

from translation of amortization/write-offs, in prior
years)
BG (book value at beginning of period)
50
250
L4 (CTD in original value, in current period)
DN (ordinary amortization)
V2 (CTD in amortization expense in income statement,

in current period)
V4 (B/S and I/S difference from translation of

amortization, in current period)
EN (book value at end of period)
50
250
Currency Translation for Goodwill (Period 3)

The exchange rate (5.0) at the date of acquisition from the additional financial data for investments does not match the current exchange rate of 4.0. The
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system needs to adjust the original value in GC to the current exchange rate in a currency translation for goodwill activity. This adjustment creates an
currency translation difference of -50, which is stored in key figure L4 in the additional financial data. The resulting relationship of the ending book values in
local and group currencies reflects the new exchange rate ratio.
Key Figure
Value in LC
Value in GC
AP (original value)
50
250


50
250
50-

in current period)

50
200
years)
In the document of the currency translation for goodwill activity, key figure L4 appears at the posting item for the original value with the subitem for CTDs for
the current year (line 1). The offsetting entry is posted to the selected item CTD Goodwill (currency translation difference for goodwill, line 2).
Cons Unit
Partner Unit
Item

(CTD Current Year)
Value in LC
0
Value in GC
50-
CTD Goodwill
50
Amortization for Goodwill (Period 3)

Ordinary amortization of goodwill is posted by the amount of -10 in local currency with an effect on net income, as defined in the consolidation of investments
(C/I) method. The system then translates the amortization in local currency into the group currency using both the current rate of 4.0 and the average rate of
3.0. This results in the values -40 and -30. As a result of the income statement translation, the ordinary amortization in group currency is stored in key figure
DN, whereas the difference of the two translations is stored in key figure V4. This changes the goodwill entry. However, the relationship of the ending book
values in local and group currencies remains unchanged at the rate of 4.0.
Key Figure
Value in LC
Value in GC
AP (original value)
50
250
50
250
50-
10
30
10
40
160

years)
in current period)
In the document of the amortization of goodwill activity, key figure DN is posted in LC and GC with a net income effect to the valuation allowance item for
goodwill and the offsetting item for amortization expense in the income statement (lines 1 and 3). Since the consolidation group owns only 80% of the upper
unit with respect to the goodwill entry, the system reclassifies one-fifth of the amortization amount in group currency to minority interests with an effect on net
income (lines 5 and 7); minority interest is not carried in local currency. This results in the remaining effect on net income for the group (lines 16 and 17).
The activity posts key figure V4 (in GC) also to the valuation allowance item for goodwill, but here it uses the subitem for CTDs for the current year (line 2).
The offsetting entry is posted (without an effect on net income) to the selected item CTD Goodwill (line 4). The item mentioned last also shows the minority
interests (lines 6 and 8).
The statistical net income items only consider the part of the valuation allowance that affects net income, according to key figure DN (lines 9-15). The
reclassification of minority interests for those net income-portions is also stored in GC in the statistical items (lines 12 and 14).
Also posted at the investee unit are the items for adjusted statistical net income and its minority interest companion. The immediate upper unit information is
stored in the partner field. Therefore, the items Adjusted Statistical Net income for Goodwill Amortization and the corresponding minority interest items
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require an optional breakdown by partner unit.
Cons Unit
Partner Unit
Item
Valuation Allowances for
Value in LC
Value in GC
10-
30-
10-
10
30
Goodwill
2

Goodwill (CTD Current
Year)
Amortization (Expense) in
the income statement
CTD Goodwill
10
MI-CTD Goodwill
MI-Income Statement
6-
CTD Goodwill
2-
10
30
10

Offsetting Item
10-
30-
11
12

Offsetting Item
6-
13
Adjusted Statistical Net

10
30
Goodwill
14

Goodwill
15
10-
36-
16
Retained Earnings
10
24
17
Net Income (income

statement)
10-
24-
Currency Translation for Goodwill (Period 6)

After running consolidation of investments in update mode for period 3, the additional financial data for goodwill contains a proposed entry for period 6 as part
of projecting future goodwill. The key figures of this proposed entry result from the rules discussed in section Key Figures for Goodwill : The key figures of the
goodwill entry in period 3 are copied to the corresponding key figures of the proposed entry for the period carryforward. (The ordinary amortization in key figure
DN in local currency initially contained in the proposed entry is reset back to zero in the beginning of the consolidation run for period 6).
Key Figure
Value in LC
Value in GC
AP (original value)
50
250
50-

10
30

10
40
160

in current period)

40
160
years)
In period 6, the current exchange rate increased from 4.0 to 8.0, and the average exchange rate increased from 3.0 to 4.0. Thus, the goodwill entry for period 6
needs to be adjusted for the new exchange rates. This is done in the Currency Translation for Goodwill activity according to the Customizing settings at the
beginning of the period.
The cumulative values for the original cost in LC and GC are 50 and 200, respectively. This results in a currency translation difference of 200 for the original
goodwill, which is stored in key figure L4.
Cumulative valuation allowances in local currency is -10. In group currency, -40 were previously written off, -30 of which was charged to amortization expense.
The missing currency translation difference is -40 for the balance sheet and -10 for the income statement according to the new current and average
exchange rates. The system stores the currency translation difference in the income statement directly in the goodwill key figure V2. The difference of both
translation differences is stored in key figure V4. This modifies the goodwill entry: The relationship of the ending book values in local and group currencies
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reflects the new current exchange rate of 8.0.

Key Figure
Value in LC
Value in GC
AP (original value)
50
250

50-

10
30

10
40
160
200

in current period)
10

30
40
320
years)
In the document of the currency translation for goodwill activity, key figure L4 appears at the posting item for the original value of goodwill with the subitem
for CTDs for the current year (line 1). The offsetting entry is posted to the selected item CTD Goodwill (currency translation difference for goodwill, line 2).
Key figure V2 is posted to the valuation allowance item for goodwill, using the subitem for CTDs for the current year (line 3). The offsetting entry affects net
income (line 4).
Key figure V4 contains the remaining value for the currency translation difference in the balance sheet. It is also posted to the valuation allowance item for
goodwill, using the subitem for CTDs for the current year (line 5) and, again, the offsetting entry is posted to the selected item CTD-Goodwill (line 6).
Minority interests in the amortization expense in the income statement and selected item CTD-Goodwill are reclassified on the basis of the group share if the
immediate upper unit (lines 7 and 8 with net income effect, lines 9 and 10 without net income effect).
The net income effect that results in the currency translation for goodwill activity (lines 18 and 19) is also stored in statistical items (lines 11-16).
Cons Unit
Partner Unit
Item
Value in LC
Value in GC
200
CTD Goodwill
200-

10-
10
30-
Year)
Amortization (expense) in
5

Year)
CTD Goodwill
30
MI-Income Statement
2-
MI-CTD Goodwill
10
CTD Goodwill
6-
11
10
12

Offsetting Item
10-
13
14
2-
10
Offsetting Item
15

Goodwill
16

Goodwill
17
12-
18
Retained Earnings
19
Net Income (income
8-
statement)
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Ordinary amortization of goodwill is posted by the amount of -10 in local currency with an effect on net income, as defined in the C/I method. The system then
translates the amortization in local currency into the group currency using both the current rate of 8.0 and the average rate of 4.0. This results in the values -80
and -40. As a result of the income statement translation, the ordinary amortization in group currency is stored in key figure DN, whereas here the difference of
the two translations reflects the change to key figure V4 by the current amortization activity. This changes the goodwill entry. However, the relationship of the
ending book values in local and group currencies remains unchanged at the rate of 8:1.
Key Figure
Value in LC
Value in GC
AP (original value)
50
250

50-
10
30
10
40
160
200
10
40
10
70
30
240

years)
in current period)
The structure in the document of the amortization activity builds on the postings of period 3.
Cons Unit
Partner Unit
Item
Value in LC
Value in GC
10-
40-
40-
10
40
Goodwill
2

Year)
Amortization (Expense) in
CTD Goodwill
40
MI-CTD Goodwill
MI-Income Statement
8-
CTD Goodwill
8-
10
40
10

Offsetting Item
10-
40-
11
12

Offsetting Item
8-
13

10
40
14
Goodwill
Goodwill
15
10-
48-
16
Retained Earnings
10
32
17
Net Income (income

statement)
10-
32-
Subsequent Consolidation (Period 6)

The increased current exchange rate of 8.0 caused currency translation to post -1000 to CTD Common Stock . Minority interests in group currency is
recorded for this difference. The calculation is based on the group share in the investee unit (in this case, 60%), which is typical in subsequent consolidation.
This activity is entirely independent of any effects on goodwill.
Cons Unit
Item
MI in CTD-Common Stock
400-
CTD-Common Stock
400
PUBLIC
Value in LC
Value in GC
Page 19 of 20
PUBLIC
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Consolidation of Investments

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1.1 Organizational Change

1.1.1 Customizing for Organizational Changes

1.1.1 Customizing for Organizational Changes

A. Selected Items, Equity Method, Migrations

B. Customizing of the Dimension (Master DataDefine Dimensions)

C. Organizational Change Indicator

E. Additional Financial Data for Investments

F. Organizational Change Number

1.1.1.1 Top Node for Organizational Change

1.1.1.1 Top Node for Organizational Change

1.1.1.2 Investment Data for Organizational Changes

Organizational Change Number

1.1.1.3 Organizational Change Number

1.1.2 Example: Transfer with Organizational Change

Transfer with Organizational Change

Purchase Method with Direct Shares

Financial Statement Item

Statistical Common Stock

Statistical Common Stock

Statistical Net Income

Statistical Net Income

Statistical Net Income

Statistical Net Income

MI-Statistical Net Income

MI-Statistical Net Income

MI-Statistical Net Income

MI-Statistical Net Income

Adjusted Statistical Net Income

Adjusted Statistical Net Income

Adjusted Statistical Net Income

Adjusted Statistical Net Income

MI-Adjusted Statistical Net

MI-Adjusted Statistical Net

MI-Adjusted Statistical Net

MI-Adjusted Statistical Net

Statistical Scope of Reported

Data Retained Earnings

Statistical Scope of Reported

Data Currency Translation

Statistical Scope of Reported

Statistical Scope of Reported

Statistical Offsetting Item

Statistical Offsetting Item

Net Income Organizational

Net Income Organizational

Partial Divestiture with Organizational Change in Consolidation Group SEND

Financial Statement Item

Statistical Common Stock

Statistical Net Income

Statistical Net Income

Statistical Net Income

Statistical Net Income

MI-Statistical Net Income

MI-Statistical Net Income

MI-Statistical Net Income

MI-Statistical Net Income

Adjusted Statistical Net Income

Adjusted Statistical Net Income Subsequent Consolidation

Adjusted Statistical Net Income

MI-Adjusted Statistical Net

MI-Adjusted Statistical Net