Preparing reconciliation and elimination

Before reconciling and eliminating intercompany transactions, do the following:

Configure reporting period parameters.
Enter source data of business units.
Develop a reconciliation template.
Create sections in the reconciliation template.
Specify resources and data sources for each section.
Specify the reconciliation template in the consolidation regulation.

Reporting period parameters

Specify reporting period parameters in the Reporting period management document.

In the Main period data document section, in the Scenario field, specify a statement preparation scenario. In the Period field, specify a period for which the consolidated statements are prepared. In the Regulation field, select the consolidation regulation created for the statement preparation.

In the regulation, specify a group ownership structure and a role of each company in the structure: a subsidiary, an associated company, or a third party.

Entering source data for reconciliation

To reconcile and eliminate intercompany transactions, create and import source data of business units. Before the import, develop report types that will describe the source data structure.

You can develop a report type, for example, a proforma of an input form, that will provide data for balance reconciliation.

You can also develop a report type that will provide data for turnover reconciliation.

When you set up reports, follow the main requirements:

Reports can contain indicators, by which the reconciliation is carried out, and additional analytical indicators that detail them.
If an indicator is used for reconciliation, values of additional analytical indicators are summed up. For example, counterparty's AR/AP under all contracts are summed up.
Besides reconciliation indicators, reports can contain additional analytical indicators whose values are used for elimination only. These values are linked to the reconciliation indicators. For example, the GL account of accounts receivable is an elimination indicator, and the amount of accounts receivable by counterparty is a reconciliation indicator. Elimination indicators are not included in reconciliation. If required, you can adjust them manually on discrepancy settlement.
Reconciliation indicator dimensions must allow mapping the following data of two different companies as a debtor and a creditor:
- □ Company and counterparty.
- □ AR/AP accounting currencies.
- □ User-defined intercompany transaction parameters.

All reconciliation and elimination settings are stored in a template that is linked to the Reporting period management document regulation. If the template is not specified for a certain period and scenario, reconciliation and elimination will not be performed.

Import the source data for reconciliation and elimination to the Report instances documents.

Reconciliation template

The reconciliation and elimination template combines several settings that help to identify the data to reconcile, how to process it, and how to eliminate.

To link reconciliation and elimination settings to the Regulations for preparing reports catalog item, use the Intercompany reconciliation templates catalog.

First, in the Intercompany transactions reconciliation and elimination register, on the Reconciliation and elimination sections tab, create records with reconciliation sections that differ from each other in the elimination method and dimensions.

If reconciliation by section is not required, select the Do not reconcile check box.

The main setup parameter that defines all other parameters is the Elimination methods field.

You can choose between the following elimination methods:

Reconciliation only. Only reconciliation is performed. Elimination is not carried out.
Balance item elimination. Closing balance amounts by "Statement of financial position" accounts are reconciled and then eliminated.
Service elimination. Income and expense amounts on transactions between group companies recorded in "Profit and loss statement" accounts are reconciled and then eliminated.
Inventory elimination. Unrealized gains in inventory are calculated and then eliminated.
Report indicator elimination. Report indicators are eliminated upon reconciliation and elimination without GL accounts based on the report instance indicators.

In the Value kind field, select an accounting indicator to reconcile and eliminate: Turnover for the period, Closing balance, or Opening balance.

Exchange rates and translation settings for elimination depend on the value kind.

On the Dimensions tab, specify a set of reconciliation and elimination dimensions. The set is determined by the elimination method and changes when the elimination method changes. The Reconciliation column shows dimensions used for reconciliation. The Type for elimination column shows a dimension role in the reconciliation and elimination algorithms.

On the Resources tab, specify reconciliation and elimination values. The Type for elimination column shows whether the resource value must be used as a reconciliation indicator or a cost value.

On the Data sources tab, specify sources that provide reconciliation values, dimensions, and elimination values.

The Method of defining accounting direction column is required to separate debtor data and creditor data. In the drop-down list, select a fixed value for the data source: Only debtors, Only creditors, or By transaction sign (positive values are for debtors, negative values are for creditors).

In the Data source field, specify a report type that shows how to get data for reconciliation and elimination.

Double-click a line with a data source to open a dialog box with the Attributes of formula data source settings.

In the Report type field, select a report type that stores the intercompany transaction data.

In the Drill-down group field, specify a dimension group linked to the reconciliation and elimination indicators.

Once the required attributes are filled, on the Data filter and dimension mapping tab, you can see settings for mapping source attributes (report type dimension and indicators) to destination attributes (reconciliation dimensions and attributes).

In the Data source fields area, you can see a list of all report type attributes, dimensions of the selected drill-down group, and indicators linked to this drill-down group.

In the Data filter parameters area, you can specify filters by all data source attributes.

In the Indicator dimensions area, you can see a list of resources and dimensions of reconciliation and elimination. In the dialog box that appears, set up the mapping.

In the Filling method column, select a mapping: Source field, Document context, Fixed value, or Enter manually.

For example, to fill the Indicator dimension field for the Counterparty dimension, the Dimension1.OrganizationalUnit source field is specified in the Dimension kind column.

In this example, dimension #1 stores contracts with counterparties. To reconcile, a counterparty is required. Select it in the Business unit field. The field is filled only for intercompany transaction counterparties and allows you to get the company related to the counterparty.

If Fixed value is selected, you can assign only one fixed GL account value to the GL accounts dimension kind for each of these indicators. For example, a fixed value is commonly selected when you extract data from multiple data sources that represent balances in different GL accounts.

On the Automatic settlement tab of the intercompany transaction template, in the Materiality threshold, % field, specify the percentage below which reconciliation variances will be settled automatically.

In the drop-down list of the Automatic settlement method field, select how to write off a discrepancy amount: By creditor, By maximum value, By minimum value, or By company ratings.

In the Intercompany transaction discrepancy reasons catalog of the Discrepancy reason for automatic settlement field, select the respective reason to detail such settlements.

Once the settings of the intercompany transaction reconciliation template are created, go back to the Intercompany transactions reconciliation and elimination register. On the Elimination tab, select Settlement write-off technical account and Write-off account of unsettled discrepancies. To generate entries to write off settled and unsettled discrepancies, we recommend that you specify accounts included in the structure of the statement of financial position. In the Technical account for elimination field, select the correspondent technical account for the elimination entry.

To view records of intercompany reconciliation both with and without discrepancies, on the More actions tab, select the Register zero discrepancies check box.

To calculate the seller's margin using the standard method based on the rate of profit for intercompany sales, select the Determine seller cost according to the standard margin check box. The standard margin is deducted from revenue to get the sales cost value and eliminate the value of unrealized gains in inventory.

Use this margin calculation method when the reported cost of inventory sales to the group is unknown, but the rate of profit on sales between the group companies is known.

When the Determine seller cost according to the standard margin check box is selected, the standard margin is first eliminated from the seller's revenue against the customer's inventory balance. Then the revenue balance is collapsed to the seller's cost.

When the Determine seller cost according to the standard margin check box is cleared, the known value of the seller's cost is first collapsed to the revenue. Then the revenue balance is eliminated against the customer's inventory balance.

Once the Determine seller cost according to the standard margin check box is selected, click Create to open the Rates of profit for dimension kinds setting. Here, select subsidiaries in the Debtor and Creditor fields. In the Intercompany transactions revenue kinds catalog in the Revenue kind field, select a revenue kind for which the rate of profit is specified. In the Standard margin field, specify the rate of profit on intercompany sales between these companies for this inventory kind.

Once the Intercompany reconciliation template object is created, you can perform reconciliation and elimination for the required period and scenario. To do it, in "IFRS report preparation regulation" on the Set up process tab in the Intercompany reconciliation template field, specify a reconciliation and elimination template.

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