Consolidation Method in SAP Group Reporting and how to set up in Flat structure in New logic

In SAP Group Reporting, the Consolidation Method determines how the financial data of a subsidiary is incorporated into the consolidated financial statements of the parent company. This is a key setting within the Consolidation Group Structure.

Traditional Consolidation Methods:

• Full Consolidation: The most common method. The subsidiary's entire financial statements are included in the consolidated statements after eliminating intercompany transactions.
• Equity Method: Used for investments where the parent has significant influence but not control. The parent's share of the subsidiary's net income is recognized on the parent's income statement.
• Cost Method: Used for investments where the parent has little or no influence. The investment is recorded at cost and adjusted only for impairment.

Setting up Consolidation Methods in a Flat Structure (New Logic):

In Group Reporting's new logic, a flat structure implies a simplified approach where all consolidation units report directly to the parent. Here's how to set up consolidation methods:

1. Define Consolidation Units: Use the "Define Consolidation Units" app to create entries for the parent company and each subsidiary.
2. Create Consolidation Group: In the "Manage Consolidation Groups" app, define a consolidation group and assign a unique ID.
3. Assign Consolidation Units: In the "Assign Consolidation Units to Consolidation Groups" app, assign the parent and subsidiaries to the group.
4. Specify Consolidation Method: During the assignment process, you'll assign a consolidation method to each subsidiary. This defines how their financials will be incorporated.

Key Considerations:

• Ownership Percentage: The ownership percentage plays a crucial role in determining the appropriate consolidation method. Full consolidation is typically used for majority ownership.
• Reporting Requirements: Legal and regulatory reporting requirements influence the choice of consolidation method.
• Intercompany Eliminations: Regardless of the method, ensure proper elimination of intercompany transactions to avoid double-counting.

Using the "Consolidation Monitor" App:

The "Consolidation Monitor" app provides a centralized platform to:

• Execute Consolidation: Run consolidation processes for specific periods.
• Monitor Status: Track the progress of consolidation runs.
• Analyze Results: Review consolidated financial statements and identify potential issues.

By correctly setting up consolidation methods in a flat structure, you can ensure accurate and compliant consolidated financial reporting in SAP Group Reporting.