The concept of _Elim in group reporting - what posting levels are possible to have this generation

In SAP Group Reporting, "Elim" refers to the elimination of intercompany transactions and balances during the consolidation process. This is a critical step to ensure that the consolidated financial statements accurately reflect the economic performance of the group as a whole, avoiding double-counting or inflated figures.

Why is Elimination Necessary?

When companies within a group transact with each other (e.g., sell goods, provide services, lend money), these transactions create internal profits and balances that need to be eliminated from a consolidated perspective.

• Example: If Company A sells goods to Company B for $100,000 with a $20,000 profit, this profit is unrealized from the group's standpoint until Company B sells the goods to an external party. Eliminating the intercompany sale and profit prevents overstatement of revenue and profit in the consolidated financial statements.

Posting Levels for Elimination

In Group Reporting, elimination entries are typically generated at posting level 20. This level is specifically designed for pairwise eliminations, meaning it handles the elimination of transactions between two specific consolidation units.

However, there are other posting levels that can be involved in the elimination process:

• Posting Level 01 (or blank): This is where the original intercompany transactions are recorded in the subsidiaries' accounts. The system identifies these transactions based on matching criteria (e.g., accounts, partner units, amounts).
• Posting Level 22: This level is used for eliminations related to changes in the consolidation group structure (e.g., acquisitions, divestments).

How Eliminations Work

1. Identification: The system analyzes the data at posting level 01 to identify intercompany transactions based on predefined criteria (e.g., matching accounts, partner units, amounts).
2. Rule Application: Elimination rules are defined to specify how different types of intercompany transactions should be eliminated. These rules consider factors like the nature of the transaction, accounting principles, and group policies.
3. Automatic Posting: Based on the identified transactions and the applicable rules, the system automatically generates elimination entries at posting level 20 (or 22, if applicable).
4. Consolidation: The elimination entries are then incorporated into the consolidation process, ensuring that the consolidated financial statements reflect the true economic performance of the group.

Types of Eliminations

Group Reporting handles various types of eliminations, including:

• Intercompany payables/receivables: Eliminates outstanding balances between group companies.
• Intercompany sales/purchases: Eliminates the impact of internal sales and purchases on revenue and cost of goods sold.
• Intercompany loans: Eliminates the impact of internal lending on interest income and expense.
• Profit in inventory: Eliminates unrealized profit on goods sold internally but still held in inventory by another group company.
• Dividend eliminations: Eliminates dividends paid between group companies.

Benefits of Automated Eliminations

• Accuracy: Reduces the risk of errors associated with manual eliminations.
• Efficiency: Saves time and effort compared to manual processes.
• Transparency: Provides a clear audit trail of elimination entries.
• Consistency: Ensures consistent application of elimination rules across the group.

By effectively utilizing the "Elim" concept and the associated posting levels, SAP Group Reporting enables accurate and efficient consolidation, providing a reliable view of the group's financial performance.