Consolidated Financial Statements
The SBT Executive Series financial report writer can generate combined and consolidated financial statements for all or a specified group of companies / funds / entities. The financial report writer is able consolidate financials for companies/funds even when they are on different year ends, fiscal calendars and/or currencies. Producing the consolidated financial statements is actually easy and straightforward. It is the intercompany eliminations that requires a bit more thought as to how to approach it.
Executive Series supports several techniques for producing the eliminations that are typically required for consolidated financial reports. These include the use of the financial report writer for eliminations, the creation of an elimination company/entity, the creation of a consolidated entity, or the use of statistical accounts.
Utilizing an Elimination Company/Entity
One of the main benefits of using an elimination company is that it makes creating elimination reports very easy. The elimination company will only have elimination postings in it, and listing these out separately is done using the company/fund field on either on the column template definition or the row template. Producing a quick concise listing of the actual elimination journal entries is also very easy since that is all the elimination company has in it.
Creating the journal entries for the eliminations can be automated as much or as little as you need. Journal Entry templates can be used to automate much of this. The general ledger allocation sub-module can be used to take the automation a step further to generate the amounts as well as the accounts in the elimination company.
When generating a consolidated financial report, you simply ensure you have the elimination company included in the report’s structure template along with the companies you are consolidating.
Consolidating Within the Financial Reports
If there are no intercompany entries between companies/funds, then the consolidated financials are simply combined with no need of eliminations. The financial report writer makes this very easy to do and there are no intermediate steps of producing a combined company. You simply produce the reports.
In those cases when eliminations are needed, this method may still be used. The financial report writer itself can usually handle the eliminations needed for consolidated reports. The one drawback is that the eliminations are only in the reports, and there are no separate journal entries that show the eliminations. So if creating an elimination report is critical, the financial report elimination method may not be the best method because creating an elimination report can be somewhat harder to do.
Utilization of a Consolidation Company/Entity
Another technique to create consolidated financial reports is to create a consolidation company. This entails generating a set of journal entries from all source companies to represent period ending balances and activity. This often makes sense for those situations where much of the source data is from systems outside of Executive Series and having the detail within the individual companies is not needed. Generally, a journal entry import is used for this processing or sometimes just a large copy/paste action from the source to an Executive Series journal entry. If Executive Series is the source of this information, then use of the general ledger’s allocation sub-module could be used to automate the generation of the consolidated company’s journal entry.
One last technique for handling eliminations is to use statistical accounts for the elimination entries. A major drawback to this method is that journal entries for statistical accounts do not have to balance (credits to debits) and it would be easier to make an error. Also, you will have to be careful if you use any other statistical entries for other purposes. When generating the consolidated financial report, you would simply ensure that the report includes both financial and statistical account types.
The eliminations can be entered via a journal entry template, journal entry copy, or the allocation sub-module of the general ledger. Setting an allocation to generate statistical journal entries is easy to do and will typically automate the entire process.