Consolidation - Examples

The following three examples illustrate the use of the Consoldation module in Standard ERP:
  1. Holding Company with two Subsidiaries;

  2. Subsidiary Company is itself a Holding Company; and

  3. Currencies.
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Consolidation - Examples - Holding Company with two Subsidiaries

This page describes using the Consolidation module using an example in which there is a holding company (or "Mother" Company) and two subsidiary companies (or "Daughter" Companies).

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For this example we will use the following company structure:

For simplicity and clarity, we will enter a single Transaction in each Company. This is the Transaction in the Mother Company:

This is the similar Transaction in the first Daughter Company:

We have used the same Accounts in both Transactions, but in the Account records in the Daughter Company we have specified Consolidation Accounts:

This means that the Bank Accounts of the Mother and Daughter Companies will be shown separately in consolidated Balance Sheet reports when we produce them from the Mother Company. The Bank Account of the Daughter Company will be shown as 701, while that of the Mother Company will be shown as 700 as normal. Account 701 does not have to exist in the Daughter Company, but it must exist in the Mother Company. If it does not, the balance of the Daughter's Bank Account will not be included in consolidated reports.

In the Main Owner Percentage register of the Daughter Company, we specified that it was 60% owned by the Mother Company. As we have selected the Reduce Minorities option in the Daughter Company's Bank Account, 60% of the balance of the Daughter Company's Bank Account will be shown in consolidated reports produced from the Mother Company. However, for the purposes of the example, we have not selected the Reduce Minorities option in the Sales Account (Account 100) in the Daughter Company. This means that the full balance of the Daughter Company's Sales Account will be shown in consolidated reports.

This is the Transaction in the second Daughter Company:

Now we will produce a Balance Sheet Report from the Consolidation module in the Mother Company. For the first example, we have not selected the Include Daughter Companies option in the 'Specify Balance Sheet' window, so the balance on the Bank Account will be calculated from the Transaction in the Mother Company only:

When we produce the report again, this time using the Include Daughter Companies option in the 'Specify Balance Sheet' window, the balance on the Bank Account will be calculated from the Transactions in all three Companies. For clarity, we have shown each Company's Bank Account separately (by specifying Consolidation Accounts in the Bank Accounts of both Daughter Companies, as described above):

The Net Change is calculated as follows:

2,000.00from M
+1,400.00x 60%from D1 (60% owned by M)
+300.00from D2
3,140.00

The figure for Total Net Assets is different to that for Profit/Loss this YTD because we selected the Reduce Minorities option for the Bank Account in the first Daughter Company but not for the Sales Account. So, the Total Net Assets figure includes 60% of the first Daughter Company's Bank Account, but the Profit/Loss this YTD includes 100% of its Sales Account.

We will now produce a Profit & Loss Report from the Consolidation module in the Mother Company. If we do not select the Include Daughter Companies option in the 'Specify Profit & Loss Report' window, the balance on the Sales Account will be calculated from the Transaction in the Mother Company only:

If we select the Include Daughter Companies option in the 'Specify Profit & Loss Report' window, the balance on the Sales Account will be calculated from the Transactions in all three Companies. Again, for clarity, we have shown each Company's Sales Account separately:

As mentioned above, we did not select the Reduce Minorities option for the Sales Account in the first Daughter Company, so the report shows 100% from all Companies.

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Consolidation examples:

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Consolidation - Examples - Subsidiary Company is itself a Holding Company

This page describes using the Consolidation module using an example in which one of the subsidiary companies (or "Daughter" Companies) has its own subsidiary company (or "Grand Daughter" Company).

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For this example we will start from the following company structure:

We will add a fourth Company to the structure. The new Company is 80% owned by the second Daughter Company:

Standard ERP Consolidation supports multi-level company structures, such as a Daughter company owning part of another Company (or many companies).

In the second Daughter Company, we have recorded its ownership of the Grand Daughter Company in the Daughter Companies setting:

In the Grand Daughter Company, we have used the Main Owner Percentage register to specify that it is 80% owned by the second Daughter Company:

The Grand Daughter Company contains the following Transaction:

Working in the Consolidation module of the second Daughter Company, we will first produce a Balance Sheet without using the Include Daughter Companies option. The balance of the Bank Account is calculated from a Transaction in the Daughter Company:

When we produce the same report using the Include Daughter Companies option, the balance will be calculated from Transactions in the second Daughter Company and the Grand Daughter Company:

We have selected the Reduce Minorities option for the Bank Account in the Grand Daughter Company, so the Net Change is calculated as follows:

300.00 from D2
+850.00x 80%from GD1 (80% owned by D2)
980.00

A Balance Sheet produced from the Mother Company using the Include Daughter Companies option will appear as follows:

The Net Change is calculated as follows:

2,000.00from M
+1,400.00x 60%from D1 (60% owned by M)
+300.00from D2
+850.00x 80%from GD1 (80% owned by D2)
3,820.00

Note that the balance of Account 702 includes the balances of the Bank Accounts in both the second Daughter Company and the Grand Daughter Company.

The Profit & Loss Report produced from the Mother Company using the Include Daughter Companies option will appear as follows:

We have selected the Reduce Minorities option for the Sales Account in the Grand Daughter Company, so the Total is calculated as follows:

2,000.00from M
+1,400.00from D1 (60% owned by M, Reduce Minorities off)
+300.00from D2
+850.00x 80%from GD1 (80% owned by D2, Reduce Minorities on)
4,380.00

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Consolidation examples:

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Consolidation - Examples - Currencies

This page describes using the Consolidation module using an example in which the various companies have different home Currencies.

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For this example, we will use the following company structure, showing the Base Currencies that are being used each Company:

One Currency must be used as a Base Currency in all Companies. In this case, it is the Euro. This is known as the "Group Currency" and is the Currency that will be used in consolidated reports.

In the example, the Euro is used as Base Currency 2 in three of the four Companies, and as Base Currency 1 in the second Daughter Company. In the Consolidation Settings in each Company, it should be specified whether the Euro is being used as Base Currency 1 or 2 in that Company:

Flip B of the Transaction in the Mother Company shows its value in both Currencies:

The values of the Transactions in the other Companies are as follows:

CompanyBase Currency 1Base Currency 2
Daughter 1SEK 1500.00EUR 155.56
Daughter 2EUR 70.59
Grand DaughterNOK 850.00EUR 100.00

In a Balance Sheet produced from the Mother Company using the Include Daughter Companies option, all figures will be in the Group Currency (EUR):

The Euro figures are taken straight from the Daughter Companies, so the balance for the three Bank Accounts will be calculated as follows:

3,076.92from M
+155.56x 60%from D1 (60% owned by M)
+70.59from D2
+100.00x 80%from GD1 (80% owned by D2)
3,320.85

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Consolidation examples:

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