Consolidating business units
With Consolidations, you can automate intercompany eliminations and more accurately analyze consolidated results.When you consolidate business units, the system creates eliminating journal entries.
It is actually a reporting construct made up of the combined ledger balances of the selected business units and the intercompany offset amounts posted to the ledger for the elimination unit.This section discusses how to: check box, as this is what distinguishes an elimination unit from other units and its treatment for the consolidation process.You can also add elimination units to the consolidation tree in the same way that you add any detail Chart Field value.The placement of the elimination units on the tree tells the consolidation process what business units' intercompany activity is eliminated within the elimination unit.For example, the ELIM5 elimination unit in the consolidated management reporting tree, CONSOLIDATE_CORP, is defined as the elimination unit for the ASIA/PAC consolidation; therefore, intercompany activity between Japan and Australia are eliminated within ELIM5 .Organizations often have complex structures with multiple business or operating units and legal entities with varying degrees of ownership.
If your organization comprises more than one business unit or operating entity, you can consolidate these organizations when you report on overall operations, presenting financial statements that accurately describe your financial status.
For example, assume Consolidated Manufacturing is a multinational company that has a controlling interest in a United States business, as well as numerous other subsidiaries worldwide.
The balance sheet for Consolidated Manufacturing lists its United States investment as an asset.
Consolidated Manufacturing also owns several buildings used by subsidiaries that record the payment of rent to corporate headquarters through intercompany accounts.
While these companies are separate legal entities, they represent one unified economic entity.
To gain a complete picture of the entire organization, you combine (consolidate) all the assets and liabilities of each business unit, eliminating intercompany transactions and minority interest relationships by creating consolidation elimination journal entries.