Consolidations:
Consolidations in Dynamics 365 Finance and Operations refer to combining the financial data from multiple legal entities into a single financial statement. This process provides a consolidated view of an organization's financial performance and positions.
Before you process a consolidation, you must set up the legal entity. You can run consolidation as many times as you require, and all data will be translated from the source company's accounting currency or reporting currency to the currency that is defined for the consolidation company.
Note that you can't post daily journals in a consolidation company, but you can post them in an elimination company. Therefore, you might want to have a separate elimination company.
Pre-setup required:
- Select Organization administration, and then create a new Consolidations Legal entity.
- Find the Consolidation Company. The Use for financial consolidation and use for financial elimination process options should be set to Yes. If they are set to No, set them to Yes.
- Configure the Ledger and journal as usual for the Consolidations company C001.
- Accounts for automatic transactions:
Navigate to General ledger > Posting setup > Accounts for automatic transactions and select the appropriate main accounts for the two posting types: - Balance account for consolidation differences
- Profit and loss account for consolidation differences.
- Ledger set up:
Navigate to General ledger > Ledger setup > Ledger.In the Accounts for reconciliation tab, select the main accounts for unrealized gain and loss postings using the main account defined in the setup form “Account for automatic transactions” as “Balance sheet account for consolidation differences”. - Exchange rate types:
Set up the exchange rates that are used in the consolidation / currency adjustment run. This should be at least Average and Closing. - Exchange rates:
Navigate to General Ledger > Currencies > Currency exchange rates. Fill in the exchange rate pairs that you need.
Run the Consolidation:
Consolidate Online Templates
a. Enable feature in Feature management:
To use the templates, enable the Consolidate online using templates feature in the Feature management workspace.
Refresh the browser after enabled.
b. Consolidate Online Templates:
After you set up the consolidation information one time in the templates, you can use the templates whenever you must run the consolidation process. You no longer must set up or change the information each time that you want to consolidate accounts. The templates contain all the information that was on the Consolidate Online page. Therefore, we can quickly run the process by selecting dates and a template.
Navigate to Consolidations > Setup > Consolidation online template setup to create multiple templates that you can use in Consolidate online in Finance.
For each template that you create, you enter a name and a description. On the Consolidation online templates page, you can also edit, delete, and copy templates.
You can setup every activity you configure in consolidate online page through consolidate online templates.
Once the template is setup, navigate to Consolidations > Consolidate Online.
We can setup consolidate online templates from this page too by clicking on ‘Consolidation online template setup’. To run consolidation, click ‘Perform Consolidation’ the consolidation period isn't defined in the template. Instead, it's entered when the consolidation is processed.
Provide Consolidation period > Select the template which was previously configured > Check Run in the background > Click ok to consolidate all the balances.
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NOTE: If you are not using ‘consolidation online template’ feature, standard consolidation process is defined below. - Consolidate Online
- Select Consolidations > Consolidate online.
- Enter a description, such as the period you’re running the consolidation for.
- Optional: Enter a range of accounts. We recommend leaving the range blank so that all accounts are consolidated.
- Select whether the consolidation account should be used. If you set the Use consolidation account option to Yes, select whether the consolidation account should be selected from the main account or a group. For this example, leave the Use consolidation account option set to No.
- Select the “from” and “to” dates that you’re consolidating for.
- Set the Include actual amounts option to Yes.
- Select whether budget amounts should be included. For this example, leave the option set to No.
- Set the Rebuild balance during the consolidation option to No. We recommend rebuilding the balance as a separate batch job after the consolidation is completed.
If we have different COA then we should select use consolidation account as Yes. For us we are using single COA, hence this should be set to No.- Consolidate online – Financial dimensions.
In the financial dimensions tab, set the order of the segments by determining based on which dimensions we would like to consolidate from our subsidiaries. You need to define which financial dimensions will be populated in the group ledger, i.e. the ledger of the consolidation company. The legal entity dimension enables the option to see the source company of each transaction in the group ledger. - Consolidate online – Legal entities.
On the Legal entities tab, you define the companies that should be included in the reporting entity.- Currency revaluation in a consolidation company
- Initial Consolidation:
- Use the "Currency translation" tab of the Consolidate Online feature to select the initial exchange rates for translation during the consolidation process.
- This step ensures that all financial data from different entities are initially consolidated using consistent exchange rates, typically at the Consolidation date.
- Currency Rate Changes:
- After the initial consolidation, if there is a new exchange rate entered (for example, in the next month), you must revalue the account balances to reflect these changes.
- This revaluation ensures that account balances are adjusted based on the updated exchange rates to reflect the current value in the reporting currency.
- Exchange Rate Types:
- The exchange rate type determines how currencies and exchange rates are applied to accounts:
- Consolidation date: Use for accounts that should use the current exchange rate at the time of consolidation.
- Transaction date: Use for accounts that should use historical or average exchange rates based on transaction dates.
- User-defined: Allows flexibility to specify exchange rates manually as needed.
- Updating Unrealized Gains or Losses:
- When revaluing account balances due to exchange rate changes, unrealized gains or losses are updated based on the new exchange rates and the respective dates.
- This ensures that the financial statements reflect the most accurate valuation of assets and liabilities in the reporting currency.
- Consolidation Process:
- Continuously monitor exchange rate changes and update the consolidation process accordingly to maintain accuracy in financial reporting.
- The process involves selecting appropriate exchange rates (Consolidation date, Transaction date, or User-defined) to ensure consistency and compliance with accounting standards.
When you choose a User-Defined exchange rate, you can also force the exchange rate. However, we don’t recommend that as the history is lost each time you run the consolidation. When you translate Balance sheet accounts & Profit & Loss accounts with different exchange rates, you end up with a Currency Translation Adjustment (CTA). That’s why you need to define which accounts to use for the consolidation differences in the Accounts for automatic transactions.
Elimination rules
To eliminate intercompany transactions, you can create an elimination rule. Alternatively, you can do a manual elimination entry in a company that is designated an elimination company. If you create an elimination rule, you have two options for the elimination method: Net change and Fixed.
1. Set up elimination rules
When you set up elimination rules in Finance, you can create a financial dimension that is used specifically for elimination. Most customers name this financial dimension Trading Partner or something similar. If you decide not to use a financial dimension, make sure that you have main accounts that are used only for intercompany transactions.
You can find the setup for eliminations in the Setup area of the Consolidations module. After you enter a description for the rule, you must select the company that the elimination journal will be posted to. The company that you select should have Use for financial elimination process selected in the legal entity setup.
You can set the date when the elimination rule becomes effective and the date when it expires, as you require. If you want the elimination rule to be available in the elimination proposal process, you must set the Active option to Yes. Select a journal name of the Elimination type.
After you've defined the basic properties, select Lines to define the actual processing rules. There are two options for eliminations: you can eliminate the net change amount or define a fixed amount.
Select the source accounts. You can use an asterisk (*) as a wildcard character. For example, 1* selects all accounts that start with a 1 as a source of data for the allocation.
After you've selected, he source accounts, use the Account specification field to specify the account that is used from the destination company. Select Source to use the same main account that is defined in the source account. If you select User defined, you must specify a destination account.
The Dimension specification field works like the Account specification field. Select Source to use the same dimensions in the destination company and the source company. If you select User defined, you must specify the dimensions in the destination company by selecting Destination dimensions. Then select source dimensions and the financial dimensions and values that are used as a source of the elimination.
2. Process elimination transactions
There are two ways to process elimination transactions. The transaction can be processed during the Consolidate online process, or you can create an elimination journal and run the elimination proposal process.
Setup in the Consolidations Module:
- Ensure that the company where you want to process elimination transactions is defined as an elimination company within your financial system setup.
Selecting the Elimination Journal:- Navigate to the Consolidations module and select "Elimination journal" after ensuring the company is set up correctly.
- Choose the appropriate journal name configured specifically for elimination transactions.
Entering Lines in the Elimination Journal:
- Once the elimination journal is selected, proceed to enter lines detailing the elimination transactions. These entries typically involve eliminating intercompany transactions to avoid double-counting in consolidated financial statements.
Running the Elimination Proposal:- After entering the necessary lines, proceed to the next step by selecting "Proposals" > "Elimination proposal."
- Here, you'll specify details for the elimination proposal:
- Source Company: Select the company that provides the consolidated data. This is typically the parent or the consolidating entity.
- Elimination Rule: Choose the specific elimination rule that defines how intercompany transactions are eliminated. This could involve using specific financial dimensions or main accounts designated for eliminations.
- Date Range: Enter start and end dates to define the period during which elimination amounts should be searched.
- GL Posting Date: Specify the date that will be used to post the journal entries to the general ledger. This date is crucial for ensuring transactions are recorded in the correct accounting period.
Review and Post the Journal:- After selecting OK in the elimination proposal window, the system will generate a proposal showing the amounts to be eliminated based on the defined rules and parameters.
- Review the proposed elimination amounts to ensure accuracy and compliance with accounting standards.
- Once validated, proceed to post the elimination journal entries to the general ledger.
Verification:- Verify that the elimination entries have been correctly posted and reflected in the consolidated financial statements.
NoteThe elimination journal shows the amounts for account values in the currency of their originating transactions, not in the accounting currency. When you review the amounts in the elimination journal, you might find this behavior confusing.
