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Consolidation & Elimination

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Posted on by CU13070957-0

Hi experts,

I am planning to prepare a consolidation based on two entities, referred to as Entity A and Entity B. In this setup:

Entity A will contribute 100% of its balance to the consolidated entity.
Entity B will contribute 60% of its balance to the consolidated entity.

Both entities will have intercompany transactions as well as other external transactions.

For example, if Entity A has a receivable of SAR 100 from Entity B, then Entity B will show a payable of SAR 100. However, since only 60% of Entity B’s balance is incorporated into the consolidated entity, this will result in an imbalance in the elimination journal, as the full receivable from Entity A does not have an equal and opposite payable from Entity B.

Is there a recommended solution to ensure that the elimination journal remains balanced within the consolidated entity under this ownership structure?

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Dynamics 365 Finance

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✅ Recommended Solution: Proportional Elimination Based on Ownership

To maintain a balanced elimination journal, you must apply proportional intercompany eliminations aligned with the ownership percentage of Entity B. Here's how to approach this in Microsoft Dynamics 365 Finance (Consolidation & Elimination module):

🔧 Step-by-Step Solution:

1. Use Consolidation Percentage Settings

In the Consolidation company setup, assign:
- Entity A: 100% ownership
- Entity B: 60% ownership
This ensures that only 60% of Entity B’s balances are brought into the consolidation entity.

2. Apply Proportional Intercompany Elimination Rules

In Dynamics 365 Finance, intercompany eliminations are driven by elimination rules and criteria.
You need to define custom elimination rules that eliminate intercompany transactions proportionally based on ownership.

Example:

Entity A Receivable: SAR 100 (from Entity B)
Entity B Payable: SAR 100
- Only 60% of B’s payable (SAR 60) is consolidated
Therefore, eliminate:
- A’s Receivable: SAR 60
- B’s Payable: SAR 60

🔹 The remaining SAR 40 in Entity A's books will reflect the non-controlling interest (NCI), which is outside the consolidation scope and should remain as is.

3. Create an Elimination Rule with Filter

Use filter criteria (e.g., Main Account, Legal Entity, Intercompany relationship) and apply a calculation factor (e.g., 60%) for Entity B.

Navigate to:
General ledger > Periodic tasks > Consolidate > Elimination rule
Set the elimination amount to use a custom percentage (e.g., 60%) for Entity B.

4. Handling the Non-Controlling Interest (NCI)

The remaining 40% of Entity B’s balances should be reported as Non-controlling Interest in your consolidated financials.
Dynamics 365 doesn’t auto-generate full NCI journal entries. You will need to handle this using:
- Manual adjustment journals, or
- Financial reporting configuration (e.g., via row/column definitions in Financial Reporter or Management Reporter).

✅ Key Tips:

Ensure elimination rules are tested in a test company to avoid unintended eliminations.
Use intercompany dimensions or main account ranges to target only intercompany transactions.
If using currency conversions, ensure you eliminate at consolidated currency values.

🧾 Summary:

Item	Treatment
Entity A Receivable (SAR 100)	60% eliminated → SAR 60
Entity B Payable (SAR 100)	60% consolidated → SAR 60 eliminated
Remaining SAR 40	Treated as NCI

This ensures your elimination journal is balanced and aligns with your ownership structure.

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Suggested answer

Abhilash Warrier 5,402 Super User 2025 Season 2 on at

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Hi,

Please follow the detailed instructions mentioned by Saif Ali Sabri.
You should use the elimination proposal or manual journal in the consolidation company to post the proportional elimination.

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Suggested answer

Yng Lih 1,560 on at

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Setup Consolidate online using template. (Consolidation > Consolidation Online Templates Setup)

Setup the Elimination rule (Consolidation > Setup > Elimination Rule)

Run Consolidation (Consolidation > Online Consolidation)

If this helped, please mark it as "Verified" for others facing the same issue. Thank you.

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