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Elimination while consolidation

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Posted on by imran ul haq

4,017

Hi All

While consolidation and elimination, i want to know which ledger accounts i have to consider in the "Elimination rule".

As per my scenario, consider the two Companies A and B, to track the inter-company orders i create the two ledger accounts for the payable and receivables, two accounts for the COGS and revenue. Now i create the PO from company B and the price is $120 so, once i create the PO the sales order created automatically. Now i proceed further and invoice the PO and the sales order which generate the inter-company receivables and payable of $120 to each other. The cost of the item in Company A is $100

Company A transaction:

Inventory A/C 100 Cr.

COGS 100 Dr.

Customer B 120 Dr.

Revenue 120 Cr.

Company B transaction:

Inventory A/C 120 Dr.

Vendor A 120 Cr.

Now the company B sales the item to third party with the price $150 and generate the invoice to it.

Company B transaction:

Inventory 120 Cr.

COGS 120 Dr.

Customer (3rd party) 150 Dr.

Revenue (3rd Party) 150 Cr.

Combined Company B transactions:

Vendor A 120 Cr.

COGS 120 Dr.

Customer (3rd party) 150 Dr.

Revenue (3rd Party) 150 Cr.

Now when i consolidate and eliminate, the inter-company receivables and payable will be zero as i in the elimination rule i select these two ledger accounts. Now i want to eliminate the Cost from the Company B and revenue from the company A, how i can eliminate the cost and revenue as the amounts in these ledger accounts will not be the equal as the COGS come when i invoice to the third party ans that ledger account (COGS) will consisting of the other sales also.

Please advise, thanks in advance.

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Ludwig Reinhard Microsoft Employee on at

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Hi Imran,

I can only give you my personal opinion on that and this is that you cannot use the elimination functionality as long as the amounts do not match exactly. I once tried posting the difference on a system rounding account by increasing the allowed rounding but this cannot be a solution.

You also need to consider that you will always experience differences in the amounts to consolidate. A situation where the amounts to eliminate exaclty match is certainly the exception rather than the rule. Please also remember that those differences trigger other transactions (=> deferred tax postings) that AX currently does not support.

Due to this in several other issues, I would recommend doing the consolidation in Management Reporter or a specialized consolidation software especially if you are dealing with complex consolidation scenarios.

All the best,

Ludwig

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imran ul haq 4,017 on at

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thanks Ludwig for your reply.

yes i tried the same but the journal did not post due to imbalance of the journal, is there any way to change/edit the proposed journal.

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Ludwig Reinhard Microsoft Employee on at

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Hello Imran,

To my knowledge there is no possibility changing the proposed journal except by recording an adjustment transaction in one of your companies that gets consolidated and to run the consolidation process again. Manual adjustment postings e.g. through ordinary GL daily journals are unfortunately not possible.

All the best,

Ludwig

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Abdo Khoury 14,855 on at

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hi ,

i hope by now this was resolved by now,

i have the exact same issue , my elimination entry doesn't balance; what is the solution,

we can't manually close the difference since we are dealing with more than 50 legal entities in this consolidation, any suggestions ?

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Murthy2601@hotmail.com 637 on at

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Hi,

Generally intercompany transactions will balance only when we sell the items at cost and not cost plus.

So when we have profit element in selling to the group company then that difference would have to be adjusted (as per the Accounting standards).

We have to choose the option of "Elimination propose only" and make adjustments for the proposed elimination entries.

Regards,

Narasimha.

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Abdo Khoury 14,855 on at

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hi Narasimha

thank you for your feedback ,

but even when we run "elimination proposal only" ax doesn't allow me to add new lines , there is no option but to validate and post

please advise how you suggest we update the elimination proposal manually

thanks

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Ludwig Reinhard Microsoft Employee on at

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Hi Silvano,

That is right. AX does not allow you adding some lines that you can use for example for posting adjustments, reclassifications, etc.

For that purpose, you would have to generate a separate 'adjustment company' that you incorporate into your consolidation group of companies.

Best regards,

Ludwig

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Abdo Khoury 14,855 on at

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hello Ludwig

but what you are suggesting is creating a legal entity just for the sake of one adjustment entry,

did i understand you correct?

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Hossein.K 6,648 on at

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Hi Imran,

Consolidations and Eliminations in AX2012:

www.axug.com/.../DownloadDocumentFile.ashx

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Afnan Ahmad 60 on at

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Hi Ludwig,

I want to have your expertise on a quite complexed scenario for Consolidation

and Elimination.

P Co. is parent company to S Co.

Cost of Goods P Co. incurred 100 goods @ 100/- = $ 10,000,

P Co. sells goods to S Co. 50 goods @ 150/- = $ 7500

S Co. Sells 25 Goods @ 200/- = $ 5000/-. S Co. Sells these goods to 3rd

party customer

At Year end 25 goods remains in S Co.'s inventory.

Journal Entries:

P Co.

Purchases

Dr. Inventory 10000

Cr. Accounts Payable 10000

Sales

Dr. Accounts Receivable 7500

Cr. Sales 7500

Inventory

Dr. COGS 5000

Cr. Inventory 5000

S Co.

Purchases

Dr. Inventory 7500

Cr. Accounts Payable 7500

Sales

Dr. Accounts Receivable 5000

Cr. Sales 5000

Inventory

Dr. COGS 3750

Cr. Inventory 3750

Elimination Entries

Dr. Accounts Payable 7,500

Cr. Accounts Receivable 7500

Dr. Sales 7500

Cr. COGS 7500

Dr. Unrealized profit/COGS 1250

Cr. Inventory 1250

I have separate accounts for Intercompany Sales, Intercompany Purchases,

Intercompany AR, Intercompany AP. Challenge is to make the adjustments in

COGS and Inventory. How can I post these eliminations in MR while

consolidation?

Please suggest.

Regards,

Afnan Ahmad

Associate Functional Consultant,

Confiz Ltd,

Pakistan

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