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Dynamics 365 Community / Forums / Finance | Project Operations, Human Resources, ... / Good will and Minority...
Finance | Project Operations, Human Resources, ...
Answered

Good will and Minority Interest handling at the consolidated financials level in F&O

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Posted on by EA-24030655-0 21
  1. If part holding of subsidiary – Investment in “A” company and share capital of subsidiary has to be knocked off, in addition to the same Goodwill and Minority interest has to be accounted.
Example – “B” company
Investment in “A” company – 4.5crs, share capital and reserves of “B” company – 2crs. (“A” Company share – 1.02 (51%))
Goodwill to be accounted – 3.48crs (4.5-1.02) and Minority interest to be accounted – 0.98crs
 
So, the accounting of good will & minority interest in D365 F&O would be treated as a GL entry in a separate transactional entity or is this to be treated as elimination entries.
 
Request your feed back.
 
Thanks you very much for your support in advance.
 
Sincerely,
Sriram
Categories:
Dynamics 365 Finance
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  • Verified answer
    Saif Ali Sabri Profile Picture
    Saif Ali Sabri 2,351 Super User 2025 Season 2 on at
    In Dynamics 365 Finance & Operations (D365 F&O), goodwill and minority interest are typically handled as part of the consolidation process. The approach depends on whether you are using Legal Entity-based transactions or the Consolidation module for financial reporting.

    Solution Approach

    1. Goodwill and Minority Interest Accounting Treatment

    • Goodwill is recorded as an asset in the consolidated books.
    • Minority Interest (Non-Controlling Interest - NCI) is recorded as part of equity in the consolidated financial statements.
    • These entries are typically not treated as elimination entries but as separate financial adjustments.

    2. Journal Entry Treatment in D365 F&O

    The accounting transactions can be posted through a General Journal entry in a separate consolidation company or within the subsidiary entity, depending on the reporting structure.

    Example Based on Your Case

    Company A holds 51% in Company B:
    • Investment in B by A: ₹4.5 Cr
    • Share Capital & Reserves of B: ₹2 Cr
    • A’s Share (51%): ₹1.02 Cr
    • Goodwill: ₹4.5 Cr - ₹1.02 Cr = ₹3.48 Cr
    • Minority Interest (49%): ₹0.98 Cr

    Journal Entry in Consolidation Entity (Using a General Journal in D365 F&O)

     

    Account Debit (Dr) Credit (Cr)
    Investment in Subsidiary (A) ₹4.5 Cr  
    Share Capital & Reserves (B)   ₹2.00 Cr
    Minority Interest   ₹0.98 Cr
    Goodwill ₹3.48 Cr  

    🔹 Posting these entries ensures the correct reflection of goodwill and minority interest in the consolidated balance sheet.
    3. Using the Consolidation Module in D365 F&O

    If you are using the Consolidation module, follow these steps:
    1. Set Up a Consolidation Company
      • Go to General Ledger > Setup > Ledger Setup > Consolidation.
      • Define the consolidation company where the adjustments will be posted.
    2. Define Minority Interest Account
      • Navigate to Chart of Accounts and create a specific account for Minority Interest (Equity section).
    3. Post Consolidation Adjustments
      • Use a General Journal to post the goodwill and minority interest adjustments manually.
    4. Run the Consolidation Process
      • Go to General Ledger > Periodic > Consolidate > Consolidation Online.
      • Select the source companies and post the consolidated balances.

    Key Takeaways

    ✅ Goodwill & Minority Interest → Recorded as separate GL entries in the consolidation company.
    ✅ Use Consolidation Module → To aggregate financials and reflect adjustments.
    ✅ Manual Journal Entries → Required for goodwill and minority interest.
    Would you like guidance on configuring the Consolidation module in D365 F&O? 🚀

  • Suggested answer
    EA-24030655-0 Profile Picture
    EA-24030655-0 21 on at
    Thank you so much for such an elaborate response. Much helpful, much appreciated. Thank you!
     
    A basic query. 
     
    In the legal entity-based transaction approach, Company A and Company B would already be separate entities in F&O.
     
    Company A would have already made a accounting entry for investment in company B. Company B would already have share capital and reserves in its book.
     
    While running consolidation in F&O, the investment of company A and share capital and equity of company B would already be coming in a part of consolidated entries in the consolidation entity.
     
    In such case, passing a journal entry :
     
    Account Debit (Dr) Credit (Cr)
    Investment in Subsidiary (A) ₹4.5 Cr  
    Share Capital & Reserves (B)   ₹2.00 Cr
    Minority Interest   ₹0.98 Cr
    Goodwill ₹3.48 Cr
     
    Would this not result in double accounting of 'Investment in subsidiary and share capital & reserves' (these are already there as part of individual entities and they come in as part of consolidated entries) & again a journal entry as above is passed.
     
    Or if it does, may you please explain how this knocks off and fits as a consolidated accounting treatment.
     
    Many thanks for your help and clarification in advance.
     
    Sincerely,
    Sriram
  • Suggested answer
    Arvind Bharti Profile Picture
    Arvind Bharti 718 Super User 2025 Season 2 on at
    Hi,
     
    I think you can use elimination or general journal entries to adjust .
     
    Only thing to keep in mind you can post GL entry only in elimination entity not consolidation entity.
     
    Elimination can be posted in both.
     
    So if you are designing the structure then you can possibly think of having one elimination entity before final consolidation entity.
  • Suggested answer
    Saif Ali Sabri Profile Picture
    Saif Ali Sabri 2,351 Super User 2025 Season 2 on at

    You're absolutely right to raise this point! Let's break it down to ensure there's no double accounting and that goodwill and minority interest are correctly reflected in the consolidated financials.

    Understanding the Consolidation Process in F&O

    1. Pre-Consolidation Individual Books:
      • Company A's Books:
        • Investment in Company B → ₹4.5 Cr (Asset)
      • Company B's Books:
        • Share Capital → ₹2 Cr (Equity)
        • Retained Earnings / Reserves → Reflected in Equity
    2. When Consolidation is Performed in F&O:
      • The system aggregates all assets, liabilities, income, and expenses from both companies.
      • This means:
        • Investment in Subsidiary (A's books) appears as an asset in the consolidated balance sheet.
        • Share capital and reserves of B appear under equity.
    3. Adjustment for Goodwill & Minority Interest
      • The investment in B (A's books) needs to be eliminated against B's share capital & reserves because from a group perspective, a company cannot hold shares in itself.
      • The difference between the investment and A’s share of B’s equity is treated as Goodwill.
      • The portion of B’s equity belonging to Minority Shareholders (49%) is recorded as Minority Interest in the Equity section.

    How the Journal Entry Fits In

     

    Yes, if you directly post the journal entry in the consolidation company without eliminations, it would result in double accounting. However, in the consolidation process, this entry is posted as an elimination adjustment, ensuring that the net impact in consolidated books is correct.

    Consolidation Elimination Entry (To Remove Investment & Recognize Goodwill & Minority Interest)

    Account Debit (Dr) Credit (Cr)
    Investment in Subsidiary (A) ₹4.5 Cr  
    Share Capital & Reserves (B)   ₹2.00 Cr
    Minority Interest   ₹0.98 Cr
    Goodwill ₹3.48 Cr  

    🔹 Effect of this Journal Entry:
    ✅ Eliminates the Investment in Subsidiary (A’s Books).
    ✅ Eliminates B’s Share Capital & Reserves from the Consolidation.
    ✅ Recognizes Goodwill (Excess paid over net assets).
    ✅ Recognizes Minority Interest (49% share of B’s equity).

     

    After posting this elimination entry, the consolidated balance sheet correctly represents the group as a single entity rather than as separate companies with cross-holdings.

     

    Final Thought

    💡 Key Takeaway:
    The journal entry is necessary only in the consolidation entity to eliminate intercompany investments and recognize goodwill & minority interest. If not done, the consolidated financials would overstate both total assets (Investment in Subsidiary) and total equity (Share Capital & Reserves of B).

    Would you like a step-by-step guide on how to set up and process these eliminations in D365 F&O’s Consolidation module? 🚀

  • Vahid Ghafarpour Profile Picture
    Vahid Ghafarpour 12,133 Super User 2025 Season 2 on at
    If any of the responses helped resolve your issue, please take a moment to mark the best answer. This helps others in the community quickly find solutions to similar problems.

    To do this, simply click the "Does this answer your question?" button on the most helpful response and like the helpful posts. If your issue is still unresolved, feel free to provide more details so the community can assist further!

    Thanks for being an active part of the Dynamics 365 Community! 😊
  • EA-24030655-0 Profile Picture
    EA-24030655-0 21 on at
     
    Thank you very much for the support.
     
    In the same project, client has a expectation.
     
    If you could share your thoughts, would be much helpful..........
     
     
    Note: Currency of source company and currency of consolidation company are different 
     
    In D365 F&O, when we run monthly consolidation , only the debit or credit of balance sheet accounts gets converted based on the consolidation rate specified in consolidation online page.
     
    But the opening balance amount always remains the same when we run month on month consolidation.
     
    Client requires the total closing balance (opening balance + debit - credit) at the end of the month to be converted based on the consolidation rate in consolidation on line page.
     
    Is it possible to meet client expectation  in F&O.
     
    (Example)
     
    Source company currency JPY
    Consolidation company currency USD
       
    Dec 24 USD/JPY rate 0.0065
    Jan 25 USD/JPY rate 0.0069
    Feb 25 USD/JPY rate 0.0070
     
    Month Source currency Source amount (Debit) Consolidation currency  Exchange rate Consolidated amount
    Dec-24 JPY 1000 USD 0.0065 6.5
    Jan-25 JPY 2000 USD 0.0069 13.8
    Feb-25 JPY 3000 USD 0.0070 21
     
    What F&O does 
     
    Month Opening balance (USD) Debit (USD) Credit (USD) Closing balance (USD) Remark
    Dec-24 0 6.5   6.5 1000 JPY*0.0065 = 6.5 USD
    Jan-25 6.5 13.8   20.3 (6.5 + 13.8) 2000 JPY*0.0069 = 20.3 USD
    Feb-25 20.3 (6.5 + 13.8) 21   41.3 (20.3 + 21) 3000 JPY*0.0070 = 21 USD
     
    What client expects
     
    Opening balance + movement of each month to be consolidated at the rate for the month
     
    Dec 24
     
    1000 JPY @ exchange rate 0.0065 = 6.5
     
    Jan 25 
     
    Opening balance (1000 JPY) + Jan 25 movement (2000 JPY) = 3000 JPY @ exchange rate for Jan 25 (0.0069) = 3000*0.0069 = 20.7 USD
     
    Feb 25
     
    Opening balance (1000 JPY) + Jan 25 movement (2000 JPY) + Feb 25 movement (3000 JPY) = 6000 JPY @ exchange rate for Feb 25 (0.0070) = 42
     
     
    Sincerely,
    Sriram

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