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Warning
This document has been generated from the SAP Help Portal and is an incomplete version of the official SAP product
documentation. The information included in custom documentation may not re ect the arrangement of topics in the SAP Help
Portal, and may be missing important aspects and/or correlations to other topics. For this reason, it is not for productive use.
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You can use this component to automatically eliminate interunit (IU) pro ts and losses. This elimination can be a statutory
accounting requirement or a policy of management accounting for the group, either or both of which require that the
consolidated statements portray the group as if it were a single entity.
Interunit pro t or loss requiring elimination has been recorded in your group as a result of the sale of inventory.
The consolidation group still owns all or part of the asset that was sold within the group as per the date of consolidation
– that is, it has not been fully sold to a third party.
Implementation Considerations
Implement this component if you want to eliminate IU pro t/loss resulting from inventory transfers by means of automatic
posting.
Features
Calculation Base for Interunit Pro t/Loss
A trading relationship exists between such a pair of consolidation units. The system uses productgroupswhen reconciling the
inventory data with the supplier data of those units.
Valuation allowances may already be accounted for in the interunit pro t/loss.
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The system eliminates the interunit pro t/loss as follows:
If the difference re ects an IU pro t – that is, the difference is positive – then the system makes an adjustment to match
the lower value, in this case, the group COGM. The group records the lowest value.
If the difference re ects an IU loss – that is, the difference is negative – then the system makes an adjustment to match
the higher value – in this case, the group COGM.
The offsetting entry can be posted either to an income statement item (standard procedure) or to a balance sheet item.
At the same time, the system adjusts retained earnings and/or annual net income.
The system posts deferred taxes to the pro t adjustment item (optional).
You can transfer the distribution costs to an item you specify – for example, cost of goods manufactured.
Furthermore, you can record currency translation differences that are incurred in the elimination of interunit pro t/loss.
The component not only portrays supply relationships between two units within a consolidation group. It also portrays supply
chains that span multiple pair relationships.
The elimination of interunit pro t/loss in transferred inventory treats consolidation units according to their
accountingtechnique . The following accounting techniques are supported:
Purchasemethod
Equitymethod
(These are consolidation units, whose upper units [investors] have a controlling interest, but are nevertheless merely
included using the equity method in consolidation of investments.)
Posting Level
If you only want to account for two-sided relationships and only want to consolidate units using the purchase method, then you
use a document type that posts to posting level 20 (two-sided elimination entries).
However, if you want to account for supply chains or you want to consolidate units using the equity method, then you need to
use a document type that posts to posting level 30.
Consolidation units A and B are trading partners and are consolidated using the purchase method.
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Consolidation unit A sells goods to B, which incurs an interunit pro t of 100 monetary units.
No currency translation differences are posted and no transfer of distribution costs takes place.
1000 1000-
Expenses 1000-
1500 1500-
Expenses 1500-
The following entries are posted to eliminate the IU pro t of 100 monetary units, with a tax rate of 50%:
Dr. Cr.
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Dr. Cr.
The deferred income taxes that arise are cleared in subsequent periods.
After the elimination, the consolidated nancial statements show the following data:
= 700
= 250-
2450 2450-
Supply Chains
Use
You can use this function to portray in the system multiple sales of inventory assets between the consolidation units of a
consolidation group before such assets are sold to third parties.
Prerequisites
In the data basis , you have (or the system has) created the InfoProvider for the supplier share.
You have collected the additional nancial data for the elimination of interunit pro t/loss in transferred inventory, including the
supplier share.
Features
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The system supports supply chains of more than two consolidation units. The system calculates and eliminates interunit pro ts
(or losses) along the entire supply chain within one consolidation group. The calculation of interunit pro t is dependent on the
consolidation group, and not only on one pair of consolidation units. Therefore, the system posts the entries with posting level
30 (consolidation group-dependent entries).
The system stores the delivery relationships within the supply chain in the Supplier Share data stream. If the respective supplier
share percentages in a consolidation group do not add up to 100%, then the missing share is either self-constructed by the
buyer or originates from a third party.
Constraints
The calculation of interunit pro t does not take valuation methods such as LIFO and FIFO into account.
The system does not support delivery cycles in which a buyer sells back the asset to one of the sellers in the chain. Also
not supported are supply chains modeled as grids; only hierarchical chains are supported.
Valuation allowances can be posted only for the inventory-managing consolidation unit, not elsewhere in the supply
chain.
Interunit pro t or loss can be calculated either using percentage rates (for the pro t margin and the cost of goods
manufactured) or using absolute currency amounts. This setting may not change throughout the course of the supply
chain.
Activities
Create a document type with posting level 30.
Example
See the following examples of supply chains:
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All units (in this case, companies) are consolidated using the purchase method.
Postings
The value of the inventory asset is reduced at company C1 by the interunit pro t (USD 100), and the offsetting entry is posted
to the respective income statement item at the inventory-managing unit.
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All units (in this case, companies) are consolidated using the purchase method.
The system calculates the interunit pro ts and the carrying (book) values for companies C2 and C3 based on the carrying value
reported by C1, the pro t margin percentages, and the supplier shares.
Postings
The value of the inventory asset is reduced at company C1 by the interunit pro ts (67.50 + 33.75 = USD101.25); and the
offsetting entry is posted to the respective income statement item at the supplying units.
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Net income is reduced by USD 101.25.
Location of Values
For the inventory data, you can de ne how the system accesses the data that is necessary for eliminating interunit pro t or loss
in transferred inventory.
Additional nancial data must always be recorded for supplier data and the supplier share.
For the Elimination of Interunit Pro t/Loss in Transferred Inventory, the additional nancial data is data on the interunit
delivery of goods and services:
Inventory data
Supplier data
Supplier share
Note
As an alternative, you can have the system also read the inventory data from the totals database. See the section
Location of Inventory Data.
Use
In the Elimination of Interunit Pro t/Loss in Transferred Inventory, the additional nancial data is used to determine
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the book value and
of an asset. This calculation is based on the standardized nancial data that considers the incidental acquisition costs that must
be capitalized.
Structure
Inventory Data
Versions
Partner unit (here: supplying consolidation unit; optional for postings at posting level 30; if no partner unit is speci ed in
the additional nancial data, the system determines this from the supplier share)
Product group
This includes non-permanent valuation allowances (for example, non-permanent lump sum valuation allowances for
spare parts).
A valuation allowance disallowing losses is a permanent valuation allowance that must not convert a positive gross
interunit pro t/loss (gross interunit pro t/loss = book value in reporting period - group cost of goods manufactured) to
an interunit loss, so as not to violate a principle of prudence and lowest value applied in the individual nancial
statements. The interunit pro t and loss to be eliminated is not negative.
Inventory quantity
The incidental acquisition costs are incidental acquisition costs that must be capitalized from the group's perspective,
which increase or reduce the group cost of goods manufactured. From the perspective of the consolidation units, these
incidental costs would be posted successfully with an effect on net income as soon as they are incurred.
Supplier data
Versions
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Product group
The supplier data is valid in all subsequent periods after the starting period, meaning that you do not need to reenter it if the
supplier data has not changed. This minimizes the data entry effort.
IPI Variants
Pro t percentage 20
300 * 20/120 = 50
300 * 20/100 = 60
Supplier Share
The system needs the supplier share if you want to map supply chains. The supplier share includes:
Versions
Product group
The supplier share de nes the percentage of inventory that the relevant consolidation unit delivers.
If you specify the supplier share, the system calculates supply chains.
However, the supplier share is taken into account only when the execution of elimination of interunit pro t/loss in
transferred inventory is group-based (that is, when posting level 30 is used).
Example
Inventory data: consolidation unit A, partner unit initial, book value USD 1000, meaning that consolidation unit A has
an inventory of USD 1000
Supplier share data: consolidation unit A, partner unit B, supplier share 50%, meaning that 50% of the inventory of
consolidation unit A was delivered by B
See Also
Product Group
De nition
An aggregation of individual products. The criterion for the aggregation is the similarity in the type or use of the individual
products.
Example
In the automobile industry, you might create product groups for the various versions of individual vehicle models.
Use
The product group is only used in the elimination of interunit pro t/loss in transferred inventory.
The product group classi es the inventory items into logistical units and is used to structure the calculation of the interunit
pro t or loss from the transfer of goods and services between consolidation units.
The system automatically performs the elimination of interunit pro t/loss and the associated valuation allowance for the
product groups de ned in customizing at the level of either inventory items or product groups.
Structure
You create product groups in accordance with the accounting requirements of your consolidation group.
The product groups are read from the additional nancial data.
Integration
When customizing the posting items, you determine the combinations of items and product groups. For these combinations you
then determine the posting items for the interunit pro t/loss (offsetting item, translation differential items, and items for
transferring distribution costs).
Features
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When inventory data is read from the totals database, you are spared the extra effort in entering additional nancial data and
validating that data.
The system can read the following inventory data from the totals database:
Customizing
Customizing settings are dependent on the consolidation area. They belong to the special version for elimination of interunit
pro t/loss in transferred inventory, but they are not time-dependent.
You de ne single selections to have the system read the relevant totals data. The selections are comprised of inventory items,
product groups, and subassignments. If you de ne a single selection with a combination of inventory items and product groups,
the system automatically reads the related subassignments according to the breakdown categories that are shared between
the different inventory items. Subassignments can be, for example, custom subassignments, transaction types, subitems, or
subitem categories. However, subassignments cannot be product groups, partner units, investor units, or investee units. Once
the de nitions are complete you can specify the desired values for the subassignments.
Note
If you use the transaction type as a subassignment for gross book value, valuation allowances, or incidental costs, you also
need to specify the value for the carry-forward transaction type.
You use the values for the subassignments to determine the gross book value or inventory quantity, valuation allowances, and
incidental costs.
Single selections of inventory items and product groups may not overlap.
Single selections for the respective subassignments (for gross book value, valuation allowances, and incidental costs)
also may not overlap.
When you save your Customizing settings, the system checks that the following requirements are ful lled:
All inventory items require breakdowns by product group, partner unit, and one or more additional subassignments.
At least some of the breakdown categories of the inventory items of a single selection must have the same
subassignments; only then is the system able to determine the subassignments.
If a single selection contains transaction types, the carryforward transaction type must be contained in the same single
selection as the transaction type of the original document. If it is not, the data that is carried forward can no longer be
found once the balances have been carried forward. (See also the note shown above.)
If any of these requirements are not ful lled, the system issues an error message.
Currency Translation
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When additional nancial data is read, the system translates data recorded in local currency for the elimination of interunit
pro t/loss in transferred inventory using both the exchange rate indicator and the comparative exchange rate indicator of the
task. The system uses the comparative exchange rate indicator to determine and record currency translation differences (see
Recording of Currency Translation Differences).
When totals data is read, the system translates the totals data in the currency translation task prior to the task for elimination
of IU pro t/loss in transferred inventory (IPI). In this case, the system uses the comparative exchange rate indicator of the IPI
task as well to record currency translation differences.
Database Lists
When the system reads the inventory data from the totals database, the database list displays the data in both local currency
and group currency.
When the system reads the inventory data from the totals database, the selection screen for listing inventory data provides the
following option:
You can determine whether the system should read the logical or the physical data stream. If the system reads the data from
the totals database, you must choose the option for the logical data stream; only if you choose this option does the system use
special logic when reading from the totals database. (If you choose the physical data stream when data is read from the totals
database, the physical data stream does not provide any data because it is intended for additional nancial data only.)
Activities
Customizing
Prerequisite:
If you want to choose additional nancial data as the data source for inventory data, the data basis needs to contain the
InfoProvider for inventory data. This is not necessary if you want to read the inventory data from the totals database.
Procedure:
1. In the process view of the consolidation workbench, choose Consolidation Functions Elimination of IU Pro t/Loss in
Transferred Inventory Settings Location of Values .
2. Go to the General tab page and specify the location from where the inventory data is to be read (totals database or
additional nancial data).
3. If you specify the totals database, also go to the Inventory Data tab page and specify the single selections, which should
consist of inventory items and product groups.
a. Go to the detail view for the single selection by choosing the navigation arrow.
The detail view shows the subassignments for gross book value, valuation allowance allowing losses, valuation
allowance disallowing losses, and incidental costs (see earlier).
Posting Items
De nition
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Balance sheet or income statement items that are to be automatically posted for the elimination of interunit (IU) pro t/loss in
transferred inventory.
Structure
Combinations of Inventory Items and Product Groups
You can assign a single selection of product groups (that is, one, several, or all product groups ) to a single selection of inventory
items .
For each combination of inventory items and product groups, you determine the posting items:
The system offsets the interunit (IU) pro t/loss to be eliminated with the inventory item. The assignment of the item for the
offsetting entry determines the treatment of interunit pro t/loss: The system either posts the IU pro t/loss to an income
statement item (affecting earnings) – the standard procedure – or it posts to a stockholder’s equity item (without affecting
earnings).
When you offset interunit pro t/loss with an effect on earnings, you can determine which income statement item is posted for
each inventory item. You can specify a debit item and credit item for the offsetting entry, which, in turn, are further speci ed by
all subassignments.
When de ning the tasks, you also decide whether the offsetting entry is posted to the inventory-managing consolidation unit or
the supplying consolidation unit.
You can use the posting items for translation differences to separately post and disclose translation differences from interunit
pro t/loss in your consolidated nancial statements.
You can use the posting items for distribution costs if your corporate group uses cost of sales accounting in its income
statement and, for this reason, you need to disclose your sales-related distribution costs as an element of cost of goods
manufactured .
You have made your customizing settings for the elimination of IU pro t/loss in transferred inventory .
Activities
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You execute the task in the consolidation monitor. As a result, the system:
Prerequisites
The following data is required for calculating the group COGM:
The system requires the following information from the additional nancial data or the totals database:
Inventory data
Product group
Book value
Inventory quantity
Valuation allowances
Supplier data
Product group
Pro t margin
Supplier share (when accounting for supply chains; that is, when executing elimination of interunit pro t/loss with
posting level 30)
Supplier share
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Features
Calculation of the Group COGM in Two-Sided Eliminations
Assuming that net sales = book value + valuation allowances – incidental acquisition costs , the group COGM is
calculated as follows:
Group COGM = net sales * COGM percentage rate + incidental acquisition costs
Note
When you start the elimination task, the system translates the inventory data and supplier data from local currency
to group currency to determine the interunit pro t/loss.
Prerequisites
The calculation of the group cost of goods manufactured forms the basis for the calculation of the interunit pro t/loss requiring
elimination.
Interunit pro t/loss has resulted from the sale of goods or services between individual units in the corporate group. From the
point of view of the group as a single entity, no such pro t/loss may occur. The amount of interunit pro t/loss calculated
depends on the volume of inventory transferred and the pro t percentages your group uses. Another factor in uencing the
pro t/loss are the distribution costs and other incidental acquisition costs that arise at different stages in the supply chain.
From the group’s point of view, these costs are considered part of the cost of goods manufactured as long as such goods are not
sold externally.
Features
Calculation of Interunit Pro t/Loss
Two-Sided Elimination
The system calculates the interunit pro t/loss requiring elimination as follows:
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= Net sales
If a percentage rate is speci ed for the incidental acquisition costs, the group cost of goods manufactured is calculated as
follows:
Book value
- Group COGM
System activities:
All value adjustments made to the book value are reversed, giving the inventory value. The incidental acquisition costs (entered
either as percentages or as monetary values) are deducted from the inventory value, giving net sales.
The group cost of goods manufactured (COGM) is calculated by multiplying net sales by the COGM percentage rate and adding
the incidental acquisition costs (or by multiplying net sales by the sum of the COGM percentage plus the incidental acquisition
cost percentage).
The interunit pro t/loss requiring elimination is the difference between the book value and group COGM.
The Consolidation system gives equal consideration to incidental costs as well as the additions or reductions to the cost of
goods manufactured. This logic is based on the assumption that both gures are compatible.
You can choose one of two methods for the automatic calculation of interunit pro t/loss contained in the invoice amount:
This procedure calculates the interunit pro t/loss using a pro t percentage rate that is recorded in the supplier data. Two
calculation variants are possible:
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The pro t percentage is used as a markup. The interunit pro t/loss is viewed as a percentage of the net invoice amount.
The pro t percentage is used as a gross margin of sales. The interunit pro t/loss is viewed as a percentage of the gross invoice
amount.
When the pro t percentage is a markup, the following interunit pro t is calculated:
When the pro t percentage is a gross margin, the following interunit pro t is calculated:
The supplying unit’s COGM is calculated by multiplying the inventory quantity by the COGM recorded per unit of measure.
Hence, this method differs from the other method. The following formula is used:
Group COGM = quantity * COGM per unit of measure + incidental acquisition costs
Supply Chains
When supply chains are involved, the interunit pro t/loss is generally computed the same way as in two-sided trade
relationships; however, the supplier share is also taken into account:
The system computes the group COGM for the selling unit using the book value, the valuation allowances (from the inventory
data of the current period), and the incidental acquisition costs. When doing this, the system uses only the supplier share of the
inventory data.
In the formulas below, the seller is denoted with the number 2, the buyer with the number 1.
Value of goods supplied 2,1 = (book value 1 + (VA allowing losses 1 + VA disallowing losses 1)) * supplier share 2,1
Depending on how they are recorded, the total incidental acquisition costs (IAC) are computed as follows:
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Net salesis computed as follows:
When percentage rates are used (method 1) and valuation allowances (VA) are taken into account, the system computes the
interunit pro t/loss as follows:
Interunit pro t or loss 2,1 = net sales 2,1 * pro t percentage 2,1 – (VA allowing losses 1 + VA disallowing losses 1) * supplier share
2,1
When using method 2 (calculation with quantities), you achieve the interunit pro t/loss in the same way as when using method
1 (calculation with percentage rates).
Each time the inventory item is sold down the supply chain, the system uses the group COGM of the previous sale as the value
of goods sold.
The following situations can occur during the calculation of interunit pro t/loss:
The interunit pro t/loss to be eliminated is less than zero (in an interunit loss situation; that is, the gross interunit pro t/loss is
less than zero).
No loss can be posted in order to comply with the principles of prudence and lowest value in individual nancial statements.
The book value that results from valuation allowances disallowing losses is the maximum value permitted from group’s the point
of view.
In two-sided elimination, the system posts elimination entries for each pair of consolidation units; however, in consolidation
group-based elimination, the system posts elimination entries for each consolidation group. These entries are listed separately
in the audit trail.
It is possible to post deferred income taxes during the elimination run because the interunit pro t/loss incurred needs to be
allocated to the period in question. Interunit pro ts/losses incurred in one period are cleared in a later period. Income taxes,
therefore, are due at a later date (additional payments or refunds). If you want to post deferred income taxes, you can specify
this in the document type you use for the elimination.
Currency-related differences are recorded if the exchange rate indicator used for translating the balance sheet differs from the
exchange rate indicator used for the income statement and you speci ed a comparison exchange rate indicator in the
elimination task.
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Distribution costs can be reclassi ed to COGM (optional).
Example
The following example shows how interunit pro t/loss is calculated and posted for a pair of consolidation units.
Company A Sale of goods to company B Sale: USD 1,200 COGM: USD 1,000
Company B Sale of 80% of the goods from Sale: USD 1,300 COGM: USD 960
A to a third party
Currency Translation Balance sheet and net income Income statement at average
at current rate of rate of AUS 1.50/USD
AUS 2.00/USD
*) The currency translation difference is calculated using the comparison exchange rate indicator.
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Features
The system generates an audit trail, which discloses the interunit pro t/loss that was incurred by the postings.
Two-Sided Elimination
The posted entries affect both the reporting consolidation unit and the partner unit.
The audit trail lists the following information for each pair of consolidation units:
The interunit pro t/loss for the current period with posting documents
The interunit pro t/loss for the prior period with posting documents
The posting documents show the interunit pro t/loss incurred for each individual inventory item and product group, and all the
elimination entries posted in the balance sheet and income statement.
Consolidation group
The audit trail lists the following information for this combination of characteristics:
The interunit pro ts or losses (for the current period and the prior period)
Details with regards to the accounting technique used – such as the group share, the effective group share, and the
interunit pro t/loss (for the current period and the prior period)
The distribution of the values for consolidation units that use the equity method (for the current period and the prior
period)
This sublist shows how the interunit pro t/loss is distributed across the direct investors (upper units).
Documents
Features
In the document type you can choose whether to automatically invert the documents:
If you opt for no automatic inversion of documents, the system calculates the interunit pro t/loss of the current period
and the prior period. However, in the current period the interunit pro t/loss of the prior period is merely listed in the
audit trail and not posted. The difference (delta) is posted.
If you opt for automatic inversion of documents, the period initialization posts an inversion of the prior period values
before posting the period values.
002 50 0 50-150=100
003 0 0 0-50=-50
002 50 -150 50
003 0 -50 0
Features
How Currency Translation Differences Occur
You record goods supply data grouped by pairs of consolidation units and grouped by product group. The system
translates this additional nancial data into group currency as part of the calculation of IU pro t/loss. The function uses
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the exchange rate indicator de ned in the task and determines the exchange rate for the inventory item assigned to the
product group.
Interunit pro t/loss is therefore calculated using the exchange rate for inventory accounts. The entry for the elimination
of IU pro t/loss is posted to an inventory item and its offsetting item (which is typically an income statement item).
Income statement items are often translated using different exchange rates than those for balance sheet items, for
example, with average rates. This means that the group currency value of the revenues or expenses to be eliminated can
differ from the calculated IU pro t/loss. This discrepancy is a translation difference.
Translation differences can occur in interunit pro t/loss in inventory because the relevant additional nancial data is
translated twice: once using the exchange rate indicator de ned in the task, and once using the comparative exchange
rate indicator (which is also de ned in the task).
When the inventory data is read from the totals database, currency translation differences are incurred in the same way as
when the data is read from additional nancial data. However, the reference translation with the exchange rate indicator takes
place in the currency translation task, which is executed prior to the elimination of IU pro t/loss in transferred inventory (IPI).
As a result, the totals data already contains the amounts in group currency when the IPI task is executed. In this case, the
system uses the comparative exchange rate indicator from the IPI task to calculate the currency translation differences from
the elimination of interunit pro t/loss.
The system automatically posts translation differences that occur for inventory items to the differential item you specify
beforehand. This should be the same currency translation item you speci ed in Customizing for currency translation.
Temporal translation differences , which result from changes in exchange rates between two different closing dates, in uence
interunit pro t/loss. The system posts these differences with a summarized amount – that is, the system does not distinguish
between the “true pro t or loss” and the exchange rate differences between two closing dates.
Activities
To record currency translation differences, do the following:
If inventory data is read from the totals database, do the usual Customizing for Currency Translation . Make sure that the
inventory data is appropriately translated. If necessary, create a separate step for inventory data in the currency
translation method.
Specify the following for the task for elimination of interunit pro t/loss in transferred inventory (IPI), regardless of where
the values are located:
In the settings for the IPI posting items, specify an item for currency translation differences for each single selection.
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Activities
If you use this function, specify the following items in the maintenance of posting items:
Integration
Elimination of interunit pro t/loss in transferred inventory reuses the posting items you have speci ed in the consolidation of
investments Customizing settings concerning equity method postings.
Prerequisites
You have activated Consolidation of Investments under Consolidation Functions Used in the settings for the consolidation area .
You have speci ed which accounting techniques are to be used under System Utilization in Customizing for Consolidation of
Investments.
Features
You can use eliminations of interunit pro t/loss in transferred inventory (IPI) to treat consolidation units according to their
accounting technique. The following accounting techniques are supported:
Purchase method
These are consolidation units that are also controlled by the group but are nevertheless included in consolidation of
investments using the equity method.
In IPI, the accounting technique is dependent on the group’s level of in uence on the consolidation unit, and on the group’s
percentage of ownership (or share) in the consolidation unit:
Accounting Technique(for IPI) Group’s Level of In uence Group Share Treatment in Consolidation of
Investments
Equity method for affiliated Signi cant in uence < 50% Equity method
units
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IPI deals with two-sided relationships: the sale of an inventory asset by the seller to a buyer (or “inventory-managing
consolidation unit”). Therefore, the system must take both consolidation units into account. This results in the following cases:
Purchase method Equity method for affiliated units Group share in buyer
Purchase method Equity method for nonconsolidated units 100%(due to controlling in uence)
Equity method for affiliated or Equity method for affiliated or Group share in seller * group share in buyer
nonconsolidated units nonconsolidated units
The factor shown in the right column determines the ownership in the interunit pro t/loss to be eliminated (“effective group
share”).
The interunit pro t/loss of an equity-method unit is only partially realized. This is why the system eliminates only the group
share in the interunit pro t.
An exception is when a purchase-method unit sells an asset to a nonconsolidated unit: In this case, the system eliminates the
entire interunit pro t or loss because of the controlling in uence of the group.
Equity method entries are posted to the investor units with ownership in the equity-method unit – this is analogous to
subsequent consolidation in consolidation of investments.
Constraints
The investor unit of an equity-method unit must itself be consolidated with the purchase method. This means that the
function does not support investors that are consolidated with the equity method or the mutual stock method.
Customizing for Consolidation of Investments features the Allow Negative Investments indicator (at Settings Negative
Stockholders’ Equity – Global ). This indicator speci es whether negative investments are permitted when the equity
method is used and the investment book value is updated. Elimination of interunit pro t/loss in inventory does not take
this indicator into account.
Activities
To ensure that equity-method units are treated, use a document type with the following properties:
In the Customizing settings for the task, determine the following for equity-method units:
Whether elimination entries are posted to the investor units of the supplying unit if that unit is consolidated with
the equity method
(If this is chosen and such units are part of a supply chain, that supply chain is disrupted at that point.)
In Customizing under Equity Method Posting , specify the investment item for Clearing – Consolidation Unit . (For
more details, see Customizing for Elimination of IU P/L in Transferred Inventory .)
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Specify the scopes of reported data for the equity method in Customizing for Consolidation of Investments. (For
more details, see Customizing for Elimination of IU P/L in Transferred Inventory .)
To have consolidation of investments (C/I) automatically include the IPI postings, go to Customizing for C/I, then
to Location of Values for equity data, and choose between Read from Totals Database and Read from Totals
Database and Additional Financial Data . For the calculation base choose the document type for the elimination
of interunit pro t/loss in inventory.
Example
See the following examples concerning equity-method units:
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Explanations:
The minority interests of the seller are recorded in consolidation of investments in the activity subsequent consolidation. The
document of the interunit pro t elimination is the calculation base for consolidation of investments. (See the remarks regarding
which customizing settings are necessary for consolidation of investments.)
Postings
Sales 1100-
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The elimination entries are posted to the investment items.
To determine the percentage of interunit pro t to be eliminated, the system needs to know the ownership structure the equity-
method unit belongs to.
Document for the Elimination of Interunit Profit (taking the ownership structure into account)
Item Seller I1 I2
Inventory
Retained Earnings, CY 40
Explanations:
In contrast to postings at an inventory-managing unit that uses the purchase method, here the system posts to the investment
item.
The system posts to both investors I1 and I2 (rather than the inventory-managing unit).
The amount to be eliminated (USD 40) results from the multiplication with the group share of the inventory-managing unit.
The total amount to be eliminated (USD 40) is distributed between the two investor units according to their percentages of
ownership (USD 10 and USD 30).
Caution: Multiplication with the group share can produce rounding errors. This does not occur in our example because of the
gures we have chosen.
The table that follows shows an overview of the reported nancial data, the elimination entries, consolidation of investments,
and the disclosure of the results in reporting.
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MI–Income 15 15
Stmt
Explanation:
MI–Net 0 0
Income CY
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MI–Income 0 0
Stmt
Explanations:
The elimination entries eliminate the entire amount of interunit pro t (USD 100).
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Explanations:
The group shares chosen for this illustration are unrealistic: A group share in an equity-method unit cannot be 75%. These
gures were chosen to better compare the Example: Sale from Purchase-Method Unit to Equity-Method Unit .
In the consolidated statements, the seller discloses only the group share in the interunit pro t (75% of USD 100).
The elimination entries now are not allowed to ow into consolidation of investments because minority interests are already
taken into account. Consolidation of investments recognizes these equity-method postings because the document type has the
business application elimination of interunit pro t/loss in transferred inventory and because the elds for the investee units
are lled. Therefore, consolidation of investments ignores these equity-method postings.
The entries of the interunit pro t elimination and the entries of consolidation of investments balance each other out, resulting
in a total of zero.
Postings
To determine the percentage of interunit pro t to be eliminated, the system needs to know the ownership structure the equity-
method unit belongs to (in this case, the selling unit).
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Investment 0 0
Inventory 75-
Retained Earnings, CY 40 35
Explanations:
The investment posting triggered by the net income and the investment posting triggered by the elimination balance each
other out.
The amount to be eliminated (USD 75) results from the multiplication with the group share of the seller.
The total amount to be eliminated (USD 75) is distributed between the two investor units according to their percentages of
ownership (USD 40 and USD 35).
The table that follows shows an overview of the reported nancial data, the elimination entries, consolidation of investments,
and the disclosure of the results in reporting.
Investment 0 0 50 50 50 50
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MI–Income 10 15 10 15
Stmt
Sales 1100-
Cost of 1000
Goods
Manufactured
Legend:
For the sale from C3 to C2: 60% of the interunit pro t/loss has been realized.
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For the next sale from C2 to C1: A further 50% of the interunit pro t/loss has been realized.
Accordingly: 40% * 50% = 20% is to be eliminated. This percentage is called effective group share. The effective group
share is assigned to the C3/C1 pair.
The effective group share is usually the product of the group shares in the supply chain between the inventory-managing
unit and the unit currently considered (including this pair). Exception: When a purchase-method unit sells to a
nonconsolidated unit, the group share of the equity-method unit is not considered.
Postings
To determine the share of the interunit pro t/loss to be eliminated, the system must be familiar with the investment structure
in which the equity-method unit is included (here the inventory-managing unit).
Item C3 I1 I2
Investment 8- 12-
Inventory
Legend:
I1 and I2: The amounts were divided to these investor units (according to the ownership path and taking the group share
of C2 to the amount of 40% into account).
Purpose
You make Customizing settings to have the consolidation system automatically post entries to eliminate interunit pro ts and
losses in transferred inventory.
Prerequisites
If you intend to use currency translation, you have de ned the Customizing settings for currency translation, which
involves de ning the exchange rate types and the exchange rates. (You do not need to create a currency translation
method for the elimination of interunit pro t/loss in transferred inventory.)
The additional nancial data is ready and can be collected by means of one of the methods for data collection .
Process Flow
De ning the Document Type
Posting level:
If you want to post two-sided elimination entries only, de ne a document type with posting level 20.
If you want to also post elimination entries for supply chains, de ne a document type with posting level 30
(consolidation group-based entries).
Specify that the document type is to be used for eliminations of interunit pro t/loss in transferred inventory.
De ning a Task
3. Specify the exchange rate indicator and the comparative exchange rate indicator for the currency translation of nancial
statement items.
4. Decide whether the system is to take valuation allowances into account – that is, whether the calculation of the group
cost of goods manufactured (COGM) uses the gross book value or the net book value (which discounts the valuation
allowances).
5. Decide whether offsetting entries are posted to the inventory-managing consolidation unit (buyer) or the supplying
consolidation unit (seller).
7. Specify the following for consolidation units that use the equity method:
Whether elimination entries are posted to the investor units (upper units) of the supplying unit if those units use
the equity method
(If this is chosen and such units are part of a supply chain, that supply chain is disrupted at that point.)
8. Specify the rst scal year and period the task is to be executed in.
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Assign the task to a task group (in the process view of the Consolidation Workbench, choose Consolidation Monitor Task
Hierarchy ).
De ne the product groups, which will be the basis for eliminating interunit pro t/loss.
Note
You will only be able to use the product groups in the additional nancial data.
Specify the location from where the inventory data is to be read (totals database or additional nancial data).
If you choose totals data, go to the Inventory Data tab page and specify the single selections for the inventory items and
product groups. This ensures that the correct totals data is read.
De ne the inventory items and their subassignments. When doing this, specify the subassignments for all relevant additional
nancial data.
You can use either single values or ranges of values for specifying inventory items and product groups.
Specify the offsetting item for posting interunit pro t/loss. (These are typically income statement items.)
If applicable, specify the items for the transfer of distribution costs. When doing this, specify:
If you use posting level 30 for the elimination of interunit pro t/loss in transferred inventory, specify which investment item is to
be used in the equity method for updating the investment book value that results from the elimination across different
consolidation units. This investment item cannot be de ned in the Customizing settings for consolidation of investments. This is
because the Clearing - Consolidation Unit item is not an equity item and, therefore, cannot be processed in consolidation of
investments.
This equity method posting setting is dependent on the special version for consolidation of investments.
Relationship to Customizing Settings for Consolidation of Investments (Scopes of Reported Data for Equity Method)
The following scopes of reported data for consolidation of investments are relevant for the elimination of interunit pro t/loss in
transferred inventory:
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Net income
Elimination of interunit pro t/loss in transferred inventory identi es the scope of reported data for net income as follows:
1. The system examines scopes of reported data whose offsetting items are in the income statement (income statement-
related scopes).
2. If several income statement-related scopes exist, the system chooses the one in which the reported item is the same as
the global net income item (in the process view of the Consolidation Workbench, choose Master Data Items Selected
Items Clearing - Balance Sheet ).
3. If still no scope of reported data is found, the system selects an arbitrary income statement-related scope.
The scope of reported data for net income is used for all postings to the income statement (offsetting entry to the inventory
item, the distribution costs item, as well as the currency translation differences item in the income statement).
The following applies if currency translation differences are located in the balance sheet: The reported item for the scope of
reported data for currency translation differences must be the item that is de ned under Currency Translation Difference in
the Customizing settings for elimination of interunit pro t/loss in transferred inventory.
Result
You can record additional nancial data (inventory data, supplier data, supplier share). To do this, you execute the respective
data collection task in the Consolidation Monitor.
You execute the task for the elimination of interunit pro ts and losses in the consolidation monitor.
The system calculates and posts the interunit pro t/loss, and logs the results in an audit trail.
Statutory accounting requirements and often management accounting policies require that the consolidated statements
portray the group as a single entity. Hence, the sale of a noncurrent asset between two consolidation units needs to be treated
as if the asset was merely moved from one plant to another. You can use this component to automatically eliminate such
interunit pro ts and losses.
The acquiring consolidation unit (buyer) records the asset in its own balance sheet with the amount it paid to the supplying
consolidation unit (seller), including incidental acquisition costs. This affects the amounts to be depreciated. The buyer also
might use a method of depreciation that differs from the one used by the seller. This component enables you to automatically
adjust the depreciation charges so that they are correct from the group’s point of view.
You also can employ transaction types to correctly disclose the assets in the group’s asset history sheet (or statement of
changes in property, plant, and equipment).
Implementation Considerations
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The following prerequisites must be met before you can implement this component:
Interunit pro ts or losses requiring elimination have been recorded in your group as a result of the sale of noncurrent
assets.
The consolidation units involved in the transfer are both included in the consolidated nancial statements.
Integration
Task Hierarchy and Task Sequence
The entries posted by the task for eliminating interunit pro ts or losses (IPA task) are coded with posting level
The task hierarchy must contain only one IPA task. The IPA task must be run after the tasks that post with posting level 20, and
before the task(s) for consolidation of investments.
Data Collection
In addition to the reported nancial data of the subsidiaries, you need to collect the master data and the additional nancial
data of the assets.
To transfer this data to the consolidation system, you can use manual data entry or the methods available for automatic data
collection (such as exible upload, load from data stream, copy, and delete).
Period Initialization
You need a period initialization task to automatically adjust the additional nancial data concerning interunit pro ts/losses for
the new consolidation period (for example, a periodic depreciation charge).
Features
You can use this component to eliminate interunit pro ts and losses resulting from asset transfers, to record those assets
correctly in the consolidated statements, and to adjust the depreciation charges of those assets.
This feature is enabled not only for two consolidation units, but also for supply chains comprised of three or more consolidation
units.
When an asset is transferred within a consolidation group, you can decide whether the adjustments to the depreciation charges
should use the settings of the seller or the settings of the buyer.
In the document type you can decide whether to record deferred taxes.
A log shows the results of the elimination of interunit pro t/loss in transferred assets.
Constraints
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The elimination of interunit pro t/loss in transferred assets component calculates all gures in group currency and
disregards any differences from currency translation.
The component does not calculate or disclose minority interests. This rather is done in consolidation of investments.
The component performs eliminations only if both the seller and the buyer of the asset are consolidated with the
purchase method.
The component does not take into account any changes in group shares, nor any change in the accounting technique.
The component does not process 1:n, n:1, or m:n transfers of noncurrent assets. For example, this means that it does not
process transfers in which one asset at the supplying consolidation unit turns into four assets at the purchasing
consolidation unit.
The component does not process supply chains in which a current (or inventory) asset turns into a noncurrent asset
(such as property, plant, or equipment), or vice versa.
Example
You can use elimination of interunit pro t/loss in transferred assets to portray the following accounting case:
Consolidation units A, B, and C belong to a single consolidation group. Company T is a third party that does not belong to the
group.
Unit A constructs asset 1111 itself in the year 01. In year 02, it sells the asset to unit B. Unit A uses straight-line depreciation.
In year 04, unit B sells the asset to unit C. Unit B uses the declining-balance method of depreciation.
In year 08, unit C sells the asset to company T. Unit C uses straight-line depreciation.
Elimination Logic
Use
The system uses dedicated logic for eliminating interunit pro ts and losses and for adjusting depreciation charges (when
applicable).
Prerequisites
You have made your settings in Customizing for Elimination of IU Pro t/Loss in Transferred Assets .
Features
Group Valuation
In group valuation, noncurrent assets are valuated from the group’s point of view. The decisive factors for group valuation of
assets are listed below:
Original value (acquisition costs) = original value of rst seller + incidental costs incurred in the supply chain
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The seller charges incidental costs (such as dismantling costs) to Other Expenses in the seller’s income statement. However,
the group might want to capitalize the incidental costs of the seller. In this case, these costs also need to be depreciated.
Beginning book value = ending book value of the asset sold as valuated by the group + incidental costs for the current transfer
You specify whether the method of depreciation, start of depreciation, percentage rate of depreciation, useful life, and scrap
value are based on the seller or the buyer. (See also the section below.)
IU pro t/loss = original cost buyer – ending book value seller – incidental costs seller – incidental costs buyer
Posting Options for Interunit Pro t/Loss: Gross Method and Net Method
You can choose between the gross method and the net method.
The sale and purchase are completely reversed by transferring the original acquisition costs and the accumulated
depreciation from the seller to the buyer.
The income statement of the seller is adjusted by the interunit pro t or loss.
The acquisition cost of the buyer is adjusted by the interunit pro t or loss.
If you choose the net method and the asset item has a breakdown by transaction types, the asset history sheet of the
consolidation group (or corporate group) shows a retirement and an acquisition for the same amount.
See also:
Depreciation Adjustment
As a rule, the depreciation is adjusted according to the depreciation parameters (method, percentage rate, and so on) of the
rst seller in the supply chain.
The acquiring consolidation unit depreciates “too much” because its acquisition cost also includes the interunit pro t. A
depreciation adjustment is posted to correct this excess depreciation.
The system calculates the depreciation adjustment during task execution. The adjustment is always the difference between
depreciation of the last buyer (in the chain) and the depreciation according to the group valuation.
As an alternative, you can have the system adjust the depreciation according to the depreciation parameters of the buyer. To do
this, you need to select the Valuation Allowance According to Buyer indicator.
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If this indicator is not selected anywhere in the supply chain, then the system applies the depreciation parameters of the rst
seller. If the indicator is selected, then the system applies the depreciation settings of the seller of the last transfer in which the
indicator is selected. Thus, you may want to select the indicator whenever the use of the asset changes and, therefore, the
depreciation parameters also change.
1 A B According to seller
2 B C According to buyer
3 C D According to seller
4 D E According to seller
In this example, the system uses the settings of consolidation unit C for the depreciation of the asset at consolidation unit E.
To determine the new book value of an asset, the owner of the asset performs an impairment test in regular intervals. If the new
book value is less than the group value, the excess in the group value needs to be written off using extraordinary depreciation. If
the new book value is not less than the group value, the group value remains the same.
See also:
The period initialization task reads the additional nancial data for the previous consolidation periods and proposes values for
the depreciation in the current consolidation period.
When necessary, you can enter extraordinary depreciations (writedowns) or writeups in the data collection task that follows the
period initialization task.
Note
The consolidation frequency must be the same in both the period initialization task and the data collection task.
If you change the additional nancial data for an asset for previous consolidation periods, you have to execute the
period initialization task again for all subsequent consolidation periods.
The system includes in a supply chain only those transfers that begin inside the given consolidation group. These transfers can
be divided into those that end inside the consolidation group and those that end outside of the consolidation group (sale to
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third party).
First Transfer in Supply Chain Last Transfer in Supply Chain Treatment in the System
B
Ends inside of IU pro t/loss is
consolidation group eliminated for all
transfers in the current
Occurs within the
consolidation interval.
current consolidation
interval Depreciation is
adjusted for all
transfers in the current
consolidation interval.
The elimination of interunit pro t/loss in transferred assets posts elimination entries only for pairs of consolidation units in
which both units are consolidated using the purchase method.
The system treats transfers of assets between units consolidated with other accounting techniques as sales to third parties or
purchases from third parties.
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The following example shows a supply chain with consolidation units that have different accounting techniques:
This results in the following interunit pro t and depreciation adjustment for the year 06:
Depreciation adjustment (assuming that the seller has a depreciation of 100 currency units)
= 180 – 100 = 80
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In the year following the asset transfer (year 07), the depreciation for the buyer also needs to be adjusted.
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Whether you use the net method or the gross method determines how the asset transfer and the elimination of interunit pro t
of 400 currency units are posted.
Result using the net method: From the group’s point of view, the original value item of the buyer shows the correct net amount.
Item TT ABCF ASale BPurch. AIU Elim. APro t/Loss BPro t/Loss Total
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Item TT ABCF ASale BPurch. AIU Elim. APro t/Loss BPro t/Loss Total
Trf 0
Trf 0
Total 0 0 0 0 0 0 0
Abbreviations:
TT = transaction type; Beg = beginning balance; Acq = acquisitions; Ret = retirements; Trf= transfers
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The sale and purchase are completely reversed through the transfer of the original value of 1000 and the accumulated
depreciation of 500 from the seller to the buyer. The income statement of the seller is adjusted by the interunit pro t of 400.
Result using the gross method: From the group’s point of view, the accounts of the buyer show the correct original value and
valuation allowances.
Item TT ABCF ASale BPurch. AIU Elim. APro t/Loss BPro t/Loss Total
Total 0 0 0 0 0 0 0
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The asset is sold at the beginning of the year.
When the gross method is applied, the system posts the following elimination entries:
The system posts the following in addition to the reversal of the sale and purchase, the reversal of the accumulated
depreciation, and the purging of the interunit pro t from the seller’s income statement: The incidental costs of 100 are posted
at the seller as "Other Expenses". The acquisition costs less incidental costs are posted at the buyer (OV Buyer – IC Seller – IC
Buyer = 950 – 100 – 50 = 800). This produces the correct original value of 1150 for the buyer.
Acq 0
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Retained Earnings 0 -400 -50 0 300 0 -150
Total 0 0 0 0 0 0 0
This results in the following interunit pro t and depreciation adjustment for the year 06:
The following gure illustrates the valuation allowances of the asset for consolidation units A and B:
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When the net method is applied, the system posts the depreciation adjustment of 80 and the interunit pro t of 400 as follows:
Trf 0
Trf 0
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Retained 0 -400 180 0 400 -80 0
Earnings
Total 0 0 0 0 0 0 0
Legend:
Extraordinary depreciation = ending book value buyer – current value = 720 – 250 = 470
The depreciation adjustment solely based on the impairment test is calculated as follows:
The amount of 150 is arrived at because the valuation of the group may not exceed the valuation of the buyer. Therefore, this
part of the extraordinary depreciation must equal 150 to retain the group value of 250.
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In the data collection task that follows, you specify an extraordinary depreciation (writedown) of 200 currency units.
Extraordinary 0 0 200 …
depreciation
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At the beginning of year 05, consolidation unit A sells the asset to consolidation unit B.
At the beginning of year 06, consolidation unit B sells the asset to consolidation unit C.
At the beginning of year 07, consolidation unit C sells the asset to a third party (outside of the group).
Beginning book value 500 Beginning book value 900 Beginning book 1200
value
Ending book value 0 Ending book value 720 Ending book value 1080
The following gure illustrates the depreciation for consolidation units A, B, and C, in the years 05, 06, and 07.
This results in the following interunit pro ts and depreciation adjustments and their respective journal entries.
Postings
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Total 0 0 0 0 0 0 0
Abbreviations:
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Depreciation adjustment = 120 – 100 = 20
The amount of 100 re ects the posting history of interunit elimination on the asset item for consolidation unit B.
This amount must be reclassi ed to consolidation unit C so that no elimination postings remain at B after the
transfer to C takes place.
The amount of 900 re ects the acquisition costs of the seller. These costs must be reclassi ed from transaction
type Retirement to transaction type Transfer .
The amount of –420 re ects the posting history of interunit elimination on the valuation allowances item for
consolidation unit B. This amount must be reclassi ed to consolidation unit C so that no elimination postings
remain at B after the transfer to C takes place.
The amount of –180 re ects the valuation allowance entry for the seller. This entry must be reclassi ed from
transaction type Retirement to transaction type Transfer .
Item TT A B C A B C Tot
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Item TT A B C A B C Tot
Total 0 0 0 0 0 0 0 0 0 0 0 0 0
200, 580:
These reverse the elimination entries posted to transaction type Retirement. (The interunit pro t was realized. All
elimination entries need to be reversed.)
Item TT A B C A B C T
Acq 0
Trf 0
Acq 0
Trf 0
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Item TT A B C A B C T
Revenue -1400 -
from Sale of
Asset
Depreciation 80 20 1
Total 0 0 0 0 0 0 0 0 0 0 0 0 0
Self-Constructed Assets
Use
If a consolidation unit manufactures a noncurrent asset itself and sells it to another consolidation unit within the same
consolidation group, from that group’s point of view the transaction needs to be recorded as if the asset was manufactured and
then capitalized as an asset on the balance sheet.
Features
The sales revenue of the seller needs to be reclassi ed for the amount of the production cost. (The sales revenue is typically
reclassi ed to Other Capitalized Goods On Own Account .) Any incurred interunit pro t needs to be eliminated. The offsetting
entry is posted to the buyer.
IU pro t = original cost buyer – production cost seller – incidental costs seller – incidental costs buyer
The production cost and the offsetting credit entry are recorded at the manufacturing consolidation unit.
The depreciations regarding the eliminated IU pro t are corrected at the buyer. For self-constructed assets, the system always
uses the depreciation parameters of the buyer.
For the buyer, the asset is ultimately disclosed with the production costs less accumulated depreciation.
Activities
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When manually entering an asset transfer, you choose Self-constructed Asset for the type of asset transfer.
Note
The asset number for a self-constructed asset cannot be entered for the seller. This is only possible later on at the buyer.
The sales revenue of A needs to be reclassi ed to Other Capitalized Goods on Own Account for the amount the cost of
goods sold (500 currency units).
The cost of goods sold and the offsetting credit entry are recorded at the manufacturing consolidation unit.
The interunit pro t/loss of 400 needs to be eliminated. The offsetting entry is posted at consolidation unit B.
The postings in the following table do not take depreciations into account.
Ret 0
Trf 0
Valuation Beg 0
Allowances
Acq 0
Ret 0
Trf 0
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Total 0 0 0 0 0
Features
Since sales to third parties realize all interunit pro ts, for each transfer in the supply chain the system reverses the elimination
entries of those interunit pro ts and the sum of all depreciation adjustments, so that the original postings of the individual
nancial statements again take effect. All reversal entries are posted in the same document.
The system recognizes a sale to a third party if any of the following conditions are true:
The purchasing consolidation unit (buyer) does not belong to the consolidation group.
The sale is explicitly marked in the additional nancial data as a sale to third party.
The system is able to completely reverse the elimination and adjustment entries only if the data has no gaps in the supply chain.
Activities
You need to select the Sale to Third Party option for the type of asset transfer during the manual entry of asset transfers. This
enables the system to recognize the sale to third party and retrace the supply chain.
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This is the data about the purchase and sale of an asset and the asset’s transfer.
Structure
Data About Asset Transfers
Settings for valuation allowances (whether to use the settings of the seller or the buyer)
Sales revenue
Master data:
Consolidation unit(s)
Type of asset/liability
Ordinary depreciation
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Extraordinary depreciation (including writedowns)
Writeup
Master data:
Consolidation unit(s)
Type of asset/liability
Ordinary depreciation
Writeup
Integration
To record the additional nancial data, you use manual data entry or automatic methods of data collection ( exible upload, load
from data stream, copy, or delete).
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Seller Buyer
Type of Asset/Liability Plant and Equipment Type of Asset/Liability Plant and Equipment
Retirement year and period 001/2005 Retirement year and period 999/9999
Depreciation method Straight-line over Remaining Life Depreciation method Straight-line over Remaining
Life
Master Data and Additional Financial Data for the Asset Transfer
Seller Buyer
Revenue 900
Purpose
You use this process to de ne your Customizing settings for the elimination of interunit pro t/loss in transferred assets.
Prerequisites
You have de ned the Customizing settings for the data basis .
You have speci ed which InfoObjects are to be used for noncurrent assets at Assets/Liabilities on the Data Model tab page.
(For more information, see Data Model: Assets/Liabilities as well as the corresponding eld helps.)
You have set up the data streams Noncurrent Assets Noncurrent Assets – Consolidated, and Transfer of Noncurrent Assets on
the Data Streams tab page.
If applicable, you have selected additional subassignments and custom elds on the Data Stream Fields tab page.
You have de ned the Customizing settings for the consolidation area . In Settings, you have selected the indicator for
elimination of interunit pro t/loss in transferred assets under Consolidation Functions Used
You use at least one period initialization task to calculate proposed values for depreciation in each new period. (See Elimination
Logic .)
You have created a data collection task that will collect data about the noncurrent assets and their transfers.
You have de ned the Customizing settings for the preceding tasks, whose postings have posting levels that are less than or
equal to 20.
Process Flow
Types of Assets/Liabilities (ALTYPE)
For each type of asset/liability (such as buildings, plant and equipment, or vehicles), you specify which items are to be
posted.You do this in the process view of the Consolidation Workbench at Consolidation Functions → Elimination of IU
Pro t/Loss in Transferred Assets → Type of Assets/Liabilities
To create a type of asset/liability, go to Elimination of IU Pro t/Loss in Transferred Assets and chooseType of Assets/Liabilities
; then, in the bottom left area of the workbench screen, call up the context menu and choose Create
Assign a name for the type of asset/liability (for example, “Plant and Equipment”).
Specify the debit/credit sign (“+” for assets, “–“ for liabilities) on the General tab page.
On the Items for Original Cost tab page, specify the following items and transaction types (where applicable):
Transfers
Source item and target item (income statement items) for the reclassi cation of sales revenue from transfers of self-
constructed noncurrent assets
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You also can specify the items and transaction types for acquisitions and retirements, or for transfers, in the master record of
the asset.
On the Items for Valuation Allowances tab page, specify the following items and transaction types (where applicable):
You also can specify these items and transaction types in the master record of the asset.
The type of asset/liability the asset belongs to (for example, “Plant and Equipment”)
The parameters for valuation allowances (such as the start of depreciation, the method, and so on)
If you have not already made such settings in the asset master record, specify on the Items for Original Cost tab page the items
and subassignments for acquisitions, retirements, and transfers.
If you have not already made such settings in the asset master record, specify on the Items for Valuation Allowances tab page
the items (and any applicable subassignments) for valuation allowances (for acquisitions, retirements, transfers, depreciation,
and writeups).
Doc. Type
Create a document type for the elimination of interunit pro t/loss in transferred assets. Such a document type must have the
following properties:
Automatic posting
No automatic inversion
Task
Create a task for the elimination of interunit pro t/loss in transferred assets. (The task hierarchy can have only one task of this
category.)
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Assign a name to the task.
Whether to post the offsetting entry for the interunit pro t to the acquiring consolidation unit
When transferring the asset, whether to transfer the remaining book values from the seller to the buyer
Result
You can list the customizing settings by choosing List Settings
You can execute the data collection task for eliminating interunit pro t/loss in transferred assets.
You also need to decide whether the seller and the buyer enter the data as a collaborative effort or individually.
You can choose one of the following methods for automatic data collection: exible upload, load from data stream, copy, and
delete. However, the methods copy and delete cannot be used for collecting master data.
3. You load the additional nancial data for the asset transfer.
See also:
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Scenario B: Manual Data Collection, Step by Step
2. You manually enter the additional nancial data for the asset.
3. You manually enter the additional nancial data for the asset transfer.
See also:
Entering Asset Transfers with regards to entering master data and additional nancial data for asset transfers
1. You manually enter asset master data, additional nancial data for the asset, and additional nancial data for the asset
transfer in a single step.
See also:
Entering Asset Transfers with regards to entering master data and additional nancial data for asset transfers
Scenario 1: The seller enters the data rst and the buyer completes the data
First, the seller enters the master data and the additional nancial data for the asset and its transfer. Then, the buyer
supplements the data.
The seller has knowledge about all master data and additional nancial data, and enters all of it.
Scenario 3: The seller and the buyer enter the additional nancial data independently; assets are matched afterwards
The seller and the buyer enter the master data and the additional nancial data independently from each other (for example,
using exible upload). This produces two incomplete data records for the same asset transfer. However, there is no link between
these two records in the system.
Example
Seller point of view: Seller A sells asset “X-123” to buyer B for 900 currency units, but does not know how buyer B has labeled
the asset.
Buyer point of view: Buyer B purchases asset “Y-456” from seller A, but does not know how seller A labeled the asset.
In this case, either the seller or the buyer needs to run asset matching .
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Features
Customizing for Legacy Data Transfer
If you want to transfer the data for elimination of interunit pro t/loss in transferred assets from a legacy system, you need to
specify the following data in Customizing for legacy data transfer:
Fiscal year and period in which you want to transfer the legacy data
Balance sheet item and transaction type for posting the legacy data transfer without an effecting on earnings
In the legacy data transfer period, you enter the value of the accumulated depreciation from the legacy system in the
Impairment Charge (extraordinary amortization) eld in the additional nancial data for the Noncurrent Assets data stream.
In the period you have speci ed in Customizing, the system applies a special logic to this value. The system posts the
elimination of interunit pro t/loss and depreciation adjustments (that result from the extraordinary amortization) without
affecting earnings to the item and transaction type speci ed in Customizing.
Activities
To con gure the Customizing settings for legacy data transfer, in the process view of the consolidation workbench, choose
Consolidation Functions Elimination of IU Pro t/Loss in Transferred Assets Legacy Data Transfer .
Consolidation of Investments
Purpose
You can use this component to eliminate the equity relationships of the consolidations units included in the consolidation group.
Integration
Before you consolidate investments, you need to do the following:
Perform Customizing for the master data (organizational units, chart of accounts, and so on)
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Standardize entries
You can choose to use the capitalization and valuation allowances function to map the capitalization and amortization of fair
value surpluses. The consolidation of investments takes the results of this function into account.
Key Features
During the consolidation of investments, the investments of the parent company (investor unit) are eliminated with the
proportionate equity of the subsidiary (investee unit).
Purchase method
Equity method
First consolidation
Subsequent consolidation
Distribution of dividends
Amortization of goodwill
Increase in capitalization
Reduction in capitalization
Step acquisition
Partial divestiture
Total divestiture
Partial transfer
Total transfer
Investment writeup
Investment amortization
Indirect transfer
Method change
Organizational change
The system can use the totals database and/or the additional nancial data as the data source for the data on investment,
equity, and equity holdings adjustments. You can enter goodwill data as additional nancial data.
Constraints
The accounting technique Cost Method is not yet available.
You can use the reclassi cation function to perform Proportionate Consolidation in the system. For more information, see
Proportionate Consolidation.
The activities Increase in Capitalization and Reduction in Capitalization are restricted to increasing or unchanged percentages
of ownership.
The following activities and functionalities are not currently supported: Liquidation, reclassi cation of treasury stock, horizontal
and vertical mergers, push-down method, investor units not consolidated with the purchase method or the mutual stock
method.
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