Equity pick-up data processing
Introduction¶
Equity pick-up (EPU) data processing allows you to revalue an owner entity’s financial investments based on the current value of the corresponding portion of the owned companies’ net equity. The data processing is run on the original scenario.
This operation is carried out on a progressive basis, that is, if company A owns company B and company B owns company C, the operation takes place as follows:
-
In B’s financial statements, a revaluation of the financial investment in C is carried out on the basis of the entries on company C’s net equity.
-
In A’s financial statements, a revaluation of the financial investment in B is carried out on the basis of B’s net equity entries, C’s net equity entries, and the entries for B’s financial investment in C.
The calculation method is “flat”, so the user running the data processing can only run it freely for an individual entity (including the holding company), without having to run the same data processing for all the controlled entities at the same time.
Entity setup¶
The equity pick-up data processing is run on the original scenarios, so the entities involved in this data processing are those which are related to the Process with which it is run.
For every owner entity/owned entity pair and for every scenario/period related to the process, the direct and indirect ownership percentages needed for the calculation are considered, starting with what is present on the ownership structure register.
The result of the calculation is visible in the process rules configuration window, from which it is also possible to check the percentages for each scenario/period; see .
The percentages can be overridden in any case; see .
Equity pick-up data processing frequency¶
The EPU data processing can be calculated in two modes.
| Mode | Description |
|---|---|
| Cumulated | The figure is calculated taking account of the cumulated data up until the selected period. |
| Periodic | - The periodic data is calculated taking account of the amount of the last period in which the EPU was calculated and the selected period. In this mode, EPU journals created in the last EPU period are copied into the selected period. |
The method to be used is selected by setting the EPU period length fields in the Process rules configuration window, where it is possible to set the equity pick-up calculation period length for each scenario/period (see ).
Definition of accounts for setup¶
The Use account for setup option in the list of accounts selected for the pick-up rules must be set as follows:
| Account type | Settings |
|---|---|
| Normal/detail balance sheet account | Net Equity |
| One or several balance sheet variation accounts present as the child account not containing the initial balance within a variation control group | Net Equity |
| Financial investment balance sheet account of normal or variation type | Financial investments |
| Normal net result account in the Balance Sheet | Net Equity |
The Net result account in the Balance Sheet must be set up as follows:
| Account | Net equity/financial investment account | Financial investments account |
|---|---|---|
| Normal Net Result account in the Balance Sheet | Revaluation/devaluation P&L account | Normal financial investment account |
| Net result variation account in the Balance Sheet | Net result variation account in the Balance Sheet | Financial investment variation account |
The variation net result account in the Balance Sheet is then recalculated by the formulas, but this row is needed to define the financial investment variation and to convert the normal net result account in the Balance Sheet to the historical FX rate.
Example of P&L accounts setup
The setup of P&L accounts that do not relate to FX rate differences for conversion of the balance sheet to the historical rate and the overridden FX rate is described below.
| Account | Net equity/financial investment account | Financial investments account |
|---|---|---|
| Normal/Detail P&L account | - Same account - Other P&L account which is populated by the pick-up value | - |
The Financial investments account is not necessary and, if indicated, will not be used by the application.
The Pick-up amount on the Profit and Loss (revaluation of the financial investment) associated with the normal net result account in the Balance Sheet is the difference between the EPU value of the net result account in the Balance Sheet and the EPU value of the P&L accounts set up.
Example of P&L account setup for the FX rate differences
The setup for FX rate difference P&L accounts for the conversion of the balance sheet to the historical FX rate and the overridden FX rate is described below.
| Account | Net equity/financial investment account | Financial investments account |
|---|---|---|
| FX rate differences P&L account for the conversion of the Balance Sheet to the historical FX rate and the overridden FX rate, set up on P&L accounts. | - Same account - Other P&L account which is populated by the pick-up value | Financial investment variation account |
The financial investment’s variation account must be indicated in the Financial investments account.
In order to generate the FX rate difference on the financial investment normal account, that amount must be calculated based on the variations.
Equity pick-up calculation¶
The Equity pick-up data processing generates pre-consolidation adjustments with adjustment numbers composed as follows:
- prefix ‘EPUT’ for CCH Tagetik pick-up and ‘EPUA’ for simulation of the accounting pick-up as at the previous period
- category for pick-up
- entity whose pick-up is calculated
Each component/code is separated from the next by the ‘_’ character.
For every change, a pick-up double entry is generated on the net equity/P&L account with the same sign and on the financial investment account with the opposite sign.