Minorities calculation
Introduction¶
CCH Tagetik manages the calculation of minority interests, or the financial investments made by non-controlling shareholders that are not in the group, in the capital of entities included in the consolidation area.
When an entity is controlled but not fully owned by one of the entities in the group, it is necessary to attribute part of the controlled entity’s net equity to the minorities outside of the group who own a share of it. To do this, CCH Tagetik highlights the part of the controlled entity that does not belong to the group in the journals. In particular, the minorities calculation data processing reclassifies the share of net equity and the net result for the fiscal year pertaining to minorities in specific items in the financial statements.
In order for the minorities to be calculated correctly, you must prepare and properly set up the following Data Model dimensions. For more details on CCH Tagetik’s Data Model dimensions see .
| Dimension | Requirements |
|---|---|
| Account | The list of accounts must contain the following accounts: - group P&L net result account and group BS net result account - minorities P&L net result account and minorities BS net result account |
| Variation/Detail types | The following variation/detail types must exist: - at least one variation/detail type to allocate the amounts arising from the change in area - at least one variation/detail type for the amounts arising from the change in equity ratio percentage and proportional percentage. Note: these variation/detail types are used to create/update the variation accounts in the control groups. The variation/detail types setup (Variation/Detail types setup) determines how the balance sheet variation accounts in the minority journals are used to allocate the amounts arising from the change in area or the change in the equity ratio or proportional percentage. |
| Control groups | The Area variation field indicates whether, for the control group, the child account should be used to allocate the area variation amounts. The Modify % field indicates whether the child account should be used to allocate the minorities calculation amounts due to the change in the equity ratio or proportional percentage. See . |
| Categories | The minorities calculation for the Consolidation Journals categories is controlled by the Minorities calculation method attribute For manual Consolidation journals, the default values specified in the list of categories are used, but the consolidator can choose to change that default (Categories Setup). The minorities calculation method for automatic IC elimination journals is inherited from the elimination logics that generate the journals. The minorities calculation on balance categories and entity journals is performed if the category is included in the categories on which to calculate minorities indicated in the minorities rules. |
Variation/Detail types setup¶
The fields can be set as follows:
| Field | Description |
|---|---|
| Area variation | - No (default): the account is not used to allocate the amounts linked to the area variation. - Entry/Exit: the account is used to indiscriminately allocate the amounts due to the entry into/exit from the consolidation area. - Entry: the account is used to allocate the amounts due to the entry into the consolidation area. - Exit: the account is used to allocate the amounts due to the exit from the consolidation area. |
| Modify % | - No (default): the account is not used to allocate the amounts linked to the change in the equity ratio or proportional percentage. - Increase/Decrease: the account is used to indiscriminately allocate the amounts due to the increase or decrease in the percentage. - Increase: the account is used to allocate the amounts due to the increase in the percentage. - Decrease: the account is used to allocate the amounts due to the decrease in the percentage. |
Categories setup¶
The fields can be set as follows:
| Field | Description |
|---|---|
| Minorities calculation method | - Normal: the minorities on the two entities are calculated using the respective equity ratio and consolidation percentages. - None: minorities are not calculated. - Advanced: allows you to define different calculation methods for entity 1 and entity 2. If selected, it is possible to set a different strategy for each of the two entities. - Based on Entity 1 %: minorities are calculated applying the equity ratio and consolidation percentage of entity 1 in the journal. Method used for the financial investment / net equity elimination journals. - Based on Entity 2 %: minorities are calculated applying the equity ratio and consolidation percentage of entity 2 in the journal. - None: minorities are not calculated. |
Ownership structure register and Consolidation area¶
For the minorities calculation, CCH Tagetik uses the consolidation, direct ownership, actual ownership and interest percentages deployed in the consolidation area by processing the relationships and ownership percentages defined in the ownership structure register, unless they have been directly overridden on the consolidation area. For more details, see .
The calculation of these percentages considers ownership structure register events whose previous date is closest to the scenario/period end date. On the holding company, all these percentages are always set to 100%, and on entities at cost they are 0%.
The percentages are calculated as follows:
| Percentage type | Calculation method |
|---|---|
| Direct ownership percentage | Calculated as the sum of the financial investment percentages of the respective owner entities present in the consolidation area, considering own shares. |
| Actual ownership percentage | Calculated as the sum of the ownership percentages of the respective owners, each multiplied by the owner’s consolidation percentage, considering own shares. |
| Equity ratio percentage | Calculated as the sum of the branches owned by the entity in question, multiplied by all the higher branches up to the holding company. |
| Consolidation percentage | Depends on the consolidation method with which the entity enters the area. 100% for line-by-line entities, 0% for at cost entities, proportional percentage for proportional entities and at equity entities. |
| Total minorities percentage | Percentage not specified or deployed in the consolidation area but used in calculations. This is the difference between the consolidation percentage and the equity ratio percentage. |
Example
With the following organisational structure:
The following percentages are applied:
Moreover, the following percentages are also used in the periodic minorities calculation:
- Period equity ratio percentage
- Period actual ownership percentage
The period percentages are calculated considering the events to be included in the period based on the specific rules of the process indicated in the Setup periodic minorities calculation.
Specifics of the periodic minorities calculation¶
If the periodic minorities calculation is active, in the process rules override window (), the Setup Periodic Minorities Calculation link will appear, allowing you to select the ownership structure register events to include in the period percentages calculation in the table deployed in the consolidation area.
The original scenarios/periods belonging to the process are displayed, and for each of these you can to change the reference date for the periodic minorities calculation. This date is used to determine the events to include in the period: CCH Tagetik considers events whose date is included between the start date and the reference date for the periodic minorities calculation.
The reference date for the periodic minorities calculation is preset to be the same as the period end date and, if changed, must be between the scenario/period start and end dates.
From the Setup Periodic Minorities Calculation page (see ), from the 
menu > Events management you can override the events to be included in or excluded from the selected period. The ownership structure register events included in the selected period’s validity range are displayed.
| Event | Description |
|---|---|
| Included | Have a date <== than the reference date for the periodic minorities calculation or overridden in the included events. |
| Excluded | Have a date > than the reference date for the periodic minorities calculation or overridden in the excluded events. |
The deployment of the consolidation area calculates the period equity ratio and period actual ownership percentages considering the events included in the period.
Accounts for the minorities calculation¶
For every account on which you want to calculate minorities, you can specify the accounts whose direct minorities portion (direct minorities account) or the indirect minorities portion (indirect minorities account) must be adjusted.
The setup is typically as follows:
- A “Minorities reserve” account is related to all net equity accounts.
- For variation accounts, every variation is usually related to the same variation type as the minorities account (e.g. Net equity account - FX rate difference > Minorities account - FX rate difference).
- The “Minorities net result” account is related to the net result account (both P&L and BS).
Categories for the minorities calculation¶
For every Balance and Entity Journals category, it is necessary to indicate whether minorities must be calculated and the categories on which the minorities journal must be generated.
To perform a synthetic definition, you can use nodes of categories.
The minorities are calculated on the consolidation journals on the basis of the “Minorities calculation method” indicated in the journal header. Third parties are booked in the same journal, and therefore have the same category as the original consolidation journal. For this reason, the minorities rules do not contain the categories of consolidation journals.
Periodic minorities calculation¶
In the case of the periodic minorities calculation, the minorities amount calculated on the Balance Sheet Net result due to the minorities percentage change is allocated to the Reserves account for carrying forward the Balance Sheet net result, as indicated in the Carry forward rules (Carry forward rules page). The variation to be adjusted is determined based on the variation/detail type indicated in the Area variation entry/exit and Modify % increase/decrease fields.
Therefore, with the setup of the variation/detail types for the periodic minorities calculation, it is possible to set up the variation/detail types to be used to allocate the amount of the minorities % variation of the Balance Sheet Net result keeping the % variation on the Reserves for carry forward account separate.
If the variation/detail types for the periodic minorities calculation are not setup, the amount of the % variation of the Balance sheet net result is allocated to the area variation accounts or modify % variations configured in the control group of the Reserves account for carrying forward the Balance sheet net result.
Data Processing¶
The minority interests calculation acts on the consolidation scenario after the conversion to consolidation currency data processing. The minority journals (or minorities calculation rows in the consolidation journals) are generated on the Converted amount type and subsequently brought to the consolidable amount type.
The minorities journals are made according to the double entry logic and generate the following rows:
- write off rows on “group” net equity accounts
- reallocation rows on the accounts dedicated to reporting the minorities portion.
CCH Tagetik calculates the minorities portion separately for adjusted amounts (amounts and entity journals) and for consolidation journals.
Minorities calculation on individual data items¶
Data related to original balances and entity journals (“adjusted” data) are read and processed based on their category. It is considered good practice to calculate minorities based on adjusted data, or the amount category plus all “Entity journal” categories. For the minorities calculation, CCH Tagetik generates a new journal, on the converted amount type, which is identified with a precise journal number and labelled with the category for minorities journals specified in the minority rule.
For example: MIN_CATEGORY MINORITIES_ENTITY
The percentage applied is the total minorities % defined for the entity, or the consolidation % minus the equity ratio %.
For adjusted data, it is possible to calculate the direct minorities portion and the indirect minorities quota but attributing them to different net equity accounts. This behaviour is obtained by indicating a direct minorities account that is different from the indirect minorities account in the minority rule.
The respective portions are calculated as follows:
- direct minorities: the group net equity portion is multiplied by the direct minorities percentage (consolidation % - actual ownership %).
- indirect minorities: the group net equity portion is multiplied by the indirect minorities percentage (total minorities % - direct minorities %).
The amounts and entity journals are subjected to the minorities calculation in these cases:
- If the categories to which they are attributed are present in the minority rule associated with the process to be run.
- If the entity’s consolidation method is different from Cost.
The entities to be deconsolidated using the From previous period deconsolidation method that are also to be deconsolidated in the previous period are excluded from the minorities calculation.
Minorities calculation on consolidation journals¶
For consolidation journals, the minorities calculation is guided by the “Minorities calculation method” present in the journal header and the system generates rows within the same journal. The minorities calculation method guides the choice of equity ration percentage and consolidation percentage used for the minorities percentage calculation.
IMPORTANT: only indirect minorities are calculated in consolidation journals.
Consolidation journals are subjected to the minorities calculation in these cases:
- If the selected “Minorities calculation method” is different from None.
- If neither of the two entities has At cost as their consolidation method.
Journals in which at least one of the two header entities is to be deconsolidated using the From previous period deconsolidation method and is also to be deconsolidated in the previous period are excluded from the minorities calculation. An exception is made for eliminate financial investment/net equity from ownership structure register journals, which are processed in any case.