Periodic consolidation
Introduction¶
With periodic management, events are managed while the take place during the fiscal year and not only the situation that has crystalised at the processing period end date. This is particularly useful for managing P&L accounts.
In fact, whereas for balance sheet accounts it is necessary to have a photograph of the situation at the data processing period end, for P&L accounts the accrual principle prevails. That is, for the Costs and Revenues accounts and then the Net result account, it is necessary to consider the contributions of the various entities according to their own consolidation criteria and proportional percentages in the various periods of the year.
| Entity consolidation criteria | Periodic data |
|---|---|
| Line-by-line | 100% of costs and revenues for the contribution of only the periods in which the entity is consolidated using the line-by-line method. The Entity that entered during the year is already included. |
| Equity | The financial investment revaluation is calculated based on the actual period percentage applied to the global net equity net result. The profit/loss on entities consolidated at equity is calculated considering the contribution of only the periods in which the entity is consolidated using the Equity method. |
| Proportional | The costs and revenues as they are produced in the various periods with the relative proportional percentages. |
| Cost | For the periods in which it is at cost, the entity must not contribute to the group consolidation with its financial statements. |
If there are changes to the consolidation criteria or percentages during the year, the various methods are combined to correctly calculate the contribution to the Profit and Loss and balance sheet.
The periodic logics can be applied to the following data processing:
- Minorities calculation
- Proportional data calculation
- Converted data calculation (application o f the period average FX rate)
- Equity evaluation or Copy
- Deconsolidation (from current period and from previous period)
Requirements for periodic consolidation¶
To obtain the correct periodic values, the entity data, including the journals, must be present on the original scenario, in the period prior to its entry into the consolidation area.
Note: this normally happens when the entity is already consolidated line-by-line/proportionally in the previous period in other consolidation areas.
If, however, the data are not present, CCH Tagetik runs the cumulated calculation.
To have the periodic calculation, it is necessary to insert the data on the previous scenario and run certain data processing (e.g. counterparty eliminations). This makes it possible to obtain data, financial statements and journals with which to calculate, by difference, the periodic data.
Example
The data are only partially present: the financial statements of the entity at Equity or at Cost, and the Intercompany declarations but not the Intercompany eliminations, exist on the previous period; it is necessary to insert only the periodic part of the IC declarations in the processing period.
Otherwise, there could be incorrect contributions on the accounts of entities that were valued using the at Equity or at Cost method in the previous period.
The data processing must be run using the same calculation strategy for all periods linked to a scenario. To change strategy from a certain period onwards, it is also necessary to reprocess the previous periods. Moreover, entities which exit the group perimeter must in any case be included in the consolidation area of the subsequent periods using the at Cost consolidation criteria.