Consolidation is the period-end process of combining the financial results of
separate subsidiaries with the parent company to form a single, combined
statement of financial results. If your company has shifted operations to another country or acquired a new subsidiary. then you may want to bring your foreign operations into the same database.
If you have operations or financial transactions in foreign currencies it is most likely that you operate with multiple sets of books. It is also possible that you operate multiple sets of books within the same functional currency. If this is the case, you should take advantage of the consolidation features of Oracle’s General Ledger.
The purpose of using Oracle consolidations is to move financial results from one set of books to another. The most common reason for setting up additional sets of books is to transact business in a different currency. Other reasons for setting up additional sets of books include using a different chart of accounts, operating with a different calendar, or using different document sequences for the same transaction source.
There are some important issues to be considered before setting up consolidations:
1. Define the Parent or Consolidated Set of Books2. Map the values from the subsidiary set of books to the parent set of books.
3. Define the Eliminations
1. Transfer the Consolidation Mappings
2. Post the Consolidation Journals
3. Generate and Post the Elimination Journals
The first step is to transfer the account balances from the subsidiary set of books to the consolidated set of books. The Transfer Data form allows you to do this by clicking on the Transfer button. A few comments about the fields in this form will highlight the versatility of consolidations.
Balance Type: Use this field to transfer actual or budget amounts.
Currency: The amounts to be transferred from the subsidiary to the parent set of books must be in the same currency.
Method: Choose balances or transactions.
If you have operations or financial transactions in foreign currencies it is most likely that you operate with multiple sets of books. It is also possible that you operate multiple sets of books within the same functional currency. If this is the case, you should take advantage of the consolidation features of Oracle’s General Ledger.
The purpose of using Oracle consolidations is to move financial results from one set of books to another. The most common reason for setting up additional sets of books is to transact business in a different currency. Other reasons for setting up additional sets of books include using a different chart of accounts, operating with a different calendar, or using different document sequences for the same transaction source.
Consolidations in Oracle
There are some important issues to be considered before setting up consolidations:
- Do you have multiple consolidation levels?
- Are all consolidated results reported in the same currency? Some organizations may need a consolidation of financial results in Euros and in USD.
- How frequently will you consolidate financial results?
- Will you consolidate budget amounts in addition to actual results?
- What level of detail do you need in the consolidated set of books – balances or transactions from the subsidiary sets of books? Most organizations consolidate balances and use account drilldowns to view source transactions.
- When is the first period you want to consolidate financial results? The first period you consolidate; you should use LTD numbers to establish beginning balances.
- Do all of the subsidiaries set of books use the same chart of accounts? If not, then you will have to prepare a mapping of the account values.
- Do you use Multiple Reporting Currency (MRC) or Currency Translations to translate transactions from a foreign currency to your reporting currency?
What You Can Consolidate
With GCS, you can consolidate any business dimension at any level of detail from any point of view:
Any Source: Data from any source system, including ledger, databases, Oracle and non-Oracle applications can be consolidated with GCS. For Oracle Applications, use Cross Instance Data Transfer to transfer consolidation data to your parent on a remote instance. For non-Oracle applications use a customizable spreadsheet front-end or the open consolidation interface to upload your data into GCS.
Any Chart of Accounts: Subsidiaries can use separate chart of accounts from the parent to address unique operational accounting practices and meet local statutory requirements. GCS enables you to consolidate across diverse charts of accounts.
Any Calendar: Subsidiaries can use different accounting calendars from the parent. GCS enables you to consolidate across calendars.
Any Currency: Subsidiaries can use a ledger currency which differs from the parent’s ledger currency. GCS revalues and translates all subsidiary balances to ensure consistent consolidated results.
Any Level of Detail: Consolidate detail transactions, detail balances, and summary balances.
- Consolidate transactions when you want the convenience of accessing detailed information in the consolidated ledger and the ability to perform incremental updates to consolidated balances.
- Consolidate balances when you want the flexibility to transfer account details for only selected accounts.
- Consolidate summary balances when you only want to transfer aggregated account balances to the consolidated ledger. This method requires fewer resources and enhances processing performance.
Any Balance Type: Consolidate any balance type; including actual, average, translated, budget, and statistical balances.
Oracle Consolidation Setup Steps
The steps to set up and use the consolidation features in Oracle are:1. Define the Parent or Consolidated Set of Books2. Map the values from the subsidiary set of books to the parent set of books.
3. Define the Eliminations
Executing the Consolidation Process
The first step in consolidation process begins with translating the accounts to the conversion currency. Depending on the methodology to translate your account balances, you may need to revalue some or all of the balances. Oracle has a process that follows accepted accounting principles to do that too. Once accounts are translated and properly valued, then you begin the consolidation process and that is to:1. Transfer the Consolidation Mappings
2. Post the Consolidation Journals
3. Generate and Post the Elimination Journals
The first step is to transfer the account balances from the subsidiary set of books to the consolidated set of books. The Transfer Data form allows you to do this by clicking on the Transfer button. A few comments about the fields in this form will highlight the versatility of consolidations.
Balance Type: Use this field to transfer actual or budget amounts.
Currency: The amounts to be transferred from the subsidiary to the parent set of books must be in the same currency.
Method: Choose balances or transactions.
The values of these three fields are determined by the setups in the consolidation mapping.
In the Subsidiary region, enter an Amount Type of PTD. Use PJTD the first time you transfer amounts to establish the correct beginning balance but after that you will only want to use PTD. Enter the period that is the source of the balances to be transferred. The screen shot shown below illustrates the Transfer of Consolidation Data Sets. Oracle provides a similar form to transfer a single consolidation mapping.
Use the Apply Defaults button to apply the values in the Default Parameters region to all the consolidation mappings in this mapping data set. The Options button allows you to select values for three different run options. They are:
1. Run Journal Import. The consolidation transfer process creates transactions that will populate the gl_interface table. Checking this option submits the Journal Import process that will create a journal in the consolidated set of books. The format of the journal batch name is <Date> <Consolidation Name> Consolidation <Request ID>: <Balance Type> <Group ID>
2. Audit Mode. Select this option to have the system keep a record of how accounts from the subsidiary set of books are mapped to the parent set of books. You can then run the Consolidation Audit Report and the Unmapped Subsidiary Accounts Report to see the audit information. (Only use this as needed to verify your consolidation mappings. You can improve the system’s performance by not using this option).
3. Create Summary Journals. If your mapping options point different subsidiary accounts to the same parent account then you might want to use this option so that only one entry for that account is created in the parent set of books.
When the transfer process is complete, the general ledger will have journals that are eligible for posting. Posting the journals is the second step. It is important to note that if for whatever reason you find that you need to execute the transfer consolidation for the same period again, you will have to reverse the journal. There is no mechanism to do an incremental transfer of consolidation data.
The third and final step is to generate and post the elimination journals. The first time you do this you will want to verify that the eliminations calculate the correct amounts.
Consolidation Workbench
In addition to providing mapping sets, Oracle has a Consolidation Workbench to help you manage the consolidation process. This is especially useful if you have to manage many consolidation mappings because it gives you in one view, the status of all your consolidation mappings and it provides a launch point to execute the next step in the consolidation. An example of this workbench or state controller as Oracle calls it is shown below:
All the standard reports such as trial balances and account analysis are also available.
If you have the need to produce consolidated financial results and if you have more than one set of books, the Oracle Consolidation Process is an efficient method to accomplish that objective.
Use the Apply Defaults button to apply the values in the Default Parameters region to all the consolidation mappings in this mapping data set. The Options button allows you to select values for three different run options. They are:
1. Run Journal Import. The consolidation transfer process creates transactions that will populate the gl_interface table. Checking this option submits the Journal Import process that will create a journal in the consolidated set of books. The format of the journal batch name is <Date> <Consolidation Name> Consolidation <Request ID>: <Balance Type> <Group ID>
2. Audit Mode. Select this option to have the system keep a record of how accounts from the subsidiary set of books are mapped to the parent set of books. You can then run the Consolidation Audit Report and the Unmapped Subsidiary Accounts Report to see the audit information. (Only use this as needed to verify your consolidation mappings. You can improve the system’s performance by not using this option).
3. Create Summary Journals. If your mapping options point different subsidiary accounts to the same parent account then you might want to use this option so that only one entry for that account is created in the parent set of books.
When the transfer process is complete, the general ledger will have journals that are eligible for posting. Posting the journals is the second step. It is important to note that if for whatever reason you find that you need to execute the transfer consolidation for the same period again, you will have to reverse the journal. There is no mechanism to do an incremental transfer of consolidation data.
The third and final step is to generate and post the elimination journals. The first time you do this you will want to verify that the eliminations calculate the correct amounts.
Consolidation Workbench
In addition to providing mapping sets, Oracle has a Consolidation Workbench to help you manage the consolidation process. This is especially useful if you have to manage many consolidation mappings because it gives you in one view, the status of all your consolidation mappings and it provides a launch point to execute the next step in the consolidation. An example of this workbench or state controller as Oracle calls it is shown below:
Reporting
Aside from the obvious advantages of having all the financial results in one set of books, one very nice advantage about reporting is that all the existing financial statements will work for consolidation reporting. Nevertheless, with the financial results in one set of books, you may want to prepare additional financial statements such as those that show results of the subsidiaries in columns across the page.All the standard reports such as trial balances and account analysis are also available.
Account Inquiry
You can use the account inquiry function in the consolidated set of books and trace the transaction source clear back to its original entry in the subsidiary set of books without having to sign in to the subsidiary set of books. You can do inquiries in the reporting currency or in the functional currency. Further, you can drill down to the source in that set of books whether it be an invoice, receipt, payment, etc.Conclusion
Having consolidated data in one set of books offers advantages to financial reporting, analysis, and management. It helps ensure consistency in financial reporting and helps assure that financial controls are consistently applied. These advantages are significant and provide every reason to use the consolidation features in the Oracle General Ledger.If you have the need to produce consolidated financial results and if you have more than one set of books, the Oracle Consolidation Process is an efficient method to accomplish that objective.
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