Ax2009 Enus Finii 06

Chapter 6: Consolidations

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CHAPTER 6: CONSOLIDATIONS Objectives

The objectives are

• Set up a consolidation company • Set up a subsidiary company • Perform a consolidation • View the Consolidations inquiry • View and delete consolidation transactions • Describe intercompany eliminations

Introduction This course demonstrates the functionality and flexibility of Microsoft Dynamics® AX 2009 in consolidating subsidiary companies into a single consolidated (parent) company.

Some key features include the ability to:

• Consolidate companies whether they reside in the same database or in different databases.

• Map the Chart of Accounts and dimensions in a subsidiary to the consolidated company.

• Specify how the exchange rate should calculate for the consolidation. • Designate the percentage of ownership that should roll into the

consolidated company from the subsidiary.

Microsoft Official Training Materials for Microsoft Dynamics ® Your use of this content is subject to your current services agreement

Financials II in Microsoft Dynamics® AX 2009

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Set Up a Consolidation Company In Microsoft Dynamics AX 2009, a consolidation (parent) company is set up to accumulate the activity from the subsidiaries. Follow these steps to set up the consolidation company:

• Set up General ledger parameters • Set up a system account • Set up currency and exchange rates • Set up the Chart of Accounts

Procedure: Set Up General Ledger Parameters

Follow these steps to set up General ledger parameters for the companies involved in the consolidation.

1. Click General ledger, click Setup, and then click Parameters. 2. Select the Consolidated company accounts field.

CAUTION: If the Consolidated company accounts field is selected in the General Ledger Parameters form, you cannot make entries in the company. If you are trying to post an entry, you will receive an Infolog error.

Procedure: Set Up a System Account

Follow these steps to set up a system account to automatically post rounding differences resulting from consolidating subsidiaries with foreign currencies.

1. Click General ledger, click Setup, click Posting, and then click System accounts.

2. Press CTRL+N to add a line.



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3. In the Posting type field use the arrow to select one of the following: • Balance account for consolidation differences if you are

consolidating an integrated foreign subsidiary. • Profit & loss account for consolidation differences if you are

consolidating a self-sustaining subsidiary or a company that contains the results of several self-sustaining subsidiaries and are using translation methods to consolidate the data.

4. Use the Ledger account arrow to select the appropriate account.

FIGURE 6.1 SYSTEM ACCOUNTS FORM

Procedure: Set Up Currency and Exchange Rates

Follow these steps to set up the standard currency for the consolidation company. Set up the default currencies used in the subsidiary companies in the consolidated company.

1. Click General ledger, click Setup, and then click Exchange rates. 2. Press CTRL+N to insert a line for each currency.

NOTE: The Exchange rates form displays an additional tab, Consolidate, when you select the Consolidated company accounts field in the General ledger Parameters form.

3. For each currency, use one of the following methods.

o Add the exchange rates for each currency, as discussed in the General Ledger Setup course in the Financials I collection.

o Click the Consolidate tab and enter a fixed exchange rate in the Closing rate and Average rate fields.



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NOTE: Generally, the value in the Closing rate field is used for balance sheet accounts and the value in the Average rate field is used for profit and loss accounts.

FIGURE 6.2 EXCHANGE RATES FORM, CONSOLIDATE TAB

Procedure: Define the Currency for the Parent Company

Follow these steps to designate a company currency for the parent company.

1. Click Basic, click Setup, and then click Company information. 2. Click the Other tab. 3. Click the Currency arrow, and then click the currency for the parent

company.



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Procedure: Set Up the Chart of Accounts

If you are planning to use the fixed rate of exchange for the consolidation company, the accounts must be marked as such in the Chart of Accounts. Follow these steps to mark accounts for a fixed rate of exchange.

1. Click General ledger, and then click Chart of Account Details. 2. Select the account, and then click the General tab. 3. Click the Consolidation conversion arrow to select from the

following: o Select Historical to use the exchange rates set up for the

currency in the consolidated company to value the transactions. o Select Closing or Average to use the rates entered in the

Closing rate or Average rate fields on the Consolidate tab of the Exchange rates form to value the transactions.

4. Close the form.



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Lab 6.1 - Set Up a Consolidation Company Scenario

Contoso is expanding and has acquired an additional company. To include the activity from both Contoso Entertainment USA (CEU) and the newly acquired subsidiary of Contoso Entertainment Europe (CEE), a new company called Contoso Entertainment Consolidation (CEC) has been created.

Sara, the Chief Financial Officer, sends Ken, the Controller, an e-mail with the following information to continue with the setup of CEC.

• Any rounding differences from the consolidation should post to profit and loss account 618160.

• The consolidated company will use USD as the default currency, and the newly acquired subsidiary uses EUR as their currency.

• For the initial consolidation, the closing rate for EUR is 158.73 and the average rate for EUR is 149.25.

• The closing rate will be used to value consolidation transactions.

Challenge Yourself!

Help Ken complete Sara's request.

Need a Little Help?

• Review the general ledger parameters for the consolidation company. • Designate the system account in the consolidation company. • Set up the consolidation exchange rates in the consolidation

company. • Designate that account 618160 will use the closing rate for

consolidation purposes.

Step by Step

Follow these steps to review the general ledger parameter.

1. Verify that you are in the CEC company. If not, change to the CEC company.

2. Click General ledger, click Setup, and then click Parameters. 3. Ensure that the Consolidated company accounts field is selected. 4. Close the form.



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Follow these steps to designate the system account.

1. Click General ledger, click Setup, click Posting, and then click System accounts.

2. Press CTRL+N to create a new line. 3. Click the Posting Type arrow, and then click Profit and loss

account for consolidation differences. 4. In the Ledger account field, click the arrow to select 618160. 5. Close the form.

Follow these steps to define the consolidation exchange rates.

1. Click General ledger, click Setup, and then click Exchange rates. 2. Select the line for the EUR, Euro, and then click the Consolidate

tab. 3. In the Closing rate field, enter 158.73. 4. In the Average rate field, enter 149.25. 5. Close the form.

Follow these steps to designate that account 618160 will use the closing rate for consolidation purposes.

1. Click General ledger, and then click Chart of Account Details. 2. Select account 618160, and then click the General tab. 3. In the Consolidation conversion field, select Closing. 4. Close the form.



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Set Up a Subsidiary Company After you complete the setup process in the consolidated company, you can focus on the subsidiary company. The amount of setup needed in a subsidiary depends on how closely the Chart of Accounts and dimensions for the consolidated company and subsidiary are aligned.

Chart of Account Options for Subsidiaries - Identical Chart of Accounts

Microsoft Dynamics AX 2009 allows for different options when you are establishing the relationship between the Chart of Accounts for the consolidated company and subsidiary company.

The first situation is where the Charts of Accounts are identical in the subsidiary and the consolidated company. When this is the situation, the Consolidation account field is selected in the Consolidate Online form during the consolidation process to transfer the balances to the correct accounts.

Chart of Account Options for Subsidiaries - No Consolidated Chart of Accounts

The next situation is one where the consolidated company does not have a Chart of Accounts and the subsidiary Chart of Accounts is being used in the consolidated company. There are two options when you use this method:

• Enter a manual mapping on the Chart of Accounts in the subsidiary. This causes the mapped accounts to create automatically.

• Do not enter any mapping. This causes the Chart of Accounts to be created in the consolidated company when data transfers from the subsidiary.

When you perform this kind of consolidation, the Consolidation account field must not be selected.

NOTE: This method is not appropriate for consolidation of a foreign currency subsidiary because conversion principles cannot be applied.

Chart of Account Options for Subsidiaries - Different Chart of Accounts

The last situation is when the consolidated company and the subsidiary company have different Chart of Accounts structures. In this situation, each account in the subsidiary must be mapped to the consolidated company.



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Procedure: Map the Chart of Accounts

Follow these steps to map an account in the subsidiary to the consolidated company.

1. Click General ledger, and click Chart of Account Details. 2. Click the General tab. 3. In the Consolidation account field, enter the Chart of Account

number from the consolidation company.

NOTE: If the Account types of the subsidiary accounts that are transferring differ from the consolidated company, the values of transaction accounts override the values of total and header accounts during consolidation.

FIGURE 6.3 CHART OF ACCOUNTS FORM, GENERAL TAB

Dimensions

If you are planning to prepare reports and financial statements using dimensions in the consolidated company, map the dimensions used in the subsidiary to the consolidated company dimensions.

During consolidation, balances and transactions transfer from the subsidiary company to the consolidated company, according to assigned dimensions. For this transfer to occur, you must select the value Group dimensions in the Dimension field on the Dimension tab in the Consolidation, Export, and Consolidation, Online forms, in which subsidiary accounts are added to the consolidated company.



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To simplify the dimension structure of the consolidated company, the same consolidated company dimension must be assigned to several subsidiary dimensions.

Procedure: Set Up Dimensions

Follow these steps to map a dimension in the subsidiary to the consolidated company.

1. Click General ledger, and then click Dimensions. 2. Select a dimension value, and then click the General tab. 3. In the Group dimension field, enter the dimension.

NOTE: For the transfers to occur as planned during consolidation, you must select Consolidation account.

HINT: Set up a new department dimension in the consolidated company to be the consolidated company. This helps identify where the consolidated entries originated.

Test Your Knowledge

1. Ken, the Controller at Contoso Entertainment USA (CEU), discusses the Contoso Entertainment Consolidation (CEC) company with Sara, the Chief Financial Officer. They agree the same Chart of Accounts will be used in the CEC as in CEU. Sara asks Ken whether a Chart of Accounts must be set up for CEC before they consolidate CEU. Give your opinion and an explanation about Sara's request.



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Perform a Consolidation Microsoft Dynamics AX 2009 supports the following options to perform consolidations:

• From the same database using the online option • From and, or to another database using the Import/Export option

NOTE: Before you perform a consolidation at the close of a period, ensure that the period closing preparatory activities are performed, but do not close the subsidiary accounts until the consolidation is completed.

Procedure: Consolidation, Online

Follow these steps when the consolidated company and the subsidiary are in the same database, so that an online consolidation can occur.

1. Click General ledger, click Periodic, click Consolidate, and then click Consolidation, Online.

2. Specify a range of accounts, a period of time, and budget model(s) to use for the consolidation.

3. Select Consolidation account to use the account mapped in the subsidiary company or if the Chart of Accounts are the same in the subsidiary company and the consolidated company.

4. Select Current or Budget to include transactions or budget. 5. Select Exchange adjustment for the ledger transactions in the

subsidiary to adjust during consolidation using the data specified on the Exchange rates form.

6. Click the Dimension tab, and specify the dimensions for which data should consolidate from the subsidiary.

7. Click the Companies tab, and enter a line for each subsidiary company that indicates the percentage of ownership and whether exchange differences post to a balance sheet or profit and loss account.



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8. Click the Description tab, and enter a meaningful description for the consolidation.

9. Click OK to process the consolidation immediately or use Batch to run the consolidation as a batch job.

FIGURE 6.4 CONSOLIDATE ONLINE FORM

Procedure: Consolidation, Export

Follow these steps when the subsidiary company is in a different database than the consolidated company, in which case the export option can be used to prepare a comma-delimited file to import into the consolidated company.

1. Click General ledger, click Periodic, click Consolidate, and then click Consolidation, Export.

2. Specify a range of accounts, a period of time, and budget model(s) to use for the export.

3. Select Consolidation account to use the account mapped in the subsidiary company or if the Chart of Accounts are the same in the subsidiary company and the consolidated company.





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6. Click the Dimension tab, and specify the dimensions for which data should export from the subsidiary.


8. Click OK to process the export immediately or use Batch to run the export as a batch job. When the export is finished, a message lists the number of records saved in each file. The files are ready for importing into the consolidated company.

Procedure: Consolidation, Import

Follow these steps when the subsidiary is in another database and its data has been exported to a comma-delimited file, so you can perform an import to bring the subsidiary data into the consolidated company.

1. Click General ledger, click Periodic, click Consolidate, and then click Consolidation, Import.

2. Click the Criteria tab, and specify a range of accounts, a period of time, and budget model(s) to use for the import.




6. Click OK to process the import immediately or use Batch to run the import as a batch job.

Test Your Knowledge

1. What three types of consolidation processes are available in Microsoft Dynamics AX 2009? (Select all that apply)

( ) Offline ( ) Online ( ) Export ( ) Import



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Lab 6.2 - Perform a Consolidation Scenario

Sara, the Chief Financial Officer has asked Ken, the Controller, to consolidate the activity for Contoso Entertainment USA (CEU) from 01/01/2006 through 12/31/2008 into the Contoso Entertainment Consolidation (CEC) company. Sara also has asked Ken to specifically review the balance of account 110110, Cash in bank-U.S., to verify the accuracy of the consolidation.

Challenge Yourself!

Help Ken perform a consolidation of CEU.

Need a Little Help?

1. Use the online option to consolidate the subsidiary. 2. Check the Current field on the Criteria tab to perform the

consolidation.

Step by Step

1. Select the CEC company. 2. Click General ledger, click Periodic, click Consolidate, and then

click Consolidation, Online. 3. In the From period field, enter 01/01/2006. 4. In the To period field, enter 12/31/2008. 5. In the Consolidation account field, do not select the field. 6. In the Current field, select the field. 7. Click the Companies tab. 8. In the Company accounts field, use the arrow to select CEU. 9. In the Share field, enter 100.0. 10. Click the Description tab. 11. In the Description field, enter Initial Consolidation. 12. Click OK. While the consolidation is processing, a status window

displays. 13. Click General ledger, and then click Chart of Account Details. 14. Locate account 110110, Bank Account - USD. 15. Click the Balance button, and then click Balance. 16. Note the balance. 17. Switch to the CEU company and repeat steps 13 through 16. Notice

that the balance for the account is equal in both companies.



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Consolidations Inquiry After performing a consolidation, it may be necessary to review the entries that are created. Microsoft Dynamics AX 2009 has functionality to facilitate the review of the consolidation entries.

To review, click General ledger, click Inquiries, and then click Consolidations.

The Overview tab provides a list of all the entries created through the consolidation process. In addition to the information on the Overview tab, the General tab displays the time the entry was created and the user ID of the person who created the entry.

The Transactions button has options of Current or Budget. This enables the display of the consolidation entries that are created.



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Lab 6.3 - Consolidations Inquiry Scenario

Ken, the Controller has a meeting with Sara, the Chief Financial Officer. The newly created consolidation company is on the agenda. Sara asks whether it is possible to view all the transactions created by the recently processed consolidation.

Challenge Yourself!

Help Ken show Sara how to view the transactions from the consolidation.

Step by Step

1. On the Status bar, double-click the company field. 2. Click the line for CEC, and then click OK. 3. Click General ledger, click Inquiries, and then click

Consolidations. 4. Click the Transactions button, and then click Current. 5. Review the transactions. 6. Close the form.



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View and Delete Consolidation Transactions There may be times when it is necessary to remove consolidation transactions. For example, a data entry error may be made when a user sets up the consolidation process. Microsoft Dynamics AX 2009 has functionality to simplify the deletion of consolidation entries.

Procedure: Remove Consolidation Transactions

Follow these steps to remove consolidation transactions.

1. Click General ledger, click Inquiries, and then click Consolidations.

2. Click the line for the transactions to remove. 3. Click Remove transactions. A confirmation form opens. 4. Click OK to delete the transactions.



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Lab 6.4 - View and Delete Consolidation Transactions Scenario

Ken, the Controller, receives a frantic call from Sara, the Chief Financial Officer. The recent consolidation that was processed in CEC is incorrect; Sara had provided the incorrect dates. She wants to know whether the transaction can be deleted.

Challenge Yourself

Remove the transactions resulting from the initial consolidation.

Step by Step

1. Click General ledger, click Inquiries, and then click Consolidation.

2. Click the line for Initial Consolidation. 3. Click the Remove transactions button. 4. Click OK in the confirmation form. When the deletion is complete,

an Infolog form displays. 5. Close the Infolog form. 6. Close the Consolidations form.



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Intercompany Eliminations Elimination transactions are required when a parent company conducts business with one or more subsidiary companies and uses consolidated financial reporting. Some transactions that occur between the companies must be eliminated because consolidated financial statements must only include transactions that occur between the consolidated entity and the other entities outside the consolidated group. Because of this requirement, transactions between a parent company and its subsidiary companies must be removed or eliminated.

Predefined elimination rules create elimination transactions in a company specified as the destination company for eliminations. You can generate the elimination journals during the consolidations process or by using an elimination journal proposal.

In earlier versions of Microsoft Dynamics AX, the recording of an elimination transaction is a manual process. In Microsoft Dynamics AX 2009, the automation of elimination transactions decreases the complexity and time that is required for the consolidation process.

Scenario

Phyllis, the Accounting Manager, is responsible for the period and fiscal year closing for Contoso and its subsidiary. During the fiscal year, Contoso paid the payroll of its subsidiary. During the fiscal year closing, Phyllis must eliminate the amounts in the associated payroll accounts.

Types of Companies

Refer to the following table for descriptions of the types of companies associated with intercompany eliminations.

Term Description

Consolidation Company

A company created to report financial results for a group of companies. The financial data from the companies is consolidated into this company, and then a financial report is created by using the combined data.

Elimination Company

An elimination journal is valid only in companies designated as elimination companies. A company can be both an elimination company and a consolidation company.

Source Company

The company in which the amounts to eliminate reside.

Destination Company

The company in which the elimination journal is created and posted.



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Procedure: Designate an Elimination Company

Follow these steps to designate a company as an elimination company, which will allow you to create elimination transactions in the company.

1. Select the company to designate as an elimination company. 2. Click General ledger, click Setup, and then click Parameters. 3. On the Ledger tab in the Eliminate section, select the Elimination

company option.

Procedure: Create a Ledger Elimination Rule - Overview

Elimination rules are the setup part of creating system-generated elimination transactions, defining how to eliminate transactions between a parent company and a subsidiary company. An elimination rule is stored based on each company and must be unique.

NOTE: You can set up elimination rules in any company, but you can process them only in the Consolidation company. To designate a company as a Consolidation company, select the Consolidated company accounts option in the General ledger parameters form.

Follow these steps to create a ledger elimination rule.

1. Click General ledger, click Setup, click Posting, and then click Ledger elimination rule.

2. Press CTRL+N to create a new rule. 3. In the Rule field, enter a unique identification for the elimination

rule. This may default from the number sequence settings. 4. Enter a Description. 5. Select a Destination company, which is the company where the

elimination journal will be created. The Elimination option must be selected in the General ledger parameters form for the destination company.



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NOTE: The currencies of the destination and source companies must be the same.

6. Enter or select the beginning date as the Effective start date. 7. Enter or select the ending date as the Effective end date. 8. Select the Active check box to indicate whether the elimination rule

is available for processing.

FIGURE 6.5 LEDGER ELIMINATION RULE FORM



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Procedure: Create a Ledger Elimination Rule - General

Follow these steps to enter the general information for a ledger elimination rule.

1. On the General tab of the Ledger elimination rule form, view information previously designated on the Overview tab including the elimination rule, description, destination company, and starting and ending dates for the elimination rule.

2. In the Date last run field, view when the elimination rule last was processed successfully.

3. In the Journal settings section, select a journal Name with the type of elimination.

FIGURE 6.6 LEDGER ELIMINATION RULE FORM, GENERAL TAB



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Procedure: Create a Ledger Elimination Rule - Lines

Follow these steps to enter additional information, such as the elimination method, source and destination accounts, and dimension information, about the elimination rule.

1. From the Ledger elimination rule form, click the Lines button. 2. Press CTRL+N. 3. From the drop-down list, select an Elimination method.

• Net change: Eliminates an account's net change for a specified date range. This is the most common elimination method.

• Fixed amount: Eliminates a specified amount for an account. With this method, a manual process determines the fixed amount to eliminate for an account.

FIGURE 6.7 LEDGER ELIMINATION RULE LINE FORM



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Procedure: Create a Ledger Elimination Rule - Lines with Net Change

If the selected Elimination method is Net change, follow these steps to complete the ledger elimination rule line setup.

1. In the Source account field, enter the account the amount will be eliminated from. The source account is used together with the optional source dimensions to calculate the amount to eliminate.

2. In the Destination account field, select from the drop-down list: • Source: The respective account field will be disabled. • User specified: Enter an account.

3. If you select User specified, enter an Account. 4. In the Destination dimension field, select from the drop-down list:

• Source: The respective dimension field will be disabled. • User specified: Enter zero or one dimension codes for every

dimension.

5. Select the Source dimensions, if desired, the amount will be eliminated from.

6. In the Dimension fields, select dimensions transactions will post to for the elimination rule.

HINT: You can use wildcard characters in the source account and source dimension fields.

Procedure: Create a Ledger Elimination Rule - Lines with Fixed Amounts

If the selected elimination method is Fixed amount, follow these steps to complete the ledger elimination rule line setup.

1. The Destination account displays User specified. 2. Select the Account the transaction will post to. The destination

dimensions displays User specified. 3. Enter an Amount. 4. In the Dimension fields, select dimensions transactions will post to

for the elimination rule.



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Process an Elimination Rule

There are two methods to process a ledger elimination rule:

• The Elimination journal proposal creates a journal in the elimination company.

• During the Consolidate Online process in a consolidation company, a journal is created in the company, specified as the destination company.

Procedure: Create an Elimination Journal Proposal

An Elimination Journal Proposal will create an elimination journal in the General Ledger. The advantage of a journal is being able to preview and validate results.

This method of processing an elimination rule may be preferred if you first must consolidate data, confirm the data in the consolidation company is accurate, and then run a separate elimination journal proposal to create and approve the elimination transactions.

Follow these steps to create an elimination journal proposal.

1. Click General Ledger, click Journals, and then click Elimination. 2. Press CTRL+N to create a new journal. 3. Click the Lines button. 4. Click the Proposals button, and then click Elimination proposal. 5. In the Source company field, select the company to use to retrieve

the amounts for elimination. 6. Select the elimination Rule. 7. The Description of the elimination rule displays. 8. The date that the elimination last processed and distributions

successfully created displays in the Date last run field.



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9. Enter the beginning and ending dates by which ledger amounts will be retried for elimination in the Period and To fields, respectively.

10. Enter the posting date of the elimination journal to the general ledger in the GL posting date field.

FIGURE 6.8 ELIMINATION PROPOSAL FORM

Procedure: Process an Elimination During Consolidation

You can process a ledger elimination rule during the consolidate online process. The elimination rule runs against the consolidated company. You can run elimination rules in a proposal mode to perform what-if analysis. You can then navigate to Journals to see the proposed results. If the results are as desired, you then can post the elimination entries.

This method of processing an elimination rule is preferred if consolidations are simple and the ease of a one-step process is desirable.

Follow these steps to process a ledger elimination rule during the consolidation online process.

1. Click General ledger, click Periodic, click Consolidate, and then click Consolidation, Online.

2. On the Criteria tab, enter the Period from and Period to date range, which determines the source data to eliminate.

3. Select the Elimination tab.



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4. In the Proposal options field, select from the drop-down list. • Proposal only: Journals are created. • Post only: Journals are created and posted.

5. Enter the posting date of the elimination journal to the General

Ledger in the GL posting date field.

FIGURE 6.9 CONSOLIDATE ONLINE FORM, ELIMINATION TAB

Test Your Knowledge

1. When is using an intercompany elimination necessary?



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2. What are two benefits of an elimination journal proposal? (Select all that apply)

( ) An elimination journal proposal lets users preview results ( ) An elimination journal proposal posts automatically ( ) An elimination journal proposal lets users validate results ( ) An elimination journal proposal can only be run once

Summary This section described the setting up and processing of a consolidation using Microsoft Dynamics AX 2009.

Users who decide to apply the information provided can set up their system for consolidations.



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Test Your Knowledge Test your knowledge with the following questions.

1. Should transactions other than the consolidation transactions be processed in a consolidated company?



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Quick Interaction: Lessons Learned Take a moment and write down three key points you have learned from this chapter

1.

2.

3.



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Solutions Set Up a Subsidiary Company

1. Ken, the Controller at Contoso Entertainment USA (CEU), discusses the Contoso Entertainment Consolidation (CEC) company with Sara, the Chief Financial Officer. They agree the same Chart of Accounts will be used in the CEC as in CEU. Sara asks Ken whether a Chart of Accounts must be set up for CEC before they consolidate CEU. Give your opinion and an explanation about Sara's request.

MODEL ANSWER:

A Chart of Accounts will not need to be set up in CEC because the accounts can be created during the consolidation process. If the subsidiary, CEU, used a default currency other than USD, the Chart of Accounts would need to be set up because currency conversion cannot be performed (the Consolidation account field cannot be selected).

Perform a Consolidation

1. What three types of consolidation processes are available in Microsoft Dynamics AX 2009? (Select all that apply)

( ) Offline (√) Online (√) Export (√) Import

Intercompany Eliminations

1. When is using an intercompany elimination necessary?

MODEL ANSWER:

Elimination transactions are required when a parent company conducts business with one or more subsidiary companies and uses consolidated financial reporting. Some transactions that occur between the companies must be eliminated because consolidated financial statements must include only transactions that occur between the consolidated entity and the other entities outside the consolidated group. Because of this requirement, transactions between a parent company and its subsidiary companies must be removed or eliminated.



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2. What are two benefits of an elimination journal proposal? (Select all that apply)

(√) An elimination journal proposal lets users preview results ( ) An elimination journal proposal posts automatically (√) An elimination journal proposal lets users validate results ( ) An elimination journal proposal can only be run once

Test Your Knowledge

1. Should transactions other than the consolidation transactions be processed in a consolidated company?

MODEL ANSWER:

No, the only transactions in the consolidated company should be those created by the consolidation process.


Documents

Ax2009 Enus Finii 06