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Investment Elimination Using Currency Method 2 - Controller 8x Guideline

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Investment Elimination Using Currency Method 2 - Controller 8x Guideline
Guideline
Investment Elimination Using
Currency Method 2 - Controller 8x
Product(s): Controller 8x
Area of Interest: Financial Management
Investment Elimination Using Currency Method 2 - Controller 8x
2
Copyright
Copyright © 2008 Cognos ULC (formerly Cognos Incorporated). Cognos ULC
is an IBM Company. While every attempt has been made to ensure that the
information in this document is accurate and complete, some typographical
errors or technical inaccuracies may exist. Cognos does not accept
responsibility for any kind of loss resulting from the use of information
contained in this document. This document shows the publication date. The
information contained in this document is subject to change without notice.
Any improvements or changes to the information contained in this document
will be documented in subsequent editions. This document contains
proprietary information of Cognos. All rights are reserved. No part of this
document may be copied, photocopied, reproduced, stored in a retrieval
system, transmitted in any form or by any means, or translated into another
language without the prior written consent of Cognos. Cognos and the
Cognos logo are trademarks of Cognos ULC (formerly Cognos Incorporated)
in the United States and/or other countries. IBM and the IBM logo are
trademarks of International Business Machines Corporation in the United
States, or other countries, or both. All other names are trademarks or
registered trademarks of their respective companies. Information about
Cognos products can be found at www.cognos.com
This document is maintained by the Best Practices, Product and Technology
team. You can send comments, suggestions, and additions to
[email protected]
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Contents
1
INTRODUCTION ............................................................................................ 4
1.1
1.2
1.3
PURPOSE ............................................................................................................4
APPLICABILITY .....................................................................................................4
EXCLUSIONS AND EXCEPTIONS ..................................................................................4
2
SCENARIO ..................................................................................................... 5
2.1
2.2
SAMPLE SCENARIO.................................................................................................5
WHAT CONTROLLER DOES........................................................................................5
3
SCENARIO ..................................................................................................... 7
3.1
3.2
3.3
3.4
3.5
SOLUTION...........................................................................................................7
AUTOMATIC JOURNAL CONFIGURATION ........................................................................8
DEFINE AN AUTOMATIC JOURNAL ............................................................................. 10
SET UP THE CONTROL TABLE .................................................................................. 11
ENSURE OPENING BALANCE ACCOUNTS HAVE CONVERSION CODE C TO ENSURE ROLLOVER WHERE
THERE IS NO LC IN THE CLOSING BALANCE: ............................................................................ 12
3.6
VIEW THE JOURNAL POSTING! ................................................................................. 13
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Investment Elimination Using Currency Method 2 - Controller 8x
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1 Introduction
1.1
Purpose
This document examines how investment elimination should work when both
currency conversions methods - Method 1 (Current) and Method 2 (MNM) are in use in a single consolidation. This document has been compiled in
response to the parallel use of both methods as a common requirement in
Canada.
1.2
Applicability
Controller 8.1 or higher.
1.3
Exclusions and Exceptions
There are no known exclusions and exceptions at the time this document was
created.
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Investment Elimination Using Currency Method 2 - Controller 8x
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2 Scenario
2.1
Sample Scenario
Group G1 is a USD group with a CAD division (G2) and a mix of Method 1
(M1) and Method 2 (M2) subsidiaries. Automatic journals E100 & E105 are
used in conjunction with the investment register to eliminate investments in
local currency (LC).
2.2
What Controller does
Elimination in the G2 (all USD) group works correctly until it is converted to
CAD at the point at which it rolls into G1. The source of the issue is S3, the
owned company converting using M2.
On E100, the investment and offset account are both at closing rate (CR) so
there is no difference. On E105, there is a historical rate (HR) against equity
and a CR against the offset.
In order to balance itself, E105 converts according to the general
configuration and because E105 is posted against the owned company and
the owned company is M2, the difference is posted against the MNM
difference account in the P&L.
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Investment Elimination Using Currency Method 2 - Controller 8x
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This is not the required outcome. Differences running through the P&L on
M2 companies should not be eliminated as part of the investment elimination
journal.
The desired result is demonstrated below. E105 should put any arising
exchange differences to the balance sheet CTA for both M1 & M2 companies:
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Investment Elimination Using Currency Method 2 - Controller 8x
An undesired result also occurs at G1 (CAD) with the elimination of S1 (from
USD to CAD), also converting using M2.
3 Scenario
3.1
Solution
Entering and maintaining historical rates against the S3 Company would not
only be onerous; it would not resolve the issue either because the HR would
also have to enter against the offset of the P2 Company.
Controller’s conversion methods will not help either (not without overcomplexity).
The most viable solution is to create a custom automatic journal which
reverses any exchange differences eliminated against the MNM difference
account by other automatic journals.
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Investment Elimination Using Currency Method 2 - Controller 8x
3.2
8
Automatic Journal Configuration
Create a new automatic journal type by clicking Maintain > Configuration
> Define > Contribution Versions and Automatic Journal Types.
Select Automatic Journal types and go to the first blank line and type in
the Code, Name-Group and Name-English. The automatic journal types
1-99 cannot be used. They are predefined to represent system generated
transactions for group eliminations. Some of these numbers are not yet used
but may be used in later releases.
The code should consist of two alphanumeric characters. At least one of the
characters has to be a letter (A-Z).
Click Save and then exit.
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Investment Elimination Using Currency Method 2 - Controller 8x
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Investment Elimination Using Currency Method 2 - Controller 8x
3.3
10
Define an Automatic Journal
Create a new automatic journal by clicking Maintain \ Configuration \
Automatic Journals \ Define.
Click New and use the following steps to define the Automatic Journal.
1. In the Code text box assign a 4 digit code to the new automatic
journal. It is recommended to use the letter Z and then a
corresponding journal number, for example 400. The codes cannot
start with E, IC or IP as these are reserved for system defined
automatic journals.
2. From the Automatic Journal Type list, select C4. In this case C4 is
selected as it is new automatic journal to be used for the reversal of
currency translation differences on investment elimination.
3. From the Level list, select 2. The 2 setting is a level higher than the
level defined for E105.
4. From the Category list, select 1. The category 1 refers to the
standard automatic journals.
5. Select the Active check box. The selection of active enables the
automatic journal for use.
6. Select Alternative Currency Conversion check box.
7. The lower part of the automatic journal defines the rules and the how
the control table is set up.
8. Click Save and then close.
Column
Show
Default
HeaderText
Konto
Check
Leave blank
from account
Tecken_pf
Check
Leave blank
Sign
Konto_ib
Check
Leave blank
to account (OB)
Konto_pf
Check
Leave Blank
to account
Regel_id
R4
Msel
S1
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Investment Elimination Using Currency Method 2 - Controller 8x
3.4
11
Set up the Control Table
Set up the Control Table by clicking Maintain > Configuration >
Automatic Journals > Control Tables > Acquisition calculation. Follow
these steps to complete the set up.
1. Select Z400 or the automatic journal created in section 3.3.
2. From the Journal Number list, select 1.
3. Define the Contribution Version (Should include E100 and E105
only).
4. Define the MNM difference account in the From Account column on
the profit and loss statement.
5. Define the TO account (OB) account.
6. Define the reversing MNM difference account and posting to balance
sheet CTA in the TO account column.
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Investment Elimination Using Currency Method 2 - Controller 8x
3.5
12
Ensure Opening balance accounts have conversion code C
The final step is to ensure that the opening balance accounts are using
conversion code C (to enable rollover when there is no LC in the closing
balance).
Click Maintain > Account structure > Define.
Select Retained earnings and ensure the currency code of C is assigned to
the conversion method (Copy of Opening Balance, Account).
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Investment Elimination Using Currency Method 2 - Controller 8x
3.6
The journal posting
And for year 2 -
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Investment Elimination Using Currency Method 2 - Controller 8x
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