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9 Replies Latest reply: Feb 14, 2013 11:45 AM by 968081 RSS

Multiple subholding consolidation and then group consolidation

974352 Newbie
Currently Being Moderated
Hi guys,
I am new to HFM and have the requirement to build a consolidation on a group with over 60 subsidiaries. There are multiple sub groups that will require its own sub-consolid and publish its own consolidated statements. I am wondering whether the follow hierarchy structure will fit the purpose.

GROUP_CONSOL
-- entity1
-- entity2
-- sub_consub1
> entity 3
> entity 4
-- sub_consub2
> entity 5
> entity 6

Edited by: 971349 on Nov 14, 2012 8:42 PM

Edited by: 971349 on Nov 14, 2012 8:43 PM
  • 1. Re: Multiple subholding consolidation and then group consolidation
    KostasN. Expert
    Currently Being Moderated
    Hi,
    Definitely you can specify such structures in HFM. You may run consolidation either on GROUP_CONSOL, which will trigger consolidation to subtrees as well, or you can run consolidation and report on each subtree separately. However, there are several considerations regarding a hierarchical entity structure.

    If you are not going to use customized rules to implement consolidation methods, then your users can post consolidation adjustments using journals which will handle every consolidation case. Still in this case you can use the default intercompany elimination mechanisms provided by HFM.

    However, if you are set to use customized rules to implement consolidation methods, then you should consider what kinds of complexity you may face:
    1. what if entity 1 holds an investment (and percentage) in entity 4, meaning that there are cross investments from outside your substructures?
    2. should you consider sharing entity 4 (drawn from the example in 1 above) in multiple locations in your tree?
    3. what would this mean regarding the possibly different consolidation methods used by entity 4 in each sub-hierarchy? (meaning that your implementation of methods should handle such cases)
    4. how would you avoid double-counting of any accounts coming from the same entity but different routes in the tree?

    If your client has a static group structure with no such complexities now and in the foreseeable future then you can probably build an application with an entity structure and custom consolidation rules relatively easily.

    If not then you might ask your client if he may accept that the consolidation rules will handle the simple case (all entities will appear only once in the GROUP_CONSOL hierarchy) and any possible complexities will be accounted for by your client posting adjustments to individual parent entities.

    The simplest solution (assuming that you are set to implement consolidation methods using rules), is to construct flat hierarchies, using a separate tree for each subgroup needing it's own reporting, and a tree for the super-structure which will contain all base entities. In this case you will definitely share entities among entity trees, but most of the complexity is removed, because each entity has a well defined relationship with its parent. In this case you should also take into account that your client will need to calculate effective percentages to input for each shared entity.

    Regards,
    --Kostas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
  • 2. Re: Multiple subholding consolidation and then group consolidation
    Anna Newbie
    Currently Being Moderated
    Hi,

    I also have same problem with my current consolidation. Let's say I have entity structure as below:

    Top_Entity_Grp
    -----Entity _Grp1
    --------Entity_1
    --------Entity_2
    --------Entity_3
    --------Entity_4
    -----Entity_Grp2
    --------Entity_5
    --------Entity_6
    --------Entity_7

    As you see, Top_Entity_Grp is the highest level of Entity. I have created 4 consolidation method: Cost, Equity, Full, Holding. Each consolidation happen in Entity_Grp, should do an elimination. Actually, in real organization structure, Entity_1 is parent of Entity_2 and Entity_3, while Entity_5 is parent of Entity_6. Since Entity_1 and Entity_5 have their own revenue and expense data, so in HFM structure, i made them sibling of their chidren.

    The challenge comes in elimination phase during consolidation. There are some complex calculation for elimination, one of them is to eliminate capital stock figure in group level. When I tried to create HS.CON, it always read current entity, means that each entity will have capital elimination, which is not correct.

    The calculation should be done in group level and figure should get from POWN * capital of each entity.

    Is there any way to accomplish that ? Or is it correct that elimination for consolidation should happen in group level, or maybe in holding level ?

    Appreciate your responds,
    -Anna
  • 3. Re: Multiple subholding consolidation and then group consolidation
    KostasN. Expert
    Currently Being Moderated
    Dear Anna,
    It is as you describe, HS.Con works on the entity where the consolidation method is executed. With HS.Con you will control which proportion of numbers found in [Parent Total] will roll upwards the value dimension to [Proportion] and [Elimination]. Those amounts will determine the contribution of the entity to its parent.

    If you need to do different things for different entities, you will need to implement and assign different methods to each entity. For example the holding entities Entity_1 and Entity_5 will definitely use a method which will be different from the method you will use for subsidiary entities. This means that the methods defined by the business like full, equity etc do not correspond one-to-one with the methods you will implement in HFM.

    --Kostas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
  • 4. Re: Multiple subholding consolidation and then group consolidation
    Anna Newbie
    Currently Being Moderated
    Hi Kostas,

    Yes, i know that I have to separate the consol method.
    My issue currently is, how to create an elimination in group level, while the figure comes from other source.

    Ex:
    Capital for Entity_1 = 100
    Capital for Entity_2 = 200
    Capital for Entity_3 = 400

    Capital for Entity_Grp1 = 700

    During consolidation, Entity_grp1 should be eliminate for amount 600 only, not 700. Is that possible using HS.Con that way ?

    Or maybe

    Thanks,
    Anna
  • 5. Re: Multiple subholding consolidation and then group consolidation
    KostasN. Expert
    Currently Being Moderated
    Hi Anna,
    Ok, this is what I have described above in words, but lets use your example:

    Lets say that the account is called "Capital", and that you have defined two consolidation methods called "HOLDING" and "SUBSIDIARY". In each consolidation method you have also created a row-set using the HS.OpenDataUnit() function (to keep the code in this posting short).

    Then the subroutine implementing the SUBSIDIARY method will look like this:
    Call vDataUnit.GetItem(i, vAccount, vICP, vCustom1, vCustom2, vCustom3, vCustom4, dData)
    If HS.Account.IsConsolidated(vAccount) Then
    Select Case vAccount
    Case "Capital"
    Call HS.Con("", dPCon, "")
    Call HS.Con("V#[Elimination]", -1 * dPCon, "")
    Case else
    Call HS.Con("", dPCon, "")
    End Select
    End If
    On the other hand the subroutine implementing the HOLDING method, will look like this:
    Call vDataUnit.GetItem(i, vAccount, vICP, vCustom1, vCustom2, vCustom3, vCustom4, dData)
    If HS.Account.IsConsolidated(vAccount) Then
    Select Case vAccount
    Case "Investment"
    Call HS.Con("", dPCon, "")
    Call HS.Con("V#[Elimination]", -1 * dPCon, "")
    Case else
    Call HS.Con("", dPCon, "")
    End Select
    End If
    The second one will pass the "Capital" account to the "Case else" part of the code and capital will not eliminate.

    Then you will apply method "HOLDING" to Entity_1 and Entity_5 and "SUBSIDIARY" to all other entities.

    --Kostas                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
  • 6. Re: Multiple subholding consolidation and then group consolidation
    Anna Newbie
    Currently Being Moderated
    Hi Kostas,

    Yup, currently my rules file is exactly as you described :)

    In this case, the elimination (for Subsidiary Method) will happen in each entity. I was expecting to create an elimination in let's say Entity_Grp1 (set as CONSOL method) with the value to eliminate is a summation of capital from all Subsidiary Method's Entity.

    And, by the way, for DataUnit.GetItem syntax, does it only limit to Custom4 ? Because now i have custom6.

    Thanks,
    -Anna
  • 7. Re: Multiple subholding consolidation and then group consolidation
    KostasN. Expert
    Currently Being Moderated
    Hi Anna,
    In HFM, during consolidation each entity takes care of its own numbers, given the consolidation method that you have set up for it. In the case of Entity_Grp1, after doing what I have described before, it will have a Capital = 100. However, in the second step of consolidation to the Top_Entity_Grp, Entity_Grp1 must behave somehow as a subsidiary, therefore a "SUBSIDIARY" (or a new "SUBGROUP") method should be applied to it, so that this Capital = 100 will also eliminate, so that only the holding company's Capital makes to the "Capital" account of the Top_Entity_Grp.

    Regards,
    Kostas
  • 8. Re: Multiple subholding consolidation and then group consolidation
    Anna Newbie
    Currently Being Moderated
    Thank you Kostas, you are very helpful :)
  • 9. Re: Multiple subholding consolidation and then group consolidation
    968081 Newbie
    Currently Being Moderated
    Hey Kostas

    I have been following this post. Thank you very much for providing your very valuable insight. I have two questions:

    1. Please confirm whether we need to apply the "HOLDING" method to 'Top_Entity_Grp.

    2. I need to do SEC Rule 310 Roll_Up, whereby I need to, besides, traditional entity hierarchies, create alternate entity hierarchies: rolling up Issuer of Debt Entity, Subsidiary Guarantor and Issuer of Debt Entities, Subsidiary Non Guarantor and Non Issuersof Debt Entities, Eliminations Entities and Consolidated Entities (comprising Issuer of Debt Entity, Subsidiary Guarantor and Issuer of Debt Entities, Subsidiary Non Guarantor and Non Issuersof Debt Entities, Eliminations Entities). Can this structures be created in Entity Dimension or do we need to utilize a Custom Dimension?

    Yours and any other Gurus urgent response would be highly appreciated.

    Much thanks

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