Group reporting: Unable to Consolidate correctly Equity based method entities- indirect shareholding

[TULLEYC]

Dear community, I have the following Group structure and would like to know why my consolidation is not producing the anticipated results: with Group reporting cloud based version using Rules based Cost of investments.

Group structure : Single Group A where:

Company J184 is the Holding company and  company J0196  and company 197 are both Equity based investments. 

Company J0184 owns 30% in Company J0196. The participation ( cost of investment) of J0184 in J0196 is  52,000

Company J196 owns 40% in company J0197. The Participation( cost of investment) of J0196 in J0197 is 8,000

The Group share of J184 in J0197 is 30% x 40% =12%.

All data that has been imported into the system is data import.png.

Once the consolidation has been run, I see immediately that the Cost of investment of J0196 in J0197 is eliminated twice, once through the PCC process in Document 0Z preparation of Group changes -8000 and also document 3A  investment of Equity elimination -8000.  So the cost of investment 172100 is eliminated twice. 

How should the system be set up so that the cost of investment is not eliminated twice and we have an over elimination which is clearly incorrect.  I also see other issues but I would like to start the discussion here. Looking forward to hearing from an expert on this soon.

kind regards

Colin

[Chuma]

Hello @TULLEYC 

I see what’s happening here. You have a two-tier indirect equity structure (J0184 → J0196 → J0197), but Group Reporting is removing the cost of investment in J0197 twice.

Document type 0Z (Prep Group Changes / PCC): removes the investment J0196 holds in J0197 (-8,000).

Document type 3A (Investment/Equity Elimination) removes the same cost again (-8,000).

FS item 172100 – Investments in Subs, JV and Associates, GV gets over-eliminated.

The reason why the error occurs is

In rules-based consolidation in S/4HANA Cloud Public Edition, the system aims to reduce investment costs both:

At the direct parent/partner consolidation unit level (J0196 versus J0197), and at the ultimate parent consolidation group level (J0184 versus J0197, via equity method).

Because indirect shareholding is not automatically handled unless you adjust your consolidation methods / rules, both elimination steps fire.

How to fix/set up correctly

You need to manage where the elimination takes place.

Review the Consolidation Method assignment.

J0196 (equity method entity) → should use a method such as Equity Method (No Full Elimination).

J0197 should be linked only to J0196, not directly to J0184.

Ensure that only one elimination rule is applied (either PCC or 3A).

Adjust the Rule for FS Item 172100

In Define Rules for Elimination of Investments, set the scope to include only direct ownership.

Exclude indirect ownership from the investment elimination rule.

Group Shares / Ownership Manager

Check that Group Share (%) and Direct Share (%) are maintained correctly:

J0184 → J0196 = 30%

J0196 → J0197 = 40%

J0184 → J0197 = 12% (calculated, not directly maintained).

If you’ve maintained J0184 → J0197 directly, the system will trigger an extra elimination.

Document Types

Document type 0Z is for preparatory PCC entries,

Document type 3A is for investment/equity eliminations.
If both hit the same relationship, you’ll see a double elimination. Adjust the active document type for equity-accounted entities.

Practical resolution

In Central Ownership (App F3440), retain only the direct ownerships. Allow the system to calculate indirect shares automatically.

Assign the correct consolidation method to equity method entities so they are not subject to full investment elimination.

Run the consolidation again – you should see only one removal of the -8,000 cost, not both.

Your system is removing J0197 twice because indirect ownership is configured as if it were direct. Fix by:

Keep only direct links in ownership manager (J0184→J0196, J0196→J0197).

Allowing the system to calculate the indirect share (12%).

Ensuring the equity method consolidation does not cause double elimination.

Feel free to reach out if you need further information

With regards

Chuma

[TULLEYC]

Hi Chuma, Thanks for your reply. Working through your response I have checked the following:

J0184 is set up as consolidation method 00 Parent Direct Shares

J0196 and J0197 is set up as consolidation method 20 Parent (Direct Shares)

I use the accounts  S0001 Group Share and S0002 Direct share to determine the shareholding.

This is set up to indicate the share holdings. The Fiori app you have mentioned does not exist F3440.

How do you exclude indirect ownership from the rule?

thanks 

Colin