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Consolidation reserve calculation in BFC

Former Member
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1,157

Hello expert,

I am facing huge problem in understanding consolidation reserve calculation and explaining it to my client.

When ever we run the consolidation there is balance going and sitting in Consolidation reserve account from reserve account.

And some eliminated investment from Retained earning also going and sites in Consolidation reserve account.

First off all i wanted to understand why consolidation reserve account should be there ?

2 .How consolidation reserve will be calculated?

3. Is my actual reserve is some of Reserve + consolidation reserve? or

Is my total retained earning is sum of retained earning + consolidation reserve?

4. If we don't want consolidation reserve to be calculated , how to do the changes in the system.

Actually my client don't want there reserve to get eliminated and consolidation reserve account to have any balance at consolidation .

Please help me with this an urgent basis. Thanks you in advance for all your support.

Regards,

Sudhanva B.S

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Answers (2)

Answers (2)

former_member181999
Contributor
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Hello Sudhanva,

Please find my answers for your questions.

Q1. Why Consolidation Reserves.

A1. This reserve (Is an annual net profit at the business subsidiary location) is not available for dividend distribution. A consolidation reserve is required for consolidated profits that are not available for distribution.

Q2. How the Calculation takes place

A2. If our calculation is for Year 2013Jan to 2013Dec. If our company board meets in Jan2013 and decides to   Reserve =  5% (at least)

  Reserve = 10 % (Actual)

  If our annual company profit = 1000$ (Local currency)

  The max profit that can be share to our share holders for giving dividend = [1000 X (90% (10% we reserved)] = 900$ (Local currency). The reserved amount = 100$ (Forbidden to distribute to Share holders)

Q3. Your client specific calculations

A3. I see your Client's calculation is good and it is considering Reserves (Taking off our example =100$). But still advise to take an example calculation and get it validated with Client's functional/business team.

Q4. Can we ignore Consolidation Reserves.

A4. Considering / Maintaining Consolidation Reserves. The % varies from location to location. Generally it is controlled by the Law of business in the location. It is advised to be obey the law of business in the location (Geography).

Hope this clarifies you..

Regards | Ashok.

Former Member
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Hi Ashok,

Thanks for your detailed explanation.

Actually in my client case total 100% of reserves are sitting under consolidation reserve.

Now they don't want this calculation to take part in the system . Please let me know how to changes these % calculation in the BOFC system for subsidiaries.

Its really helps me a lot .

Thanks ,

Sudhanva B.S

Former Member
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Hi Sudhanva,

Which Starter Kit version are you using?

In any case, please check documentation for the starter kit to understand the configuration:

https://websmp208.sap-ag.de/~sapidb/011000358700001155472013E/FC100_IFRS_SP5_DesignEN.pdf

Former Member
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Hi Mehmat,

Thanks for your reply,

We are using BFC 7.5 version.

Could you please explain how to change consolidation reserve % calculation .

Regards,

Sudhanva B.S