Group Accounting is Procountor’s chargeable additional service that enables group consolidation, group accounting and group financial statements. Group Accounting enables also real-time reporting of the group.
More information about ordering and pricing of Group Accounting can be found here. Ordering and activating Group Accounting additional service is done in the following way:
- The customer creates a consolidation environment (the purpose and use of this environment is described in more detail later in this article) that includes the word “Group”. After this, the customer notifies Procountor’s administration at firstname.lastname@example.org with the following information:
- Name of the created consolidation environment
- When it is wanted to begin using the consolidation environment in production usage?
- Which environment is invoiced for the consolidation environment?
- After the previous information has been passed forward, the administration will activate Group Accounting additional service to be used in the consolidation environment.
Group accounting is implemented in the following way: in addition to each separate environment for different group companies, an additional environment is created for the group consolidation. Basically, this means that there is always one more group-related environment in Procountor than there are actual group companies in reality. The following illustration exemplifies the relation of group environments:
The topmost consolidation environment in the illustration is used for the elimination of the internal transactions of the group, creating group accounting and compiling the group financial statements. In order for the consolidation to be successful, chart of accounts of the consolidation environment must include all accounts that are used with different source environments. The chart of accounts is discussed in more detail later in this article.
Financial years must be the same in all environments of the group. Automatic data transfer between the group environments uses dimensions in a way that the consolidation environment receives information from the source environments that is allocated to dimension’s items created for each group environment. This makes it possible to distinguish different group companies from each other on reports. A more detailed look into the dimension settings can be found here.
Group consolidation view
After a new consolidation environment has been created and group accounting has been activated in that environment, Group consolidation view appears in Management > Accounting info > Group consolidation of the consolidation environment:
The upper section of this view is used to determine the environments that are part of the group. The lower section of this view is used to determine the accounts that are used in group consolidation.
Determining consolidation relationships
Before consolidation relationships are determined in the Group consolidation view, a dimension with necessary items that are used with the consolidation must be created in the consolidation environment. A dimension is created in Dimensions view (in Management > Accounting info > Dimensions):
- Create a dimension that is named as “Group”.
- Create an item named as “Elimination” that is used to eliminate all internal transactions of the group.
- Create items for each group company; for example, the previous picture includes two group companies, a parent company and one subsidiary.
After creating the dimension and the items, it is time to go to the Group consolidation view:
Consolidation relationships are determined by clicking the Add environment button in the upper section of the view. The following window opens:
- Source environment drop-down menu is used to choose the environment to be attached to the group. The menu includes all environments that the user is added to.
- Target dimension drop-down menu is used to choose the newly created “Group” dimension.
- Target item drop-down menu is used to choose the corresponding item that has been created in the previous step under the “Group” dimension for the attached environment.
- Elimination code drop-down menu is used to choose the “Elimination” item that has been created in the previous step.
- When the selections are done, it is time to click the OK button.
After this, the added environment appears in Environments for group consolidation section of the view. If there are errors in the information concerning the added environment, the active environment row can be deleted with the Remove environment button.
Determining group accounts
The account chart of the consolidation environment must include all accounts that are used in the source environments. A specific account number must be used also in the same purpose with each environment. For example: if account 3000 is a sales account in source environment A, the account 3000 must be sales account also in all the other environments of the group.
The following is a recommended way to create account charts for the group environments in a situation when the Procountor environments have not yet been created:
- First, create a Procountor environment for the parent company. After the parent company’s environment has been created with Procountor’s default account chart (or with some other possible account chart), add needed accounts to necessary account groups for the internal transactions of the group on Edit chart of accounts view.
- Name new accounts with the word “Group”: Procountor automatically recognizes the accounts to be eliminated by the word “Group”.
- After the new accounts have been added to the parent company’s existing account chart, choose it as the account chart for subsidiary environments and the consolidation environment. This is done by selecting the parent company’s account chart from Copy account scheme and default accountings drop-down menu on Set up a new environment view.
When the consolidation environment has been created and the parent company’s account chart is copied to the consolidation environment, the accounts to be used in group consolidation can be chosen in the Ledger accounts for group consolidation section of the Group consolidation view:
Accounts can be combined by transactions by choosing the selection box in the Transactions column for specific accounts. If it is wanted to import all accounts by transactions, there is a button for it (Import all accounts by transactions). Transactions column selection can be deleted from all accounts by clicking this button again. Note! Transactions selection may cause slowness in updating the group information especially when there are lots of transactions in the environments.
The accounts to be eliminated (i.e. accounts that include internal transactions of the group) are chosen by activating the selection box in the Elimination column. Accounts that include the word “Group” are chosen by default. However, it is recommended to check the selections so that no accounts are missing from the accounts that are going to be eliminated.
If a need to create new accounts in the middle of a financial year arises, the new accounts must be created to all group environments. After this, the accounts are determined as eliminated accounts in the Group consolidation view of the consolidation environment.
Formation of the group’s accounting
The accounting of the group is created automatically daily after the tasks mentioned above have been made. Accounting information is brought to the consolidation environment from the parent company and subsidiaries in a way that the information is automatically dimensioned with the corresponding items (that were determined with consolidation relationships). Entries in the accounts to be eliminated are dimensioned in the following way: entries with original sign are dimensioned with the target item (name of the group company), and entries with reverse sign are dimensioned with the elimination item. This way the transactions are neutralized.
Group consolidation data is brought daily to the consolidation environment as an automatically updating journal receipt material that includes the business transactions of all group companies. Transactions are brought from the source environments (parent company and subsidiaries) within the oldest open tracking period. If no tracking periods have been created to the consolidation environment at all, transactions are brought to all open financial years of the consolidation environment. When a tracking period gets closed up, the latest changes are automatically updated to the journal material. However, transactions in a tracking period are not brought anymore to the daily journal material after the tracking period in question has been closed. In order to speed up the information transfer, it is recommended to close the tracking periods of the consolidation environment in the same pace compared to the tracking periods of the source environments. If the consolidation environment does not have any closed tracking periods and financial years, the information will be updated from the source environments starting from the date that has the first entries.
The journal receipts formed to the consolidation environment can’t be edited in the consolidation environment. Therefore, possible changes and fixes have to be made in the Procountor environments of the parent company and subsidiaries. In order to include recent changes to the consolidation environment on the same day, reporting database has to be updated in the parent company/subsidiaries and after that also in the consolidation environment. The reporting database is updated, for example, in Accounting reports view (Reports > Accounting reports) by clicking the Update reporting database button.
The situation of the group and different group companies can be observed with accounting reports. For example, income statement can be formed in a way that it distinguishes different group companies clearly from each other:
- Choose Every dimension code and total sum from the Presentation type drop-down menu. With this selection, the income statement is created by separating the different items (that are the group companies in this case) from each other.
- Choose Dimensions from the New search criterion drop-down menu. After this, choose Group dimension from the Dimensions drop-down menu and all items from the Items field.
- Add other possible search criteria and click the Search report button in the top bar of the view.
The corresponding search criteria can be also used with balance sheet. In order to distinguish group companies from each other in general journal, a general journal can be created with By transactions, dimensions showing selection from Presentation type drop-down menu.
Consolidating a non-Procountor company to the group
All examples in this article have been about situations where all group companies are in Procountor. If there is a group company that is not in Procountor, it can be added to the consolidation environment in Procountor by following these steps:
- Create a corresponding item for the group company in a way that is described earlier in this article.
- Bring accounting data of the company manually to the consolidation environment and set it to the item created for the company. For example, this can be done with the ledger entry tool’s paste transactions function. When the correct item is used, the company information becomes visible to the income statement in a same way compared to the companies that are in Procountor.
- When the accounting data is brought in manually, for example, with the ledger entry tool’s paste transactions function, the elimination entries have to be created also manually. This is done by posting the reversed elimination entries with the item that has been created for eliminations.
Consolidated financial statements
Consolidated financial statements are created with the closing of account tools.
- Financial statement material for the whole group can be created in the consolidation environment. Because the accounting material of the consolidation environment has taken the group’s internal transactions into account, the accounting reports created in the consolidation environment represent the situation of the whole group.
- Correspondingly, financial statement material for the parent company and subsidiaries can be created in their own environments with the closing of account tools.