2/1/2020 SAP e-book

Unit 4
Lesson 4
Using Activity Based Purchase & Equity
Method

LESSON OBJECTIVES
After completing this lesson, you will be able to:
● Use Activity Based Purchase & Equity Method

Use activity based consolidation of investments

Consolidation of Investments Process - Frequently Asked Questions: https://help.sap.com/

viewer/4ebf1502064b406c964b0911adfb3f01/1909.000/en-US/
b5e72dcb74ac4577b1fa43d086355f61.html
Either rule based or activity based consolidation of investments can be used by customers.
But, not both at the same time.

Figure 195: Rule Based vs Activity Based COI

Consolidation of Investments (Activity-Based): https://help.sap.com/viewer/

4ebf1502064b406c964b0911adfb3f01/1909.000/en-US/
2f07a213a53f425eada2e096f6c6f1b0.html

First Consolidation - Purchase Method

● Purchase Method:

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Lesson: Using Activity Based Purchase & Equity Method

- The individual financial statements of an investee unit consolidated using the purchase
method are included in their entirety in the consolidated financial statements.
- The investment in the consolidation unit that has been consolidated using the purchase
method or its equity is eliminated completely from the automatic consolidation of
investments.
● During consolidation of investments (C/I), all investment relationships between
companies in your corporate group are eliminated.
● This is accomplished by eliminating the value of the parent companies’ investments
against the corresponding portion of the subsidiary stockholders’ equity.
● The investment is compared with the investor's share of the investee's equity and the
difference is booked as goodwill.
● Non controlling interest is recorded.

Figure 196: First Consolidation - Purchase Method

● The group share of 67.5 is calculated. However, the calculations are using the direct share
of 75% based on the method assignment to each Consolidation unit.
● 100% of the investment of 150,000 is eliminated:
- Credit 172100 Investment 150,000.
● 100% of the Equity is eliminated:
- Debit 316000 PY Retained Earnings 41,640.
- Debit 311000 Issued Capital 68,090.
● Non-controlling interest (NCI) is booked:
- Credit 321100 NCI 10,410 (.25 x PY Retained Earnings 41,640).
- Credit 321100 NCI 17,022 (.25 x Issued Capital 68,090).

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