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FIN_ACC_GC_BCOMB: Vertical and Horizontal Mergers (New) ( RELNSEM-BCS_605_GRPCLS_F )

FIN_ACC_GC_BCOMB: Vertical and Horizontal Mergers (New) ( RELNSEM-BCS_605_GRPCLS_F )

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FIN_ACC_GC_BCOMB: Vertical and Horizontal Mergers (New)

Use

As of SAP enhancement package 5 for SAP ERP 6.0 (SEM-BW 605), you can depict consolidation unit mergers within a consolidation group. In a vertical merger, the balance sheet for the ceding consolidation unit is transferred to the parent unit. In a horizontal merger, the absorbing unit and ceding unit have the same parent unit.

Effects on Existing Data

Vertical Merger

Ceding Company

The total divestiture generally posts entries that affect earnings to gain and loss items from the divestiture. In addition, the system posts the divestiture in consolidation group changes and in consolidation of investments using the transaction type for divestiture. However, neither of these actions is desirable in mergers.

In the consolidation unit hierarchy, the Divestiture Accounting due to Merger indicator was previously used for evaluation and did not have any impact on the posting logic in consolidation functions.

When you activate the business function Financials, Group Close, Business Combinations, the following new functions are available for use:

  • In Customizing for transaction types, you can assign a special transaction type for mergers to each transaction type.
  • In Customizing for appropriation of retained earnings, you can specify a new special item for posting the net income for mergers without an effect on earnings.
  • The Divestiture Accounting due to Merger indicator in the consolidation unit hierarchy now ensures the relevant posting logic is applied. If you select this indicator, when processing consolidation group changes or consolidation of investments, the system uses the transaction type for mergers as well as the special item for posting the net income for mergers without an effect on earnings.

Absorbing Company

In a vertical merger, you have to enter the equity from the subsequent consolidations of the ceding company again for the absorbing company.

Also note the following with respect to the absorbing company: If goodwill is carried for the absorbing company from the acquisition of the ceding company, this goodwill is to be retained when a merger takes place. The reduction of the book value for the goodwill as a result of valuation allowances carried out for the ceding company before the merger took place must be taken into account.

When you activate the business function Financials, Group Close, Business Combinations, the following functions are available for use:

  • When you enter the equity for subsequent consolidation of the absorbing company, choose the new activity, activity 24 Updating of Retained Earnings Merger, rather than activity 02 Subsequent Consolidation. You record the update of retained earnings that you report for this activity on the special Net Income for Merger item and not on the Clearing - Balance Sheet item. By doing this, you ensure that:
  • The system posts the entry using the transaction type for mergers.

  • The system prevents an entry from being posted to the income statement by using the new item for posting net income for mergers.

  • The system posts the adjusted statistical net income items for the net income for mergers.

  • When you enter the data for goodwill, select the new activity, activity 17 Vertical Merger.
You use this activity to record the goodwill data again for the absorbing company. You select the absorbing company as both the consolidation unit and the investee unit for the manual goodwill entry.
If you enter a value for the beginning book value that is not same as the original value, the system posts the difference between the original value and the beginning book value as a valuation allowance.
To ensure that the posting does not affect earnings, you select the Logic.Org.C. (logic for organizational change) indicator when you enter the goodwill data.

Horizontal Merger

Ceding Company

For the ceding company, you use the same functions as those described above for the vertical merger.

Absorbing Company

When entering new equity data for subsequent consolidation for the absorbing company, you use the same functions as those described above for the vertical merger.

With horizontal mergers, you also need to enter the following book values again:

  • You enter the investment book value for the parent unit for the ceding company again as an investment book value for the absorbing company.
  • You enter the eliminated equity of the ceding company that results from their first consolidation and from increases and reductions in capitalization again for the absorbing company.

When you activate the business function Financials, Group Close, Business Combinations, the following functions are available for use:

  • You can enter investment and equity data using activity 16 Horizontal Merger.
The entry screen for activity 16 provides the same fields as those provided for activity 05 Increase in Capitalization. The posting logic for activity 16 in consolidation of investments is the same as the posting logic for activity 05; however, activity 16 triggers a posting for the transaction type for mergers.
  • To handle situations in which valuation allowances were applied to goodwill on the ceding company, the Manual Changes to Automatically Generated Goodwill function has been enhanced.
After you have performed the consolidation of investments, you can change certain properties of the goodwill entry as before by selecting the Changed Manually indicator. The Changed Manually indicator is available only for automatically generated goodwill and during the acquisition period only.
In addition to the existing properties that you could change (using activity 16 only), you can now also change the following properties:
  • Beginning Book Value

If you enter a value for the beginning book value that is not same as the original value, and you then perform the consolidation of investments again in the same period, the system posts the difference between the original value and the beginning book value as a valuation allowance.
  • Log.Org.C. (logic for organizational change) indicator

To ensure that the posting does not affect earnings, you select this indicator.

Effects on Data Transfer

Effects on System Administration

Effects on Customizing

The following changes have been made in the consolidation workbench:

  • Customizing for consolidation units
Until now, the Divestiture Accounting due to Merger indicator was used for evaluation only. When you activate the business function Financials, Group Close, Business Combinations, this indicator triggers the system to use the transaction type for mergers and the item for posting the net income for mergers.
  • Customizing for transaction types
In Customizing for transaction types, there is now a new field in which you can specify a transaction type for mergers.
  • Customizing for appropriation of retained earnings
In Customizing for appropriation of retained earnings, the new Net Income in Merger field is now available on the Net Income tab page. You can use this field to specify a balance sheet item to be used to allow net income to be posted without an effect on earnings when a merger takes place.
  • Customizing for validation tasks
In Customizing for validation tasks, a new Ceding Unit in Merger indicator is now available. If you select this indicator, the validation checks the totals data and documents for the ceding companies in a merger. When you execute the validation task, the system displays a message if you have posted totals data or documents in which the ceding company is specified as the consolidation unit, partner unit, investee unit, or investor unit, and if this posting is made for the ceding company in a period later than the merger period (divestiture period of the ceding company). You can specify whether the system is to handle this message as an error or simply as a warning.

Further Information

Release note Financials, Group Close, Business Combinations

SAP Library for SAP ERP on SAP Help Portal at http://help.sap.com/erp -> SAP ERP Enhancement Packages ->ERP Central Component Enhancement Package 5 -> Industries in SAP ERP -> SEM - Strategic Enterprise Management -> Business Consolidation (SEM-BCS).






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