Consolidations

Workday consolidated reporting allows you to report financial information on companies included in company hierarchies. You can run consolidated reports throughout the period and include elimination information in reporting at any time.

By the end of this chapter, you will be able to:

Financial consolidation is combining financial data from several business entities within an organization and rolling it up to a parent company. Consolidated financial statements present the results of operations, statement of cash flows, and financial position of the combined entity. Each company keeps separate accounting records but not for the consolidated entity. To determine the consolidated results, add the amounts for the individual affiliated companies together. Then make specific calculations and adjustments including the following:

There are different methods of consolidation depending on the percentage of ownership a parent organization has in a subsidiary. The next section outlines different types of ownership and how firms generally account for them; however, the way organizations account for each type of ownership may vary.

Organizations generally account for an investment in a subsidiary that represents ownership of 20% or less under the cost method. Organizations typically carry the investment at cost on the parent's books. Workday does not include the subsidiary in the consolidation hierarchy.

Organizations generally account for ownership of a subsidiary between 20% and 50% using the equity method. Workday does not include the subsidiary in the consolidation hierarchy and records a portion of the subsidiary's earnings on the parent's book each period.

You can use the Equity Pickup task to record this activity in the parent's book. Note that equity pickup is a way to record the equity method, but firms often use it for fully consolidated subsidiaries as well.

Full consolidation occurs when the parent has greater than 50% ownership or control of the subsidiary. Workday includes the subsidiary in the consolidation hierarchy. Subsidiary equity accounts that represent ownership will fully eliminate. Accounts that represent other comprehensive income may not eliminate entirely. Ownership less than 100% becomes noncontrolling interest (NCI).

Record the proportional method of consolidation by recording the owned percent of each subsidiary ledger account in the consolidated results. This method is common in partnerships but does not comply with most accounting guidance. Most believe it provides a more insightful and accurate picture of operations at a consolidated level. In Workday, accomplish this task using allocations and book codes.

Complete the following configuration to produce consolidated financial reports in Workday:

Establish intercompany profiles to allow for transactions between entities.

In Workday, a company hierarchy groups related companies for role assignment, multicompany processing, and consolidated reporting. To use consolidations, configure company hierarchies accordingly and assign all companies in the hierarchy the same account set. However, each company can have different company currencies and fiscal schedules as long as they share a common primary or alternate schedule.

The

Consolidated Trial Balance

is a standard Workday report that displays the ending balance of all ledger accounts for each company included in the company hierarchy. When applicable, the report will include intercompany eliminations, equity pickup, and noncontrolling interest results.

Workday delivers the Close and Consolidation hub which centralizes key close and consolidation reports and tasks. The hub provides users visibility over the close and consolidation process and reduces navigation to individual tasks and reports. The Close and Consolidation hub delivers the following sections:

Use the

Edit Consolidation Details

task to update the consolidation-related setup for a company hierarchy. Setup requires a fiscal schedule, account set, and default reporting currency. Optionally, you can set up an account translation rule set (when company ledger currencies differ), a default reporting book, and a consolidating parent company.

The

Audit Consolidation

task displays details of the consolidation structure for a company hierarchy. It allows you to identify and resolve potential issues before running consolidated reports.

You can define ownership details for every company in a company hierarchy and use the effective date to accommodate ownership changes. Use the

Edit Company Ownership Details

task to define an owner company. The owner company can be an existing company in Workday, or you can create and select a third party. For each owner company, specify an ownership percentage or claim on assets percentage. The total for each must equal 100%. Workday calculates equity pickup based on the period end ownership percentage. You can configure noncontrolling interest to use either the ownership percentage or claim on assets percentage in its calculation. You can select the "No Owner Companies" checkbox if the company is a consolidating parent that does not have any owner companies.

Consolidation allows reporting transparency for a group of affiliated companies. Workday automates this process, allowing you to quickly and easily run consolidated financial statements on demand. To ensure reporting accuracy, be sure you configure consolidation details properly.