Hi.
In this video, I am going to talk to you about financial consolidation using DivaSystem.
Let me start by giving you some background information.
DivaSystem LCA, which stands for 'Legal Consolidation Accounting'
is our default module and core product for financial consolidation.
It takes automation to the next level with built-in logic
that can automate all kinds of consolidation process.
This is our core value to differentiate our products from other EPM software packages.
In general, many of those packages require certain kinds of programming for financial consolidation
in prior to the system implementation.
On the contrary, DivaSystem LCA offers quick implementation
as there's no need for development process.
Our automated consolidation process is comprised of a number of sets of built-in rules.
These are the key features, that I'll cover one by one
in this video and our upcoming videos.
To make it easy for you to understand how it works
I've prepared a simple case study.
So, in this case study
company A, which is located in Indonesia
is the parent company of the whole corporate group.
Company B has been a domestic subsidiary since the beginning of this year.
Company C has been a foreign subsidiary since the end of this year.
Company D has been an equity method affiliate since the beginning of this year.
For each process, using each company's financial statements
as shown in the screen here,
I will show you how the consolidation accounting works
according to the general practice first.
And then, you will learn how each automatic calculation is processed in DivaSystem
as we look at the four stages of each process as illustrated in the screen.
It's comprised of master maintenance, data input, automatic processing, and output report.
All processes from data collection to consolidation, are fully traceable
from our embedded reports linked with each process.
So first and foremost, what we need to do
after unifying financial statements from your subsidiaries and affiliates
is to convert the foreign subsidiaries' and affiliates' financial statements
to its reporting currency.
And then, combine all the items
such as assets, liabilities, equity, income, expenses and cash-flows.
In our case study, combined numbers look like this.
Now, let's take a look at how to get this done in DivaSystem.
In case there's more than one foreign entity within the consolidation scope,
the first set of setup that needs to be done
is to enter monthly rate for both Average Rate and Closing Rate.
And then define each company in the corporate group
to outline the consolidation scope in advance.
Now we're ready to import financial statements
from all entities within the organization.
In case of foreign entities with accounts to be translated at the Historical Rate
don't forget to make a manual entry
on [Translation Adjustments] screen.
Now let's navigate to the automatic processing for currency translation.
The first thing to notice is that, the kind of exchange rate to use
is different depending on the type of the account.
When translating P/L items such as revenues, expenses, gains, and losses,
average rate will be used.
For B/S items such as assets and liabilities, closing rate will be used.
What you're looking at here is
Non-Consolidated Financial Statements Translation report
In general, Common Stock and Retained Earnings are the amounts
that have been translated at the Historical Rate
and entered on the translation adjustment screen.
And the translation adjustment account is generated
to make up the difference between the total debits and total credits.
This way, the calculation process of each automatic processing is available to view
from DivaSystem's report function
for the deep down analysis.
Moving on to the next part
let's combine financial statements of each entity within the organization.
But not all the entities are eligible to be consolidated.
DivaSystem LCA will generate simple aggregation report
by excluding the affiliates' financial statements,
so that their data will not be consolidated into the parent's books.
With such accuracy in the consolidation steps,
your finance team can investigate and verify every figure of every step in consolidation.
This way, your data will be more accurate and easier
for both auditors and managers to review.
Let's start from [Master maintenance]
at the bottom of the main screen
where the metadata such as accounts, entities, and products maintenance,
completed in the application.
So, Monthly Rate Master is for specifying the translation rates
for automatic processing of foreign currency translation.
This is a complete manual process
which is an easy and fast way to update your master data
And what you're looking at here is 'Consolidation Scope Master by Project'
where you can configure which companies to include in the consolidation scope.
I think that just about covers the necessary master maintenance.
Moving on to the next part,
let's take a look at the data Input section.
One way to collect financial statements from group companies is using EIGS.
For more details on how to use EIGS for Excel online data collection,
please watch our previous video on EIGS data collection.
This is where the separate financial statements of each company are stored.
While the data import can be automated by using EIGS or Dx3,
you can always input or update data manually by using this screen.
As you can see right here
Data validation check items, provided by DivaSystem are also available.
What we're going to do next is
register translation adjustments, for accounts to be translated at the historical rate.
Since Company C became company A's subsidiary at the end of this year,
there's no need to translate these accounts using historical rates.
So I will just skip this part this time.
What you're looking at here
is the key features of DivaSystem built-in automatic processing.
Select all the items and click the 'Execute' button right here
to automatically create journal entries needed for consolidation.
This includes translation process right here
and consolidation of worksheets right here.
As I said at the overview,
the process of automatic calculation is fully traceable
from our embedded reports linked with each process.
Here, I'll select company C to see the translation report
and set Microsoft Excel as an application to use.
As you remember, B/S items are translated at the closing rate
and P/L items are translated at the average rate.
Common Stock and Retained Earnings are the amount
that were translated at the Historical Rate
and entered on the translation adjustment screen.
And the Translation Adjustment account is generated
to make up the difference between the total debits and total credits.
Finally, this is a simple aggregation report
generated by combining financial statements of each entity within the organization.
You will notice that company D's data have not been consolidated into the parent's books
because it's an affiliate, not a subsidiary.
So that brings us to the end of my demonstration today.
Thank you for watching this video
and if you have any questions or would like to know more,
please contact us via email in the description below
and I'll be pleased to answer them.
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