Overview
Consolidated financial statements must include only transactions that occur between the consolidated organization and other entities outside that organizations.
As a result, transactions between legal entities (i.e. intercompany balances) that are part of the same consolidation must be removed, or eliminated, from the general ledger, so they don’t appear on financial reports.
The following graphic shows a simple illustration of GL account balances at a subsidiary company level that include related intercompany debtor (USMF) and intercompany creditor balances (DEMF) alongside regular non intercompany balances, with the related intercompany balances then being subject to elimination when consolidated within the parent company.
Dynamics 365 Finance, Consolidations provides a number of options to support intercompany eliminations
Financial Reporter
The accounts and financial dimensions that are used to determine intercompany activity can be filtered on a row definition or column definition in Financial reporting, and full drill-down capabilities can be used. A calculated column or row can then be used to remove the accounts and financial dimensions from the consolidated total.
Consolidation Online
Elimination rules can be set up in the system to support and enable auto-generation and optionally auto-posting of elimination journals. Elimination journals can be generated and posted independently from within the specific elimination journal option, or as an integral part of running the consolidate online process.
Important: Elimination Journals can only be posted within a Legal Entity where Legal Entity setup has ‘Use for financial elimination process’ option set to ‘Yes’. This option can either be set for a consolidation company i.e. elimination journals are posted within the consolidated general ledger, or for a separate consolidation / elimination adjustment company. If the latter setup is more appropriate, the adjustment company must form part of the company selection when running the consolidate online process.
Alternately, elimination journals can always be calculated and prepared manually and either be entered manually or via the extended excel journal entry capability. Manually prepared elimination journals, will need to be entered and posted within a separate Legal Entity that has been setup specifically for consolidation / elimination adjustment purposes and will need to be created and posted via a general journal (journal type ‘daily’).
Financial Reporter – Calculated Eliminations
Financial Reporter fully supports the definition and generation of Consolidated Financial Statements, including the ability to handle inter company eliminations.
The accounts and financial dimensions that are used to determine intercompany activity can be filtered on a row definition or column definition in Financial reporting, and full drill-down capabilities can be used. A calculated column or row can then be used to remove the accounts and financial dimensions from the consolidated total.
Figure 1 below shows a column definition for a Consolidated Income Statement. Two profit and loss intercompany accounts are defined for each company by using the dimension filter. Column D includes only the elimination accounts for the USMF company, and column E includes eliminations for the DEMF company. Both column D and column E are set up so that they are not printed on the financial
statement.
When the report is generated, the elimination amounts are calculated in columns D and E, and they are totalled in column F. Column G shows the consolidated amounts, excluding eliminations for the USMF and DEMF companies.
Whether you use accounts, dimensions, or both, Financial Reporter lets you filter out the elimination entries by using the dimension filtering capabilities.
Elimination Rules and Elimination Journals
Elimination Rules
Elimination rules provide the criteria that are used by Dynamics 365 Finance to auto-construct elimination journals for intercompany transactions and / or balances.
In order for an elimination rule to be effective, the underlying elimination rule lines should be defined such that when utilised in the auto-creation of an elimination journal, the user would expect that the resulting journal lines and journal voucher created should balance to zero, so that it can be optionally reviewed and approved and ultimately posted.
Note: Elimination Journals can be subjected to workflow review and approval if there is a supporting business requirement. Approval Workflow (if required) is controlled by the setup on the supporting financial journal name(s) for journal type ‘elimination’.
Consolidate Online
Elimination Journals can be optionally generated as an integral part of running the Consolidate Online process, and if generated in this way they can also be optionally posted … based on the setting of the ‘Proposal Options’ option.
Elimination Journals
Dynamics 365 Finance, elimination journals can only be created (i.e. journal line creation), by the elimination proposal process that utilises pre-defined elimination rules. It is not possible to create, or update elimination journal lines manually !
Elimination Journals can either be created by the Consolidate Online process as described above, or by utilising the elimination proposal option on the elimination journal, journal lines form having first created the journal batch manually and navigated to the journal lines form, as shown in the screenshot below.
Further Information
Further information specific to intercompany eliminations is provided on the Microsoft Docs sites via the following URLs …
Consolidation and elimination overview – Finance | Dynamics 365 | Microsoft Docs
Financial consolidations and currency translation overview – Finance | Dynamics 365 | Microsoft Docs