Transformation & consolidation

NaviCon Holding report transformation and consolidation module helps to solve the core consolidation reporting tasks for all divisions and businesses as well as to transform these reports into IFRS. The consolidation data can be exported from any accounting system used within a holding. This module helps to map different charts of accounts from different holding divisions, thus ensuring control over the generation procedure of final statements. Internal holding transactions are eliminated during the report generation process; other corrections with regard to international standards are supported as well. Consolidation and transformation module increases the management and transparency levels of holding enterprises, decreases considerably the time spent to generate consolidated reports; improves data quality and reliability. Separate holding divisions can use Microsoft Dynamics NAV (former Navision), Microsoft dynamics AX (former Axapta) as well as any other accounting system, e.g. “1C: Enterprise” for their accounting purposes.

NaviCon Holding solution offers 2 variants to organize the accounting.

Architecture variant 1. It is ideal for those companies who use financial accounting as the primary one. Accounting data are transferred periodically (monetary transactions daily) to management accounting companies (firms). These data are added to management accounting data. In the majority of cases the management accounting firms are organized per cost centers or per businesses. Management accounting firms contain additional functionality and transactions (treasury, cost allocation, planning, etc.).

The financial accounting data are transformed periodically to the corresponding IFRS or US GAAP firms. Then FIRS and US GAAP firms perform asset estimation, balance restructuring and correction posting procedures.

Depending on the company requirements the consolidated reporting can be done in any of the following standards: RAS, IFRS, US GAAP or according to the management accounting standards. Often financial accounting and management accounting firms apply different posting procedures (including chart of accounts and dimension matrix).

We recommend applying the following NaviCon Holding solution architecture to solve transformation and IFRS consolidation tasks in those cases when financial accounting in geographically distributed holding divisions is done in accounting systems (e.g. 1C):

“Accounting Firms (1C mirrors)” layer n Microsoft Dynamics NAV/AX DBs is primarily used to:

1. Simplify auditing functions for IFRS statements. During IFRS statements audit it is often necessary to have the source RAS data (i.e. accounting transactions in the way as they have been posted in the accounting). This task can be substantially simplified for a geographically distributed holding (when its divisions are located in a far distance from one another) if its financial department has the opportunity to work with RAS data from all the holding divisions in one single database.

2. Possibility to define the explicit links of General Ledger transactions between accounting and IFRS entries. This results in the report transparency, thus ensuring the deviation tracking between RAS and IFRS accounting standards.

3. Ensure the correct IFRS entries even in case of inappropriate data entry closing in financial accounting or in case of their corrections (when accountants correct in the open period the data that have already been transferred to the management company for IFRS generation and consolidation purposes).

Architecture Variant 2. It is ideal for those companies who regard the management (operational) accounting as the primary one. In the majority of cases the management accounting firms are organized per cost centers or per businesses. Management accounting firms register the initial data, perform planning, treasury processing, and additional management functions. Financial accounting and management accounting firms Often apply different posting procedures.

All initial documents (customer documents in the first place) like payment invoices, VAT-invoice, shipment documents are printed by management accounting firms. The management accounting data are transformed periodically to the corresponding IFRS or US GAAP firms. Then FIRS and US GAAP firms perform asset estimation, balance restructuring and correction posting procedures.

To exclude double entry the data export to the financial accounting firms has been realized. Depending on the company requirements the consolidated reporting can be done in any of the following standards: RAS, IFRS, US GAAP or according to the management accounting standards.

Data export from the external source, import to module. If some external transaction system serves as the data source, its transactions are exported as they are for a certain period and with all the necessary analytics. From the architectural viewpoint there are 2 ways to integrate the transformation module with an external system: file exchange and synchronization on the Microsoft SQL Server DB level. Both variants support tracking of document changes during the recurring import: the system analyzes modifications (changes, deletions) that might have happened in the external system.

Consolidation Dispatcher. This tool is a part of NaviCon Holding transformation and consolidation module. It provides the additional user convenience by displaying all the necessary history and statistics of imported and converted data.

Data export to the local accounting general ledger. Upon completion of the data import from an external source the transactions are exported to the general ledger of a local accounting firm. Thus it becomes possible to call the RAS data directly from Microsoft Dynamics NAV instead of calling an external system.

Transformation rules setup. Transformation means the data conversion procedure of the local accounting data according to the IFRS standards. Therefore Transformation and Consolidation module provides flexible setup possibilities of the following rules for each source:

• Reporting currency change rules. FIRS reporting can be generated in two currencies: basic functional (e.g., US dollars) and additional (e.g. Russian rubles). Besides, each entry contains the reference data of the original transaction currency.
• Chart of accounts conversion rules. It provides possibility to map the local chart of accounts with the one of IFRS.
• Analytics conversion rules. It provides possibility to map the user defined analytics with those of IFRS. If these analytics do not require conversion, they are transferred to the FIRS in the original way.
• Transformation exclusion rules. It is possible to setup a rule that will exclude certain data (e.g. exchange differences) from the transformation process.

Primary accounting data conversion according to the transformation rules. Applying the predefined data conversion rules (e.g. reporting currency, chart of accounts, analytics, exclusions) the user can automatically transform transactions from the local accounting into the IFRS data. In this case each transaction in the IFRS General Ledger keeps its link to the source transaction.

Assets parallel accounting. Parallel accounting of assets (basic and intangible) has been realized in NaviCon Holding Transformation and Consolidation module. Each such object contains reference data for local accounting standards as well as the accounting model for IFRS standards.

IFRS correction accounting and report generation on the legal entity level. Transformation Table functionality has been realized in NaviCon Holding Transformation and Consolidation module to reflect posting differences between local and IFRS standards as well as to provide the display of notes for IFRS statements. This table provides for automatic or manual corrections; flexible setup of basic printed forms (balance, P&L report, money flow report) and their notes, correction articles and their corrections. As a result the users get from the system all the necessary reporting forms and their notes prepared in accordance with the international standards. These forms can be electronic (with the drilldown possibility from totals to the transaction level), printed or exportable to external systems (e.g. Microsoft Office Word or Microsoft Office Excel) reports.

Consolidation, posting corrections, generation of consolidated reports. Consolidation function is the key feature of this module. It consolidates statements from legal entities into the user defined business segments or into a certain group. This consolidation can be performed either per transaction, keeping all analytical dimensions or in an aggregated way per certain accounts, dimensions, and periods.

The generation process of consolidated statements comprises the following steps realized in NaviCon Holding solution:

• Data consolidation from sources;
• Reconciliation and automatic elimination of group internal turnovers;
• Calculation of portion of indirect possession;
• Goodwill calculation;
• Minority portion calculation;
• Calculation of other corrections for consolidated statements.

Reconciliation of group internal turnovers. Similar to report preparation per legal entities, correction calculation functionality as well as all other definable consolidated reporting forms and notes are available for the users of consolidation module.

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