consolidation of investments in Mexico

[Former Member]

Hello,

In order to accomplish the Mexican laws for consolidation, Is there any SAP note that can be implemented to support the Mexico requierements about consolidation of investments?

One of the requirements is to calculate the minority interest in P&L, similar to the minority interest (this is in balance), in Mexico we call it MP (Method of Participation). I understand that I can prepare a reclasification or manual posting in order to get this but I want it to know if already exists some for Mexico.

Thank you very much.

[dan_sullivan]

If you would please explain how the COI for Mexico is different from USA and others it may be easier to help.

In the case of USA, the minority interest is also bases on P&L. For P&L gains the entry is debit to minority interest expense (P&L) and credit to minority interest liability (balance sheet).

[Former Member]

Thank you Sullivan,

I identify 2 principals differences, and for now we are doing manual postings.

In Mexico,

- first, the user updates the financial statements for holding. This step is related with to update the Investment holdings (this is in balance) and to update an item call it Subsidiary's P&L Participation (in P&L, according with the results of the subsidiary). The value is calculated : Retained Earnings of the Subsidiary * % investment share, the amount calculated is debit in Balance and credit in P&L in the holding.

- after this step, we can now run the task consolidation of investment

- finally we update the minority interest in P&L, this minority interest is the result of Retained Earnings of the Subsidiary * (100-% investment share)

Best regards,

Elizabeth Echavarria

[dan_sullivan]

From what you have described, this appears that the manually calculated entry is the application of the equity method to realize the parent's share of the investee earnings as both an update to the investment balance as well as to the earnings statement. Then the COI task determines and posts minority interest, which is the purchase method.

Having both is inconsistent unless the equity earnings is eliminated in the interunit eliminations.

However I have experiences where the both methods is required for different but separate reporting requirements. In such cases we created two hierarchies where for one the equity method was assigned for all units and groups and for the other the purchase method or combination of methods was applied, depending on the reporting requirements. In these cases, the COI task must be separately executed for each hierarchy and reporting for each is separate as well.