Sequence of Activities & Divestiture

[dan_sullivan]

Our 4.0 implementation uses the default COI sequence of activities below:

Seq # Act. Activity text Stop here

1 01 First Consolidation

2 16 Horizontal Merger

3 04 Amortization of Fair Value Adjustments

4 05 Increase in Capitalization

5 06 Reduction in Capitalization

6 07 Step Acquisition

7 08 Partial Transfer

8 09 Total Transfer

9 17 Vertical Merger

10 10 Partial Divestiture X

11 11 Total Divestiture

12 12 Liquidation

13 13 Reclassification of Treasury Stock

14 14 Amortization of Investment

15 15 Writeup of Investment

16 02 Subsequent Consolidation

17 03 Amortization of Goodwill

18 18 Distribution of Dividends

When we recorded an end-of-period total divestiture (via AFD), the COI log does the following:

1. Partial divestiture from 100% to 0% - reversing first consolidation elimination of investment, recording 100% to minority interest balance sheet, and recording gains

2. Subsequent consolidation – because ownership is now considered 100% the entire earnings for the period of divestiture is recorded as minority interest

3. Total divestiture – reversing first consolidation elimination of equity, reversing minority interest balance sheet from partial divestiture above, and gain for earnings of period of divestiture

What bothers me is that subsequent earnings recoded 100% minority interest. Why would this occur when the divestiture is at the end of the period per the master data? Should the activity sequence number for subsequent consolidation change to a number lower that for partial and total divestiture, but remain after the Stop? If so what are the consequences?

The only other alternative I can think of is to leave the activity sequence alone and record the divestiture at the beginning of the next period.

Any help with this is appreciated.

[Former Member]

Hi,

In 6.0 version system provides the facility of

defining the sequence of activities change per unit .

so If I drag subsequent consolidation before divesture then system will take the investment % before affecting the partial / total divesture. Check if this is there in 4.0.

Even other wise also , lets take your case,

during the divesture period , if DABP is not selected,

whatever the system posts as susbequent consolidation

in divesture period ( even with 100 % minority ) this effect will

be reversed in the Total divesture entry along with other

earlier consolidation entries including the partial divesture entry

happened in the period of divesture.

Is this happening in your case ?

Please also let me know how you will shift divesture entry to

nextperiod ? is it by changing the consolidation interval ( n +1 )

?

[dan_sullivan]

Anandkumar,

Thanks for your response.

In 4.0 there is no way I know of to have sequence of activities change per unit.

You are correct that the 100% minority interest is offset in the divestiture but these are different accounts and functional areas which is causing the Income Statement to report incorrectly.

To correct the current situation we made manual posting level 30 entries to change the accounts and functional areas.

Unless I learn of a way to avoid this, in the future I will divest at the beginning of period after actual divestiture when there should be no income statement records.

Based on what I've heard from others it is not recommended to change the activity sequence from the delivered sequence without throroughly testing. This may be another option but only once there is more time for this testing.

Any additional suggestions will be greatly appreciated.

[Former Member]

Dan,

Been looking at this myself these last few days. I know conventional wisdom is to not touch the sequence, but I can't see the delivered sequence working correctly (ever) in the case of divestitures if there is activity in the period. As discussed, perhaps this is what makes people chose the DABP option.

In addition to your case with the M/I due to the subsequent consolidation, if you were to issue a dividend in the period of divestiture that dividend income would be reclassed to minority interest as well.

My solution on the dividends to was to bring the activity above the partial transfer step, with the reasoning that in the event of a transfer you would be dividending to the old parent, not the new parent. Testing so far of our likely C/I activites seems to work with the sequence as desired.

For the subsequent consolidation I'm also having issues that we've PL30 topsided around, but I wouldn't want to do that in a transfer because of the income statement adjustments that would be necessary and the statistical account impact. In a future total divestiture activity, the gain/lose would be incorrectly calculated unless I got those statistical balances spot on to agree with the manual PL30.

I suspect the subsequent consolidation should be after the total transfer or vertical merger, with the reasoning that this activity should be performed in the new parent (err...cons group) in this case. Haven't had a chance to test all our likely activities with this scenario, but will probably need a solution real soon.

I'm familiar w/ this note on the topic, wihch is essentially the help.sap.com documentation in a little more technical detail:

https://service.sap.com/sap/support/notes/698955

But I'm not aware of any other documentation on the subject.

Finally....I remember when I took the SEM240 class a while ago they harped on not touching the default sequence, but those of us in the room with a live implementation had all changed from the default sequence.

Anyway...I don't really have a question or helpful info. Just surprised there's nothing more on the topic.

Chris