Intercompany Eliminations in Custom Dimensions

Mike Arnoldy

March 25th, 2015

We all know that HFM will perform intercompany eliminations on the entity dimension. This is inherent functionality in HFM and is used in almost every HFM application. What is not as well known is that it is also possible to perform intercompany eliminations on a custom dimension.

Intercompany Eliminations are not a common requirement for the consolidation application but it does come up, and you can successfully implement it in your HFM application. The main obstacle that you need to overcome is identifying and storing the partner information so that you can make the elimination at the proper level of the hierarchy.

Why Would You Want to Do An Intercompany Elimination?

Many companies have a requirement to have both an external report hierarchy and a management reporting hierarchy. In Hyperion Enterprise, this was usually accomplished with two separate entity hierarchies. With HFM and the custom dimensions, it became possible to move one of these hierarchies to a custom dimension. Usually, the management reporting hierarchy is placed into a custom dimension and it is based upon profit centers, cost centers or departments. As this dimension is rolled up, there can be a need to eliminate the intercompany transactions, just like is done on the entity hierarchy.

Best Practices for Implementing An Intercompany Elimination

The first issue is to determine where to perform the elimination. In the entity dimension, the elimination is performed at the first common parent. The partner for the transaction is recorded in the ICP dimension. This information is used during the consolidation to determine the first parent where the entity and the partner meet in the hierarchy. The same principle can be used in the custom dimension. The partner can be recorded in a second custom dimension. This makes available both the profit center/ cost centers/department that has the transaction and the profit center/ cost centers/department that is the partner for the transaction. So how do you get the partner information populated? Some ledgers have this information available. SAP has a Partner Profit Center that you can use for this purpose. If the ledger does not have this information, it is possible to define where the eliminations will occur using the user defined fields. While this will not provide the same granularity or accuracy, it may be sufficient to meet the requirements.

The next step in enabling this functionality is to modify the consolidation rules. Many applications do not use custom consolidation rules. They can be turned on in any application and rules added the replicate the default consolidations in HFM. These default rules are then modified to take into consideration where in the custom dimension to place the elimination entries. If the partner information for the custom dimension is available, you can use the HS.Custom. IsDescendant function to determine the first common parent in the custom dimension hierarchy. If that information is not available, then you can reference the User Defined Field to determine where to place the elimination. Once you have identified the custom dimension member to use for the elimination, you can then use this information, when the entity intercompany elimination is recorded, to include a specific custom dimension member in the entry.

Final Thoughts

More and more companies are taking advantage of intercompany eliminations. Many companies are successfully implementing them in their HFM applications by moving one of the separate entity hierarchies to a custom dimension. By following the two simple steps: 1. Determining where to perform the elimination, and 2. Enabling the functionality by modifying the consolidation rules, you can easily identify and store the partner information so that you can make the elimination at the proper level of the hierarchy.

Mike Arnoldy

About Mike Arnoldy

Mike Arnoldy has over 20 years experience in all phases of design, development, and implementation of financial applications. He has exceptional problem-solving and architecting skills with a strong technical background. He specializes in financial consolidation applications that include complex calculations, foreign currency translation, inter-company/equity eliminations and varied reporting requirements to satisfy both external and management reporting needs. Mike is also a Certified Public Accountant.

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