Difference Between Legal Consolidation and Management Consolidation

Question

Dear Experts,
Kindly help me to know
1) To Differenciate between Legal Consolidation and Management Consolidation Theoritically?
2) To Differenciate between Legal Consolidation and Management Consolidation Technically in BPC?
3) What is impact on /Difference on Business Process Flow in BPC in case of Legal Consolidation or Management Consolidation? (What should be done in Management COnsolidation and Legal COnsolidation in BPF in BPC)
Thanks in Advance
Ritesh

Answer 1

True accounting/legal consolidations encompasses the three following elements:
1.  the general ledgers of the entities
2. elimination entries between entities (inter entity transactions such as sales/cost of sales, a/r and a/p etc.)
3. adjustments for partially owned entities
Using the legal app, rate and ownership apps, and the proper configuration, outlooksoft achieves a legal/accounting  consolidation.  Accounting consolidations also link to a legal hierarchy of entities.
Any consolidation that is referred to as management or financial consolidation etc. can have differing connotations.   In Outooksoft  software,  management consolidations does not include item 3.
However, when the terms are used by the client they can have different meanings.  They could mean either :
A true legal consolidation BUT tied to the  Management hierarchy of entities (as  opposed to a legal hierarchy) OR An aggregation without item 3 above and tied to the Management hierarchy of entities.
9 times out of 10, clients usually want the first  rather than the second alternative.  Financial statements
rolled up using legal consol should equal that using management consol.
However, when clients do planning, they may have their entities plan as if they were fully owned. They could also have their entities provide actals for less than 100% in the case of partially owned entities.   In these cases, you have to adjust appropriately.
From an Outlooksoft config point of view, you need the legal, rate and ownership app and the related configuration for a legal consolidation.  Management consol depends on client definition and client practice in the data that they collect from the entities.
In the area of BPFs, the key difference between legal and management COULD be the steps (1-3) and the maintenance of the different hierarchies and ownership values.
Hope the above helps.