The HFM Equity Pickup ModuleAutomating Guarantor/Non-Guarantor Financial Statements

Keith BerryUS-Analytics

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Accolades

– Original Oracle Hyperion and Pillar Partner – Oracle Hyperion Financial Management 11– Oracle Hyperion Planning 11– Oracle Essbase 11– Oracle Data Relationship Management 11

2013, 2014, 2015

2015 Oracle TOLA EPM Partner of the Year

Plan of attack

Accounting

Journal entries for Equity Method investments

TechnicalConfiguring and using the EPU Module

Use Case

Guarantor/Non-Guarantor Financial Statement/Disclosure

AccountingJournal entries for Equity Method investments

The Equity Method

Record investment as single line on Balance Sheet

Increase investment value each month based on income booked by subsidiary

Decrease investment for dividends paid

The Equity Method

Record investment as single line on Balance Sheet:

The Equity Method

Record investment as single line on Balance Sheet:

Increase investment value each month based on income booked by subsidiary:

The Equity Method

Record investment as single line on Balance Sheet:

Increase investment value each month based on income booked by subsidiary:

Decrease investment for dividends paid:

Reporting

The investment usually appears on the Balance Sheet under Long Term Assets:

Reporting

Income appears in a separate section of the Income Statement:

Equity Method – additional details

Change in ownership applied to current period and forward:

The pickup should include Other Comprehensive Income/CTA

So what’s the big deal?

0% 20% 50% 100%

Fair Value Equity Consolidate

US GAAP/IFRS –Method of consolidation based on control:

Owned Percent of Shares Outstanding

But what about this?Need equity entry for company 100

100

20095%

400100%

60035%

700100%

800100%

300100%

500100%

60065%

700100%

800100%

TechnicalConfiguring and using the EPU Module

Equity Pickup ModuleBooks equity pickup entries to an entity from its subsidiaries based upon a complex ownership chain

Driven by SharesOwned/SharesOutstanding

Launched independently of consolidation

Handles cascading ownership

Cascading ownership

Net Income $300

Net Income $250EPU 500Total Net Income $750

A

B

C

Equity Pickup Module

Equity Pickup Module

100

20095%

400100%

60035%

700100%

800100%

300100%

500100%

60065%

700100%

800100%

Ownership Accounts

Shares Owned

Shares Outstanding

Voting Owned

Voting Outstanding

Shares%Owned

Input or Calculated

Voting%Owned

Input Calculated

[PCTRL]

[PCON]

[POWN]

[DOWN]

Ownership Accounts

Shares Owned

Shares Outstanding

Voting Owned

Voting Outstanding

Shares%Owned

Input or Calculated

Voting%Owned

Input Calculated

[PCTRL]

[PCON]

[POWN]

[DOWN]

Sample ownership entry

Owned entity Owning entity

Shares Owned/Shares Outstanding =

Shares%Owned

Split ownership

Full ownership file

Sample EPU Calculation

100

20095%

400100%

60035%

700100%

800100%

300100%

500100%

60065%

700100%

800100%

What does Status mean?

EPU statusFrom New Source Data

Set as Impacted when new data/ownership is loaded to source entity

EPU Status will not change to OK until EPU is run. Consolidation or calculation of source entity do not affect EPU status.

From Consolidation Status

Set as Impacted when source entity Consolidation Status goes to CN (from ImpactStatus rule, prior period calculation, etc.)

EPU Status changes back to OK when Consolidation Status returns to OK. Re-running EPU is not necessary.

Circular ownership

What happens when I run EPU?

700

600

EUR

USD

2. Calculate () for <Entity Curr Adjs> of Sub (EUR Adjs) 1. Calculate () for <Entity Currency> of Sub (EUR)

700 Owned By 600

What happens when I run EPU?

700

600

EUR

USD 4. Calculate () for <Entity Curr Adjs> of Owner (USD Adjs) 3. Calculate () for <Entity Currency> of Owner (USD)

What happens when I run EPU?

700

600

EUR

USD

USD

5. Translate () from Sub’s Default Currency (EUR) to Owner Default Currency (USD)

What happens when I run EPU?

700

600

EUR

USD

USD 6. Calculate () for translatedSub data (USD)

What happens when I run EPU?

700

600

EUR

USD

USD

7. EquityPickup () at <Entity Currency> of Owner (USD)

Equity Pickup Module

Demo

Metadata Requirements

• Target accounts IsCalculated=N

• Entities set up as IsICP=Y

If HFM intercompany eliminations used -

• Target accounts IsICP=Y

EPU rules

Look! A special subroutine!

EPU rules

1. Get current Owner, Subsidiary and Ownership

EPU Functions

Hs.Entity.Owner

Hs.Entity.Owned

Hs.PEPU(“S#.Y#.P#”, Owner, Owned)

- POV is Scenario, Year and Period- Input owner and owned- Returns percent ownership- Hs.PEPU(“”,””,””) returns current POV- Same as GetCell on [Shares%Owned]/100

EPU rules

2. Get Owner’s default currency

EPU rules

3. It’s up to us to clear prior calculations.

EPU rules

Make sure we clear only the current Sub’s data

EPU rules

Also, we’re going to want to keep this data separate

from everything else

EPU rules

4. Pull the Sub’s earnings for the month.

EPU rules

Be sure to pull in currency of the Owner

EPU rules

Proportionalize

EPU rules

5. Book periodic income using Sub as ICP

EPU rules

6. Increase Investment by same amount, also using

Sub as ICP

EPU Rules

Custom dimension:

Be sure to roll EPU for the Investment accounts

Use CaseGuarantor/Non-Guarantor Financial Statements

Guarantor/Non-Guarantor StatementsRule 3-10 of SEC Regulation S-X:“Financial statements of guarantors and issuers of guaranteed securities registered or being registered”

Summary:• Financial statements required for issuers or guarantors of

registered securities

• Can substitute with condensed consolidating financial information in footnote if conditions met • Full ownership• Unconditional guarantee• Joint and several

Condensed Consolidating Information

Columns for

-Parent

-Issuer (if different than Parent)

-Subsidiary Guarantors

-Subsidiary Non-Guarantors

-Adjustments/Eliminations

-Total Consolidated

Condensed Consolidating Information

Additional columns

-Less than 100% ownership

-Foreign vs. domestic

-US GAAP reconciliation

Preparation

Parent company should show all subsidiaries booked under the equity method

Preparation

Subsidiary issuers or guarantors should also show non-guarantor subsidiaries booked using equity method

Preparation

Eliminate equity method entries to come back to reported consolidated results

Steps in HFM• Create alternate entity hierarchy with G/NG

categories

Steps in HFM• Create ownership file containing all entities

• Run Equity Pickup to show each base entity with equity pickup of all its subsidiaries

• Allow EPU entries to eliminate during consolidation using standard intercompany process

Steps in HFM• EPU for entities within each category will eliminate,

leaving only EPU balance for entities outside the category

Steps in HFM• The final elimination reverses the remaining EPU

balances across columns to return to consolidated results

Implementation tips

Create code in Sub Calculate to clear all EPU entries should it become necessary. The code should be activate by a trigger account

Set policy to never delete owner ship entries, Retain them and set the value to zero

Consider tracking original source of EPU entries via custom dimensions

Set up a regular recon process for the top node(s)

Allow extra time for automating CTA/OCI entries

Additional DataType

Questions?