System Setup For Equity Pickup

Equity Pickup (EQP) is a technique used by firms to assess the profits earned by their investments in other companies. The investing firm reports the income earned on the investment on its income statement, and increases the net value of its investment. Longview calculates the EQP journal entry dynamically as data changes in the system. CPM Setup configures most of the steps for this functionality, but there are additional manual steps for the event to function properly.

Updating the configuration file

Note: The instructions below assume configuration via server manager, but the settings can be configured directly in the lvsrvr.cfg file. The name of the parameter is given in brackets.

1. Start Server Manager.
2. Right-click on server and select Server Configuration.
3. Select Application.
   1. Check Journal Entries (USE_JOURNAL_ENTRIES).
4. Select OK.
5. Stop and start the server for the change to take effect.

Adding EQP accounts

Solutions Framework install creates attributes for both the target balance sheet account and the target net income account where the equity pickup journal entry will be posted to.

1. EQP target balance sheet account:
   • Attribute Name: AZEQPTargetAccountBS.
2. EQP target net income account:
   • Attribute Name: AZEQPTargetAccountNI.

Note: A single account can be used for all equity pickup adjustments by setting the default value for these attributes.

To create new EQP accounts:

It is possible (if required) to configure EQP using one account per subsidiary, in which case the following steps are needed by subsidiary (e.g. subsidiary 727).

1. Start Application Administrator.
2. Navigate to Symbols > ACCOUNTS.
3. Navigate within the balance sheet hierarchy (normally under the investments section in non-current assets) to where you would like the EQP target balance sheet account.
4. Right-click on the parent account and select New Symbol.
5. Enter the name of the account. For example, EQP_727.
6. Enter the description. For example, Net Share of Profit of Associate 727.
7. Select Carry Forward for type.
8. Select Debit for the balance type.
9. Click the Parents tab.
10. Set the priority for the new symbol. For example, 100.
11. Click OK.
12. Navigate within the net income hierarchy to where you would like the EQP target net income account.
13. Right-click on the account and select New Symbol.
14. Enter the name of the account. For example, SP_727.
15. Enter the description. For example, Share of Profit of Associate 727.
16. Select Standard for type.
17. Select Credit for the balance type.
18. Click the Parents tab.
19. Set the priority for the new symbol. For example, 100.
20. Click OK.
21. Repeat steps 1-20 to create additional accounts for each subsidiary, as required.
22. Select Actions > Maintenance to toggle maintenance mode to off.

To update the target account attributes for a subsidiary:

Updating the target account attributes (AZEQPTargetAccountBS and AZEQPTargetAccountNI) is done through the Manage Entities App. For more information, see Managing Entities.

Setting the target entity for EQP

Each subsidiary must be related to a target entity. The calculated journal entry will be posted to this target entity.

To update the target entity attribute:

Updating the target entity attributes (AZEQPTargetEntity) is done through the Manage Entities App. For more information, see Managing Entities.

Source equity pickup account

The source account used in the equity pickup calculation is defined by the following attrbute:

• ASNCISourceAccount

By default, this attribute is set to the Net Income (NI) account. This can be changed to a different account as required.

Source equity pickup dataview

The source dataview used in the equity pickup calculation is defined by the following attribute:

• ASNCISourceDataview

By default, this attribute is set to the Management Reporting (MGMT) dataview. This can be changed to a different dataview as required.

Updating source and target equity pickup symbols for custom dimensions

The Solutions Framework has 6 standard dimensions:

• ACCOUNTS
• TIMEPERIODS
• ENTITIES
• DATAVIEWS
• SCENARIOS
• CURRENCIES

If your Longview system has more than the 6 standard dimensions listed above, you will need to specify the equity pickup target symbols for each additional dimension.

This is done through the following system attribute:

• ASNCID<Dimension>Target

This attribute specifies the target symbol for each additional dimension in order to define the location of the target symbol to use to post the result of the calculation. By default, all additional dimensions target symbols will be set to <Dimension>_Total.

For example, if you have an additional dimension called PRODUCTS, the equity pickup target symbol attribute would be set to PRODUCTS_Total. This means that the calculated journal entries for equity pickup would be posted to the PRODUCTS_Total symbol. The attribute should only be set to a leaf symbol. If PRODUCTS_Total becomes a parent, the attribute value should be modified to a leaf product symbol.

Note: The equity pickup event expects the target symbol value in ASNCID<Dimension>Target to stay the same for any given fiscal year.

For the source symbols for all additional dimensions used to retrieve the net income amount (NI) needed for the calculation, the source cash flow attribute is used:

• ASCFD<Dimension>Source

Please refer to System Setup, Source and Target Symbols for more details.

Inputting the ownership percentages

The user needs to input ownership percentages for the event to work properly. For more information see “Inputting intercompany investment data” in the Solutions User Guide.