How to divest a company?

[Former Member]

Hi,

We are trying to set some standards for divesting a company. We dont know if the current process is the most efficient or not. It requires a lot of work.

Steps

1. Post pre-divest transactions in FI e.g clearing interco balances and cash

2. Exctract data into BCS and get the trial balance

3. Post divest activities in FI i.e. zero out the trial balance of the divest company

4. Set up the divest date of the company in the master data

5. Zero out the investment in AFD. We dont zero out the equity in AFD

6. Extract data into BCS and run through PCGC and the rest of the tasks.

7. Remove the company from the hierarchy in the following year

We dont know if this is SAP's standard way of divesting a company. Any ideas will be appreciated.

Thank you.

[dan_sullivan · Accepted solution]

A few clarifications may help.

1. & .2 it is unclear to me why these are considered necessary

3. It is only necessary to record for the parent company any proceeds from sale against the investment balance with any difference being gross pre-consolidated gain/loss on divestiture of this subsidiary. It is not necessary to zero out balances of the divested subsidiary as the BCS cons group master data changes will automatically exclude the data for divested cons units.

4. It is most important to update the cons group(s) master data to indicate the period/year of the divestiture - not the company master data.

5. This should be accomplished via AFD divestiture activity

6. Extract data into BCS and run through PCGC and the rest of the tasks.

7. Remove the company from the hierarchy in the following year - or leave in for additional year for year-over-year comparison reporting

Edited by: Dan Sullivan on Aug 9, 2011 12:17 PM

[Former Member · Accepted solution]

Hi Dan,

Thanks for the quick response.

1. From what I have heard all the intercompanies should be settled before you divest a company. Also, from accounting perspective we are not selling the cash to the external party. Therefore, we transfer it to the parent.

2. In order to show the divest activity separate from the current month activity on the cashflow, sometimes we need to get the trial balance before the divest.

3. To be honest, I dont know why we are doing this. We are thinking of changing the process and not to zero out the balance in FI. We need some confirmation that this is not the right/best way of divesting a company. COI also generates gain/loss? How does it calculate the gain/loss?

4. Yes, you are right.

5. Beacuse we zero out the balances in FI, we have to make the AFD entry. I am thinking if we change the process, the AFD will take care of it.

Thank -you

[dan_sullivan · Accepted solution]

1. It is only necessary to settle intercompany if required by the agreement with the acquiring enterprise.

2. Okay

3. COI calculation of gain/loss is netted against any proceeds recorded in FI for the true net gain/loss. This, along with not zeroing out balances may be tested and if not satisfied then the balances may be zeroed out, but is should not be necessary.

4. Okay

5. AFD should be divestiture activity - is that what you expect to use? PCGC tasks along with the cons group master data changes will automatically remove or exclude the data relative to this divested subsidiary even though the data may continue to be loaded and eliminated. The reports will be correct.

[Former Member · Accepted solution]

Hi Dan,

I have one more question re #3.

If we dont zero out the balance in FI, all the FI reports will show the divested companies balance forever. Do we cleanup the balance after the divest month or do we leave everything in FI?

5. Yes, we would use divest activity in AFD.

[dan_sullivan · Accepted solution]

Whether or not the balances in FI are zeroed out is stricly a business decision. There is no need to do so for BCS.

[Former Member · Accepted solution]

Your response is much appreicated!