For 30 years there has been a divergent view as to the best approach to using technology to support the key finance process of consolidation and reporting, generally known today as the “record to report process”.
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The divergent views could be split into two clear camps:
- ERP Integration: Consolidation is best integrated into the underlying transaction processing systems as the fundamental requirement is the aggregation of trial balances from multiple companies, with the application of relevant accounting adjustments to eliminate the investment in subsidiaries, minority interests etc. This approach was incorporated many years ago by SAP into its core ERP solution and was known as “EC-CS” or Enterprise Controlling – Consolidation System. A key dependency of this approach for real success, however, was that these multiple companies were all on the same shared accounting system with a common chart of accounts. As soon as there were companies in the group not on the common platform then additional effort was needed to integrate and map data from disparate systems with different charts of account into the common ECCS platform.
- Best of Breed Consolidation: Very few large international groups have all their companies on one accounting platform and consolidation has many requirements above and beyond the aggregation of trial balances from multiple companies and the application of accounting rules if the process is to be truly efficient. For example, there are large quantities of non-financial data to be collected and consolidated as well as a clear need for movements as well as balances to be included in the process to automate the disclosure notes required under IFRS and US GAAP. Therefore, the better approach was to use a specialist consolidation solution that had specialist functionality, and which could also be integrated with multiple underlying accounting systems and charts of account. Traditionally these options were developed and sold by the specialist vendors such as Hyperion, Cognos, Camshare, Cartesis and Outlooksoft. Through acquisitions, of course, SAP also became a supplier of two such solutions, Cartesis Magnitude became SAP Financial Consolidation (SAP FC) and Outlooksoft became SAP Business Planning and Consolidation (SAP BPC).