Kscope16 presentation by Keith Berry on the Equity Pickup Module in Hyperion Financial Management (HFM)

1. The HFM Equity Pickup Module
Automating Guarantor/Non-Guarantor Financial Statements
Keith Berry
US-Analytics

2. ABOUTUS-ANALYTICS
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3. Plan of attack
Accounting
Journal entries for Equity Method investments
Technical
Configuring and using the EPU Module
Use Case
Guarantor/Non-Guarantor Financial Statement/Disclosure

4. Accounting
Journal entries for Equity Method investments

5. 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

6. The Equity Method
Record investment as single line on Balance Sheet:

7. The Equity Method
Record investment as single line on Balance Sheet:
Increase investment value each month based on income
booked by subsidiary:

8. 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:

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

10. Reporting
Income appears in a separate section of the Income
Statement:

11. Equity Method – additional details
Change in ownership applied to current period and
forward:
The pickup should include Other Comprehensive
Income/CTA

12. 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

13. But what about this?
Need equity entry for company 100
100
200
95%
400
100%
600
35%
700
100%
800
100%
300
100%
500
100%
600
65%
700
100%
800
100%

14. Technical
Configuring and using the EPU Module

15. Equity Pickup Module
Books 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

16. Cascading ownership
Net Income $300
Net Income $250
EPU 500
Total Net Income $750
A
B
C

17. Equity Pickup Module

18. Equity Pickup Module
100
200
95%
400
100%
600
35%
700
100%
800
100%
300
100%
500
100%
600
65%
700
100%
800
100%

19. Ownership Accounts
Shares Owned
Shares Outstanding
Voting Owned
Voting Outstanding
Shares%Owned
Input or
Calculated
Voting%Owned
Input Calculated
[PCTRL]
[PCON]
[POWN]
[DOWN]

20. Ownership Accounts
Shares Owned
Shares Outstanding
Voting Owned
Voting Outstanding
Shares%Owned
Input or
Calculated
Voting%Owned
Input Calculated
[PCTRL]
[PCON]
[POWN]
[DOWN]

21. Sample ownership entry
Owned entity Owning entity
Shares Owned/
Shares Outstanding =
Shares%Owned

22. Split ownership

23. Full ownership file

24. Sample EPU Calculation
100
200
95%
400
100%
600
35%
700
100%
800
100%
300
100%
500
100%
600
65%
700
100%
800
100%

25. What does Status mean?

26. EPU status
From 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.

27. Circular ownership

28. 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

29. 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)

30. What happens when I run EPU?
700
600
EUR
USD
USD
5. Translate () from Sub’s
Default Currency (EUR) to
Owner Default Currency
(USD)

31. What happens when I run EPU?
700
600
EUR
USD
USD 6. Calculate () for translated
Sub data (USD)

32. What happens when I run EPU?
700
600
EUR
USD
USD
7. EquityPickup () at <Entity Currency> of Owner (USD)

33. Equity Pickup Module
Demo

34. Metadata Requirements
• Target accounts IsCalculated=N
• Entities set up as IsICP=Y
If HFM intercompany eliminations used -
• Target accounts IsICP=Y

35. EPU rules
Look! A special subroutine!

36. EPU rules
1. Get current Owner, Subsidiary and
Ownership

37. 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

38. EPU rules
2. Get Owner’s default
currency

39. EPU rules
3. It’s up to us to clear prior
calculations.

40. EPU rules
Make sure we clear only
the current Sub’s data

41. EPU rules
Also, we’re going to want to
keep this data separate
from everything else

42. EPU rules
4. Pull the Sub’s earnings
for the month.

43. EPU rules
Be sure to pull in currency
of the Owner

44. EPU rules
Proportionalize

45. EPU rules
5. Book periodic income
using Sub as ICP

46. EPU rules
6. Increase Investment by
same amount, also using
Sub as ICP

47. EPU Rules
Custom dimension:
Be sure to roll EPU for the Investment accounts

48. Use Case
Guarantor/Non-Guarantor Financial Statements

49. Guarantor/Non-Guarantor Statements
Rule 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

50. Condensed Consolidating Information
Columns for
-Parent
-Issuer (if different than Parent)
-Subsidiary Guarantors
-Subsidiary Non-Guarantors
-Adjustments/Eliminations
-Total Consolidated

51. Condensed Consolidating Information
Additional columns
-Less than 100% ownership
-Foreign vs. domestic
-US GAAP reconciliation

52. Preparation
Parent company should show all subsidiaries booked
under the equity method

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

54. Preparation
Eliminate equity method entries to come back to
reported consolidated results

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

56. 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

57. Steps in HFM
• EPU for entities within each category will eliminate,
leaving only EPU balance for entities outside the
category

58. Steps in HFM
• The final elimination reverses the remaining EPU
balances across columns to return to consolidated
results

59. 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

60. Additional DataType

61. Questions?