What is proportion of equity method in SAP EC-CS - Consolidation?

SAP Term: proportion of equity method

• Component: EC-CS

• Component Name: Consolidation

• Description: A variant of the equity method of consolidation. The equity method has two variants: One-line consolidation also called book value method Two-line consolidation also called proportion of equity method By contrast to the one-line variant, in two-line consolidation the difference between the investment book value of the parent and the proportional share in the stockholders' equity of the subsidiary is stated as a separate item in the balance sheet. This difference is recorded as goodwill and reduces the value of the investment item.

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• Key Concepts: 
  The Proportion of Equity Method is a consolidation method used in the EC-CS Consolidation component of SAP. It is used to calculate the proportion of equity that each subsidiary has in a consolidated group. This method is based on the assumption that the parent company and its subsidiaries are separate legal entities, and that the parent company has a controlling interest in the subsidiaries. 
  
  How to use it: 
  The Proportion of Equity Method is used to calculate the proportion of equity that each subsidiary has in a consolidated group. This calculation is based on the parent company's ownership percentage of each subsidiary. The parent company's ownership percentage is determined by taking the total equity of the parent company and dividing it by the total equity of all subsidiaries. The resulting percentage is then multiplied by the total equity of each subsidiary to determine its proportion of equity. 
  
  Tips & Tricks: 
  When using the Proportion of Equity Method, it is important to ensure that all subsidiaries are included in the calculation. Additionally, it is important to ensure that all equity values are up-to-date and accurate. 
  
  Related Information: 
  The Proportion of Equity Method is one of several consolidation methods available in SAP EC-CS Consolidation. Other methods include the Full Goodwill Method, Partial Goodwill Method, and Equity Method.