What is pooling-of-interest method in SAP FI-LC - Consolidation?

SAP Term: pooling-of-interest method

• Component: FI-LC

• Component Name: Consolidation

• Description: The pooling of interest is a consolidation method that is used when the parent's influence in the subsidiary is even greater than that in the purchase method of consolidation. For example, the German commercial code HGB requires this method when the investment share lies between 90% and 100% and the purchase was made by exchanging stock. The pooling-of-interest method does not deviate from the purchase method when it is employed for the elimination of intercompany payables and receivables, revenue and expense, and profit and loss. The consolidation of investments considers only common stock as being relevant to consolidation. The differential that is incurred during the elimination of the investment is always cleared against the retained earnings appropriations without affecting earnings. In the system, the pooling-of-interest method is implemented by setting special parameters in the purchase method.

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• Key Concepts: 
  The pooling-of-interest method is a consolidation method used in SAP FI-LC Consolidation. It is used to combine the financial statements of two or more companies into one consolidated financial statement. This method is based on the assumption that the companies being consolidated are of equal value and that the combination of their assets and liabilities will result in a single entity with a single set of financial statements. 
  
  How to use it: 
  The pooling-of-interest method is used when two or more companies are merging or consolidating their financial statements. The process involves combining the assets and liabilities of each company into one consolidated balance sheet. The resulting balance sheet will reflect the combined assets and liabilities of all companies involved in the consolidation. 
  
  Tips & Tricks: 
  When using the pooling-of-interest method, it is important to ensure that all assets and liabilities are accurately accounted for in the consolidated balance sheet. Additionally, it is important to ensure that all transactions between the companies involved in the consolidation are properly recorded in order to accurately reflect the combined financial position of the consolidated entity. 
  
  Related Information: 
  The pooling-of-interest method is one of several consolidation methods available in SAP FI-LC Consolidation. Other methods include purchase accounting, equity accounting, and pro forma accounting. Each method has its own advantages and disadvantages, so it is important to consider which method best suits your needs before making a decision.