What is proportion of equity method in SAP FI-LC - Consolidation?

SAP Term: proportion of equity method

• Component: FI-LC

• Component Name: Consolidation

• Description: A variant of the equity method of consolidation. It differs from the book value variant for this method of consolidation in that the differential between the investment cost and the pro rata stockholders' equity of the affiliated company is reported as a separate item in the balance sheet. The differential is reported separately as goodwill and the value of the investment item is reduced by this amount.

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• Key Concepts: 
  The Proportion of Equity Method is a consolidation method used in the SAP FI-LC Consolidation component. 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 all 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 is done by taking the total equity of the parent company and its subsidiaries, and then dividing it by the total equity of the parent company. The resulting number is then multiplied by 100 to get the percentage of equity held by each subsidiary. 
  
  Tips & Tricks: 
  When using the Proportion of Equity Method, it is important to ensure that all of the financial information for each subsidiary is up-to-date and accurate. This will ensure that the calculation is accurate and will provide an accurate representation of each subsidiary’s ownership stake in the consolidated group. 
  
  Related Information: 
  The Proportion of Equity Method is one of several consolidation methods available in SAP FI-LC Consolidation. Other methods include the Equity Method, Cost Method, and Full Consolidation Method. Each method has its own advantages and disadvantages, so it is important to understand which method best suits your needs before making a decision.