In addition to requiring that you perform consolidation activities to meet legal entity reporting requirements, some regulatory agencies (the Securities and Exchange Commission in the U.S.
, for example) require that you produce consolidated financial statements by business segment. A business segment is a line of business that produces a significant amount of the total output of a group. The rules regarding what defines a business segment may vary depending on the regulatory agency requiring these reports. In Legal Consolidation (LC), you can create consolidated financial statements to meet these requirements using business area consolidation.
In our IDES model, all companies in the U.S. model are broken down by business segment, which is called business area in the R/3 System. When data is transferred from FI, two different views of the data can be stored: 1) the legal entity view, where each company code’s data is transferred to its corresponding company in LC, and 2) a view for business area consolidation. In this view, the LC company master record value is substituted based on the combination of company code and business area in FI. This is also true for the trading partner in intercompany documents. The LC trading partner is derived from the combination of the company and business area of the trading partner.