Example: Equity method with affiliate entity in Advanced Ownership Consolidation

Suppose that an ownership structure has a parent entity E100 with subsidiary entities E200, E300, E400, and E401.

The ownership structure in this example has:

• Three levels of parent and subsidiary entities.
• Different ownership percentages per subsidiary entity.
• A subsidiary entity at the lowest level that rolls up to multiple parent entities.

The ownership percentages in this ownership structure are as follows:

• E100 is the top parent entity.
• E100 owns 100% of E200 and E300, and 40% of E400.
• E200 owns 40% of E401.
• E300 owns 30% of E401.
• E400 owns 30% of E401.

In this example, we're looking specifically at the rollup from E401 to E100, by way of E400. Intacct records the net income of subsidiaries E401 and E400 using equity consolidation method. Examining this rollup on its own enables looking more closely at the impact of using equity consolidation method.

The equity entries roll up from E401 to E100 as shown in the following table:

Equity method entries for E401 rolling up to E400 and E100.

Entity	Parent entity	Percentage owned	Net income	Total net income
E401	E400	30%	100,000	100,000
E400	E100	40%	200,000	230,000
E100	None	parent entity	300,000	392,000

Equity method during consolidation

In this example, Intacct uses the equity method to consolidate multi-level ownership structures from the bottom up, beginning with E401. The equity entry is calculated as the percent ownership of the subsidiary multiplied by that entity's net income, or Equity entry = % owned x net income.

The equity method entries for subsidiary entity E401 rolling up to E400 and E100 are as follows:

• E401: The parent entity for E401 in this example is E400. Intacct calculates the equity entry and posts it to parent E400. This is 30% x 100,000 = 30,000. Intacct posts 30,000 as equity income to E400.
• E400: Parent entity E100 owns 40% of E400. The total net income for E400 is 230,000. This includes the E400 net income plus the equity income from E401 that Intacct posts to E400 (200,000 + 30,000 = 230,000).
• E100: The parent entity is E100. Intacct calculates the equity entry and posts it to parent E100. This is 40% x 230,00 = 92,000. Adding the equity income from E400 to E100 net income, we get the total income for E100 (92,000 + 300,000 = 392,000).

Report for equity consolidation method

Regional availability

Equity consolidation method is available to customers with a subscription to Advanced Ownership Consolidation in the following regions:

• Australia

• Canada

• South Africa

• United Kingdom

• United States