Configure Matrix Consolidation

Large, diversified corporations typically operate across various geographic regions and multiple product lines. When reporting financial performance, these organizations must satisfy two distinct requirements:

• Legal reporting (for compliance and tax purposes): Regulators require companies to present their consolidated financial statement by statutory legal entity. We call this legal consolidation.
• Management reporting (for business strategy): Internal decision-makers evaluate financial performance across specific operating segments, such as product lines or business units. We call this management consolidation. Usually, organizations run two separate, time-consuming processes to generate these reports.

The Matrix Consolidation lets you combine and analyze your financial data across multiple dimensions simultaneously. This means you can track your numbers by statutory legal entity (for compliance and tax purposes) while also tracking them by business segments, such as segments, profit centers, or geography.

This dual-reporting capability gives you deeper insights into business performance. It also keeps your data consistent in a single place. The system automatically handles all internal transactions between your business units. This avoids manual transactions, reporting, and reconciliation between legal and management consolidation.

In traditional consolidation, the system only considers legal hierarchies, using the Entity and Intercompany dimensions.

In a standard setup:

• The system eliminates transactions between companies at the first shared parent in the Entity hierarchy.
• It posts the elimination entry at Group for a model with a Group dimension or at the elimination entity for model without a Group dimension. 

But this standard setup misses the business segments. As a result, your segment reports appear incorrect or distorted. Matrix consolidation solves this. It tracks the Segment and Partner Segment for management elimination in addition to Entity and Intercompany for legal consolidation. The system then removes these internal transactions directly on the Segment dimension. This keeps both your legal reports and your segment reports accurate and reconciled without any additional efforts.

Before you start, you must set up your model with these items:

• Include Segment dimension as type Other in your consolidation model.
• Optionally, include PartnerSegment dimension as type Other in your consolidation model.
• No additional elimination rules are needed for segment eliminations. The system uses the same consolidation rules for segment elimination.
• Create elimination members in your segment hierarchies to capture inter- (between different segments) and intra- (within the same segment) segment eliminations.

To define the Matrix Consolidation, select one of two options:

• Use with Segment and Partner Segment dimensions. This is applicable when an entity has transactions in multiple segments. 
• Use ‌only the Segment dimension. Use this option when each entity operates in a single segment or when the source accounting/ERP system doesn't provide a detailed breakdown by partner segment..