Types of eliminations in Fathom
Fathom enables you to make two types of eliminations in consolidated groups:
Eliminations allow you to remove the impact of transactions between companies in a group, resulting in a more accurate view of consolidated performance. One typical use of an elimination would be to account for intercompany loans or intercompany management fees within a group. If you have an account or accounts holding the amounts of these loans or management fees, then you are able to eliminate the entire account.
You are also able to perform partial account or specific amount eliminations. Partial elimination adjustments are often required in multi-currency consolidations to balance the balance sheet, since movements in exchange rates (used to translate the accounts) can cause the inter-company accounts to no longer contra each other out.
A currency translation adjustment or a cumulative translation adjustment would be a specific amount adjustment that would easily allow you to get the Balance Sheet in balance for the consolidated group.
💡Pro Tip: If you want to make a partial and balanced elimination on a pair of accounts, then you can do this with a adjustment in ‘Step 1 - Update Data’ of the consolidated group. If the partial account elimination or adjustment needs to be unbalanced, then you will have to use an Eliminations Company instead. For more detailed information about the balanced adjustments you can make in ‘Step 1’, please see our ‘Adjustments’ article.
Full account eliminations
In ‘Step 3 - Chart of Accounts’ in the consolidated group’s Settings, you are able to perform full account eliminations. To eliminate an account:
The selected account(s) have now been eliminated from the consolidated group. In subsequent updates, the account will remain eliminated unless you restore it. To restore the account, simply click on the red ‘Eliminate’ button again to open the eliminations menu for that account. Then select the red ‘Eliminated’ to restore the account.
💡Pro Tip: We recommend that intercompany transactions are isolated in specific accounts. This approach means that each elimination is applied once and is then maintained automatically for subsequent updates of the financial data without the need to go back into the consolidated group and restore accounts between updates.
You will be able to preview the order/structure of your accounts, as well as a summary of eliminations performed. To do so, scroll to the bottom of ‘Step 3 - Chart of Accounts’ and select the green ‘Download Preview’ option. This will download the detailed consolidated financial statements for a recent period.
Within this report you can hover over any elimination amount to display the contribution from each company within the group.
Performing Specific Elimination Adjustments
Fathom allows you to import an excel spreadsheet which details specific elimination adjustments. This spreadsheet will import as a separate ‘Eliminations Company’ into your Fathom account. You will then be able to add the Eliminations Company to your consolidated group to perform specific eliminations adjustments.
The Eliminations Company will not be shown as part of the performance of the group in analysis and reports; the adjustments in the Eliminations Company will only be reflected in the eliminations column of your consolidated financial statements.
❗Note: These adjustments must only be at the account level. It is not possible to add eliminations for custom headings or totals.
Creating an eliminations company
To perform partial account eliminations or specific eliminations adjustments through an Eliminations Company, you must first create an Excel file to import as the company.
The spreadsheet for the Eliminations Company must include the word "eliminations" as its name (Cell B1). The eliminations adjustments should be entered as negative values. Each adjustment can be mapped to a specific account already in the consolidated group or you could create a separate new account to house all of the specific eliminations adjustments made within the group.
Example: Above is an example spreadsheet showing account specific eliminations. The ‘Investment or Other Non-Current Assets’ and the ‘Long Term Debt’ accounts in the consolidated group will each have $1,000 eliminated from them in the month of July 2021. The account classification identifies these accounts as an ‘Other Non-current Assets’ account and a ‘Long Term Debt’ account respectively.
💡Pro Tip: For a list of the types the classification codes, please see our ‘Account Classifications’ article.
Adding the eliminations company to the consolidated group
After creating the eliminations company, go to your ‘My Companies’ page in Fathom.
Because the entity has ‘Eliminations’ in the company name, Fathom will add the adjustments contained in this import file to the eliminations sections of your reports. In the consolidated financial statements you will see these adjustments shown in the eliminations column. You are able to see a preview of your eliminations adjustments totals at the bottom of ‘Step 3 - Chart of Account’ for the consolidated group.
Updating an eliminations company
Because an Eliminations Company is an Excel-based company, you would update an eliminations company the same way you would update an Excel company in Fathom. For more information on updating Excel companies, please see our 'Importing Financials from Excel' article.
Exchange rate translation adjustments
For multi-currency consolidations, you may want to add an additional ‘Currency Translation Adjustment’ or a ‘Cumulative Translation Adjustment’ account to your consolidated group to balance the Balance Sheet. This type of adjustment can be included as part of an Eliminations Company. You are able to essentially create a Balance Sheet account for the consolidated group and assign values to that account through the Eliminations Company.
Example: Above is an example of a how a foreign currency translation adjustment account might appear an Eliminations Company file. Currency translations adjustments can be added to the Eliminations Company for each month an adjustment is needed. After adding the Eliminations Company to the consolidated group, this account will appear on the Balance Sheet of the consolidated group to balance the group.
Congratulations on setting up your eliminations in your consolidated group! Any eliminations you made can be reversed, if necessary, at any time. Finish setting up your consolidated group for analysis, reporting, and forecasting by choosing from one of the next steps below:
What you want to do:
Next step in setup process:
Ready to set up KPIs or Key Performance Indicators in your consolidated group?
Happy with your KPIs and ready to set targets in your consolidation?
Additional knowledge & common questions: