BizTech Blog

Torn Between Two LIFOs: Financial Consolidation and Oracle HFM

Posted by Stephen Goldsmith

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Oct 31, 2013 4:03:06 PM

If you’ve ever read any of my blogs before, you are aware that I am a music fanatic. While late 60’s and 70’s classic rock holds a particular appeal to me, I’m not ashamed to say that 70’s lite music also has its place in my heart. Hearing old softies like “Torn Between Two Lovers” by Mary MacGregor (yes, really), can often brighten an otherwise long day, one sadly spent not using an Oracle Hyperion EPM Tool.

In “Torn Between Two Lovers,” our singer is in quite a pickle, being in love with two different people at the same time, all the while knowing that sooner or later she must make a choice. Loving them both is breaking all the rules, she tells us. And so it is.

In the business world however, companies with multiple ERP systems do not share such a dilemma. Hyperion Financial Management (HFM), the number one financial consolidation tool in the world makes consolidating multiple financial systems, with various ledgers and accounting treatments, a simple, push button process.

Consolidation, in accounting language, means merging different sets of data, often from different ERP systems, into one. For example, a consolidation accountant at a PA-based chemical company may ask finance managers in France, or Spain to provide financial statements to be consolidated with the U.S. operating data. Thus, entities who may have different ERP systems or even different ways of accounting for their inventory (such as LIFO (Last In, First Out) or even modified LIFO) still must be combined with US financial data. This offers the benefit of viewing the whole group's financial information together to see how all companies are doing combined.

In the past, consolidation was usually performed manually, via Excel Spreadsheets and data warehouses. Complicated formulas, journal entries and pivot tables were often the only way companies could bring together disparate financial data into one place.

Regardless of the method, there are numerous shortcomings to manual consolidation, such as:

  • Relying on error prone spreadsheets, which can be difficult to audit and tie back to the GL;
  • Losing the integrity and sources of account balances from the various general ledgers;
  • Becoming overly dependent on one or two consolidation “super users” to write the complex macros often need to consolidate manually;
  • Difficulty meeting deadlines as the parent company becomes more and more reliant on local entities closing their books;
  • Trying to push through adjustments or allocations to the local entities for certain pass through costs;
  • Ensuring that financial statements have been prepared per the proper accounting standard;
  • Enduring sky high audit fees as public company audit firms need to increase testing due to difficulty relying on the consolidated financial statements.

Oracle Hyperion Financial Management is a packaged best-of-breed financial consolidation and reporting application. For a software solution to be classified this way, it must do all of the following:

  • Structure and automate. Typically used by finance teams in midsize-to-large publicly traded corporations, financial consolidation and reporting applications structure and automate the monthly or quarterly aggregation of historical results. These applications embed rules, procedures, and techniques with an accompanying methodology, fulfilling specific statutory/legal reporting requirements associated with the period-end financial close. Such standards include the GAAP and the IFRS.
  • Support management reporting. Financial consolidation and reporting applications allow users to analyze information about the business and help to plan for change, a process collectively known as management reporting.

In addition to the powerful features provided "out of the box", HFM is also highly configurable to support the complex elimination and allocation requirements specific to your organization. HFM is a finance-owned, IT-supported system that allows your organization to quickly make changes to financials results as conditions warrant provides transparency, visibility and auditability.

And so, unlike poor Mary in that masterpiece of a song, we are not torn between two lovers, or even two LIFO’s, feeling like a fool. Different divisions in the same company may indeed love their own ERP systems and that is certainly NOT considered breaking all the rules according to Hyperion Financial Management. In fact, it is encouraged!

For more information about how you can use Oracle HFM to simply your consolidation and reporting process, contact BizTech, and Oracle Platinum Partner, at 610-592-0600 or email me at

Topics: Hyperion EPM