Equity Pick in OneStream

[PFugereCSO]

Equity pickup (EPU) is a method of reevaluating the investments owned by a holding company allowing the parent to realize changes in equity. This results in the holding company’s balance sheet showing the current value of the corresponding share in the equity of the subsidiary. Investments are normally shown at historical or acquisition cost.  But an invested company has a value that can vary based on profit and loss they are incurring.  The equity pickup adjustment offsets the historical cost in local currency, showing the actual value of the equity owned. 

Direct Ownership Percentage * Equity of Owned Entity =

Current Equity Value - Investment =

Equity Pickup Adjustment

You can calculate the adjustment by simply taking the direct ownership percentage multiplied by the equity of the entity owned then subtract the investment in the parent.  In OneStream the ownership percentage can be entered directly on the entity or by creating a Ownership cube.  But once this information is in the system you can calculate the adjustments.

Some people will calculate this outside of the system and use a journal or form to enter it into OneStream.  And you might be thinking, these rules are complicated enough and if it works why open the can of worms.  Well, there are some nice advantages here when it is set up correctly.  There are some reasons for wanting to create these rules, but I like to recommend creating the calculation within the system because it is audited and documented. 

Once rate has been pulled you are ready to calculate the adjustment.  Let’s assume you have an entity owned (Keene) 75% by some parent (Boston).  You would need that 75% in the system.  You would also need to see that entity Keene was bought for $1,000,000.  That would be recorded in the Boston set of books and loaded into HFM.  But since Keene has been growing over the last year, it is really worth 2,000,000.  The adjustment is (75% *2,000,000) – 1,000,000 = 500,000.  This reflects that actual value of Keene, which is 75% of the 2,000,000.

So hopefully the calculation makes sense, there is no major thing more to consider… If you are recording this adjustment, where would you put it?  There are two options – you can create a holding company.  This is just an entity that sits below the parent that owns investment entity.

Tot - Parent that holds the investment

            Sub A – Subsidary

            HoldCo – Holding Company

When using this option, you want to be sure the Equity of Owned Entity has been calculated BEFORE you calculate the EPU.   The way to do this is to use the Equity Pick Up settings (Page 101 of the Design and Reference Guide)

The other way you might see this done is calculation at the parent entity itself.  This option is more difficult in my opinion because it can be a challenge to get the correct percentages and values from the children, and reporting can be ‘clunky’.