Entity hierarchy setup

Creating entities

Navigate to Settings → Entity Hierarchy to view the entity tree. Click Add Entity to create a new node. Every entity requires:

• Name: The display name shown throughout Arvexi (for example, “Acme US Operations” or “EMEA Holdings GmbH”).
• Code: A short unique identifier used in exports and API references (for example, US-OPS or EMEA-HOLD). Codes are immutable after creation.
• Type: One of three entity types:

• Legal Entity: A legal corporate entity that files separately or holds assets. Most entities in your tree will be this type. Legal entities own reconciliations, leases, and close tasks.
• Business Unit: An operational division within a legal entity. Useful for departmental reporting without separate legal filings. Business units inherit their parent’s currency and consolidation settings.
• Consolidation Group: A virtual grouping that rolls up balances from its children for consolidated financial statements. Consolidation groups do not own records directly.

Parent-child hierarchy

Entities are arranged in a tree structure. Each entity (except the root) has exactly one parent. The tree can be as deep as you need. Arvexi supports unlimited nesting levels.

A typical structure looks like:

1. Root consolidation group (for example, “Acme Corp Consolidated”)
2. Regional consolidation groups (“Americas,” “EMEA,” “APAC”)
3. Legal entities within each region (“Acme US Inc,” “Acme UK Ltd”)
4. Business units within legal entities (“US Manufacturing,” “US Corporate”)

To reparent an entity, drag it to a new position in the tree, or edit the entity and select a new parent. Reparenting preserves all historical data. Records stay attached to the entity, and prior-period reports reflect the hierarchy as it existed at that time.

Entity currency

Each legal entity has a functional currency that determines the currency for all its records: trial balances, reconciliations, lease measurements, and journal entries.

Set the currency when creating the entity. Arvexi supports over 150 ISO 4217 currency codes. The currency is locked once the entity has any records. To change it, you must create a new entity and migrate data.

Consolidation groups can specify a reporting currency that differs from their children’s functional currencies. Arvexi translates child balances using the exchange rate table in Settings → Exchange Rates, applying the current rate method (balance sheet at closing rate, income statement at average rate) with cumulative translation adjustments posted to equity.

Ownership percentages

For each parent-child relationship, you can specify an ownership percentage. This controls how much of the child’s balances roll up to the parent during consolidation.

• 100%: Full subsidiary. All balances roll up entirely.
• 51%–99%: Majority-owned subsidiary. Balances are fully consolidated with a non-controlling interest (NCI) line calculated from the minority percentage.
• 20%–50%: Significant influence. Typically consolidated using the equity method (only the parent’s share of net income flows to the consolidated statements).
• Below 20%: Passive investment. Consolidation is optional and typically not applied.

Ownership percentages can change over time. When you update the percentage, specify an effective date. Arvexi uses the correct percentage for each reporting period automatically.

Consolidation method

Each entity relationship uses one of three consolidation methods, typically driven by the ownership percentage:

• FULL: 100% of the subsidiary’s balances are included in the consolidated statements. Intercompany transactions are eliminated. Non-controlling interest is calculated for ownership below 100%. This is the default for majority-owned subsidiaries.
• PROPORTIONAL: Only the parent’s ownership share of each balance sheet and income statement line item is included. Used for joint ventures under certain standards (for example, IFRS 11 when the arrangement is a joint operation).
• EQUITY: Only the parent’s share of the subsidiary’s net income is recognized as a single line item. The investment is carried at cost plus accumulated share of earnings. Used for associates (20%–50% ownership).

Arvexi suggests a consolidation method based on the ownership percentage, but you can override it. The override and reasoning are recorded in the audit trail for your external auditors.

To configure consolidation settings, click any entity in the hierarchy tree and open the Consolidation tab. You will see the ownership percentage, consolidation method, and a preview of how balances will roll up based on the current period’s data.