Away with the extensive spreadsheets full of data, which in most cases are unnecessarily complex and give the wrong results. The transparency of a simple company, but for your group of companies. Unachievable or too complex? Not with HLB.
Consolidation (or financial consolidation) is an accounting technique that brings the results of parent companies and subsidiaries together. As a result a group of companies receives an income statement and a balance sheet as if it were a single company.
Consolidation allows to present the economic activity of the group as one global entity, stripped of all its legal barriers. This results in one income statement and one balance sheet.
Consolidation is more than the aggregation of all items in the annual accounts. For example, mutual claims and operations must be eliminated. When dividends are paid out in the group, they are eliminated in the consolidation. After all, these have already been included in the consolidated income statement. Not correcting this would lead to double counting and an incorrect view of your group’s ability.
When a group of companies develops over the years, a lot changes for the accounting department. Acquisitions, participations and/or restructuring (mergers, divisions, contributions, …) can quickly turn everything into an administrative tangle. Reliable reporting is, in many cases, not possible without a consolidation.
For consortia or parent companies with several subsidiaries there are several advantages to financial consolidation. It is not surprising that consolidated financial reports are required by the generally accepted accounting principles (GAAP).
For executives, investors, analysts, buyers and owners, financial consolidation is the best way to view the overall performance of a group of companies. The combination of various financial reports into a single financial snapshot gives financial institutions and stakeholders an invaluable insight into the health of the group and provides a good framework for understanding the individual annual accounts.
Coping with financial reports from different entities within a group of companies can be a compared to sailing a ship with more than one map. Financial consolidation gives executives the insight they need to budget, predict and plan more effectively. In short: to set course in one profitable direction.
HLB has built up extensive experience in the field of consolidations over the years. On the one hand as auditor, assessing the consolidated annual accounts, the financial situation and the results of the group as a whole on their true and representative character. On the other hand, as an active ‘actor’ in the creation of consolidations.
You provide the figures, be it through a full accounting report or by manual input into the digital platform of HLB. We do the calculations and ensure that the result is a consolidated annual report that gives a true and fair view of the results of your group of companies.
Any company that has sole or joint control over one or more subsidiaries, or that forms a consortium with other entities, is obliged to file a consolidation if two of the three criteria below are exceeded for two consecutive financial years:
When all available time is spent collecting data from different sources, there is not much time left to adequately turn data insights into business decisions. Moreover, when data is collected manually, it is not even certain that all conclusions are correct. A financial consolidation ensures that the data you trust on is trustworthy.
Business group Z has 50 employees (less than 250), an annual turnover of 1 million euros (less than 34 million euros) and a balance sheet total of 500,000 euros (less than 17 million euros). Business group Z is exempt and not legally obliged to submit a consolidation. However, management decides to do so, because the benefits of consolidation far outweigh the costs. In order to remain successful in the long term, a reliable insight into the activities of the group will be indispensable. Group Z will enjoy the benefits now and in the following years.
Group Y meets all conditions for exemption. It counts “only” 110 employees (less than 250), has an annual turnover of 20 million euros (less than 34 million euros) and a balance sheet total of 12 million euros (less than 17 million euros). However, one of the subsidiaries is listed on a stock exchange. Company Y must submit a consolidation report. Not a problem for the governing body of company Y, they use these figures for their strategic analyzes.
Company X has several companies as subsidiaries. The number of employees, the annual turnover and the balance sheet totals exceed the limit to be exempted from this obligation. In addition, parent company X is a controlling body and not a subsidiary of another body. A consolidation report is mandatory in this case. The board does not mind that, there are many advantages to the consolidation report.
Whether it’s mandatory or not compulsory at all does not matter. The consolidation is interesting for each group. In times of big data, every insight and overview is of value for your entire group. At HLB we know this and therefor we’re fully committed to create your next consolidation.
