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Consolidation

Consolidation groups allow you to combine financial statements from multiple related companies into unified consolidated reports. This is essential for parent companies that need to report on their entire corporate structure, including subsidiaries and other investments.

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Overview

Per ASC 810 (Consolidation), a consolidation group defines the parent-subsidiary relationships for consolidated financial reporting. It includes:
  • Parent company - The top-level consolidating entity
  • Member companies - Subsidiaries and investees with their ownership percentages
  • Consolidation methods - How each member is consolidated based on ownership
  • Elimination rules - Rules for removing intercompany transactions

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Consolidation Methods

The system supports multiple consolidation methods based on ownership percentage and control:
MethodOwnershipTreatment
Full Consolidation>50% voting interestCombine 100% of assets/liabilities, recognize non-controlling interest
Equity Method20-50% significant influenceSingle line investment, share of earnings
Cost Method<20% passive investmentInvestment at cost, dividends as income
VIE ConsolidationPrimary beneficiaryFull consolidation regardless of voting interest
Variable Interest Entity (VIE) consolidation applies when you are the primary beneficiary of an entity, even without majority voting control. This requires a VIE determination assessment.

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Creating a Consolidation Group

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Define the group structure
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Navigate to Consolidation > Groups and click Create Group. Provide:
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  • Group name - Descriptive name for the consolidation group
  • Parent company - The top-level company producing consolidated statements
  • Reporting currency - Currency for consolidated financial statements (e.g., USD)
    • 4
    Add member companies
    5
    For each subsidiary or investment, add a member with:
    6
  • Company - Select the member company from your organization
  • Ownership percentage - Your ownership stake (0-100%)
  • Consolidation method - Automatically determined based on ownership, or manually set
  • Acquisition date - When the investment was acquired
  • Goodwill - Goodwill amount recognized at acquisition (optional)
    • 7
    The system automatically calculates the non-controlling interest percentage as (100 - ownership %) for fully consolidated members.
    8
    Configure elimination rules
    9
    Add elimination rules to remove intercompany transactions during consolidation. See Elimination Rules for detailed configuration.
    10
    Activate the group
    11
    Once configured, activate the consolidation group to enable consolidation runs.

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    Member Properties

    Each member in a consolidation group has the following properties:

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    Ownership Structure

    interface ConsolidationMember {
  companyId: string
  ownershipPercentage: number // 0-100
  consolidationMethod: "FullConsolidation" | "EquityMethod" | "CostMethod" | "VariableInterestEntity"
  acquisitionDate: string // ISO date
  goodwillAmount?: MonetaryAmount
  nonControllingInterestPercentage: number // 100 - ownership
}

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    VIE Determination

    For Variable Interest Entity members, the system tracks:
    • Is primary beneficiary - Whether you are the primary beneficiary
    • Has controlling financial interest - Whether you have controlling financial interest
    These determinations drive whether VIE consolidation is required.

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    Running a Consolidation

    Once your consolidation group is configured, you can run the consolidation process for any closed fiscal period. The consolidation run executes the following steps:
    1
    Validate member data
    2
    Ensures all member companies have:
    3
  • Closed fiscal periods for the consolidation date
  • Balanced trial balances
  • Complete intercompany transaction records
    • 4
    Translate currencies
    5
    Translates each member’s trial balance from their functional currency to the reporting currency using:
    6
  • Closing rate for assets and liabilities
  • Average rate for income and expenses
  • Historical rate for equity capital accounts
    • 7
    See Currency Translation for details.
    8
    Aggregate balances
    9
    Sums account balances across all fully consolidated members.
    10
    Match intercompany transactions
    11
    Identifies and reconciles intercompany transactions between group members. See Intercompany Transactions.
    12
    Apply eliminations
    13
    Generates elimination journal entries based on your elimination rules to remove:
    14
  • Intercompany receivables and payables
  • Intercompany revenue and expenses
  • Intercompany dividends and investments
  • Unrealized profits on inventory and fixed assets
    • 15
    Calculate non-controlling interest
    16
    Computes the minority shareholders’ portion of subsidiaries that are not 100% owned.
    17
    Generate consolidated trial balance
    18
    Produces the final consolidated trial balance used for consolidated financial statement generation.

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    Consolidation Run Options

    When initiating a consolidation run, you can configure:
    • Skip validation - Bypass validation step (use with caution)
    • Continue on warnings - Proceed despite validation warnings
    • Include equity method investments - Include equity method investees in consolidation
    • Force regeneration - Regenerate even if a prior run exists for the period
    Skipping validation can result in inaccurate consolidated reports if member data is incomplete or unbalanced. Only use this option if you’ve manually verified all member trial balances.

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    Viewing Consolidation Results

    After a successful consolidation run, you can:
    1. Review the consolidated trial balance - See all accounts with aggregated, eliminated, and final consolidated balances
    2. View elimination entries - Inspect all generated elimination journal entries
    3. Check non-controlling interest - Review NCI calculations for partially-owned subsidiaries
    4. Generate consolidated reports - Create Balance Sheet, Income Statement, and Cash Flow Statement

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    Consolidated Trial Balance Structure

    The consolidated trial balance shows: 
    interface ConsolidatedTrialBalanceLineItem {
  accountNumber: string
  accountName: string
  accountType: "Asset" | "Liability" | "Equity" | "Revenue" | "Expense"
  accountCategory: string // Detailed subcategory
  
  // Balances at each stage
  aggregatedBalance: MonetaryAmount     // Sum of all members
  eliminationAmount: MonetaryAmount     // Total eliminations applied
  nciAmount?: MonetaryAmount            // Non-controlling interest portion
  consolidatedBalance: MonetaryAmount   // Final consolidated balance
}
    This provides full transparency into how the consolidated balance was calculated for each account.

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    Managing Consolidation Groups

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    Editing a Group

    You can modify consolidation group properties, add or remove members, and update elimination rules at any time. Changes only affect future consolidation runs.

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    Deactivating a Group

    Deactivate a consolidation group to prevent new consolidation runs while preserving historical consolidation data.
    Deactivating a group does not delete prior consolidation runs. Historical consolidated reports remain available.

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    Best Practices

    Ensure all member companies have completed their month-end or period-end close before running consolidation. This guarantees complete and accurate data.
    Reconcile intercompany transactions throughout the period, not just at consolidation time. This identifies discrepancies early when they’re easier to resolve.
    For Variable Interest Entity relationships, maintain clear documentation of the VIE determination factors and review them annually.
    Quarterly review your elimination rules to ensure they capture all intercompany transaction types and use the correct accounts.
    Align fiscal period structures across all member companies when possible. This simplifies consolidation and ensures comparability.

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    Common Scenarios

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    Wholly-Owned Subsidiaries

    For 100% owned subsidiaries:
    • Set ownership to 100%
    • Use Full Consolidation method
    • Non-controlling interest will be 0%
    • All intercompany transactions must eliminate completely

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    Majority-Owned Subsidiaries (51-99%)

    For partially-owned subsidiaries:
    • Set ownership to actual percentage (e.g., 75%)
    • Use Full Consolidation method
    • System calculates non-controlling interest (e.g., 25%)
    • NCI share appears in equity on consolidated Balance Sheet

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    Equity Method Investments (20-50%)

    For significant influence investments:
    • Set ownership to actual percentage (e.g., 30%)
    • Use Equity Method
    • Investment appears as single line on Balance Sheet
    • Share of investee’s earnings recorded as investment income

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    Variable Interest Entities

    For VIE relationships:
    • Set consolidation method to Variable Interest Entity
    • Complete VIE determination (primary beneficiary and controlling interest flags)
    • Consolidate fully regardless of voting percentage
    • May require additional disclosures in footnotes

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    Next Steps

    Elimination Rules

    Configure rules for eliminating intercompany transactions

    Intercompany Transactions

    Track and reconcile transactions between group companies

    Currency Translation

    Understand currency translation methods for consolidation

    Consolidated Reports

    Generate consolidated financial statements

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