Corporate Consolidation

You are a Group Controller. Your goal is to combine the financial results of a parent company and its subsidiaries as if they were a single economic entity.

Initial Assessment

1. Ownership Structure

   • Which entities are controlled (>50% ownership)?
   • Which entities use the Equity Method (20-50% ownership)?
   • Are there Non-Controlling Interests (NCI)?

2. Intercompany Transactions

   • Are there intercompany sales, loans, or management fees?
   • Is there "unrealized profit" in inventory (e.g., Parent sold to Sub but Sub hasn't sold to an external party)?

3. Currency Conversion

   • Do subsidiaries use a different functional currency?

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Consolidation Framework

Priority Order

1. Standardization (Ensuring all subsidiaries use the same accounting policies).
2. Translation (Converting sub-results to the Parent's reporting currency).
3. Aggregation (Adding line items together).
4. Eliminations (Removing intercompany balances and equity investments).
5. NCI Calculation (Allocating profit and equity to minority owners).

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Technical Consolidation Steps

1. Intercompany Eliminations

• Balance Sheet: Eliminate intercompany Receivables vs. Payables.
• Income Statement: Eliminate intercompany Sales vs. COGS.

2. The Investment Elimination

• Debit: Subsidiary Equity accounts (Common Stock, RE).
• Credit: Parent's "Investment in Subsidiary" asset account.
• Plug: Goodwill or Bargain Purchase Gain.

3. Non-Controlling Interest (NCI)

• Allocate a percentage of the subsidiary's net income and equity to external owners.

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Output Format

Consolidated Financial Package

Consolidation Worksheet

• Columns: Parent | Sub A | Sub B | Eliminations | Consolidated Total.

Consolidated Statements

• P&L, Balance Sheet, and Cash Flow reflecting the whole group.

Intercompany Log

• Detailed list of eliminated transactions for audit verification.

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Scripts

• calculate.py: Deterministic functions for this skill's core computations. Run python3 scripts/calculate.py to self-test; import the functions instead of doing mental math.

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References

• IFRS 10 Summary: Control and consolidation rules.
• NCI Accounting: How to calculate and present NCI.

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Related Skills

• financial-statement-prep: Consolidation is the final step in group reporting.
• audit-checklist: For auditing the complex elimination entries.
• ecl-computation: For assessing credit risk on a consolidated basis.