Taken on its own, the term "consolidation" simply means that a certain situation is put into context. In the world of Accounting However, financial consolidation is a clearly defined process that involves several special features and accounting principles.
Financial consolidation means that the income and expenses of a group of affiliated companies are recognised in a single financial statement. annual accounts or a joint tax return. A company is associated with a company if it is wholly or partly owned by another company.
In the course of financial consolidation, the individual divisions of a parent-subsidiary group are presented as a single company. The annual financial statements are published under the umbrella of the parent company. The financial aspects of the subsidiaries are presented as if the companies were divisions of the parent company.
Business One
Essentially, the main steps of accounting consolidation are in the process of financial consolidation:
- Collecting balance sheet data (e.g. assets, liabilities, equity, income and expense accounts) from different general ledger systems and assigning them to a central chart of accounts
- Consolidation of data according to specific financial accounting rules and guidelines, e.g. HGB, US-GAAP or International Financial reporting Standards (IFRS)
- Reporting the results to internal and external stakeholders
The main financial reports that arise in the preparation of consolidated financial statements include the income statement (GUV), which balance sheet and the cash flow statement.
You might think that financial consolidation consists of a relatively simple addition of figures taken from the financial reports of the companies in a group. However, this is not the case. Rather, specific calculations and consolidation adjustments must be made. This includes, among other things:
- Conversion of foreign currencies
- Elimination of intra-group transactions and balances
- Adjustment entries
- Accounting of partial ownership
There are also different consolidation methods, which may vary depending on the stake a parent company has in a subsidiary.
In a large company, the process of financial consolidation is usually carried out by the finance department, under the supervision of the controller or the head of the department. accounting/reporting and is ultimately overseen by the commercial management.
Financial consolidation in SAP Business One
For this purpose, SAP provides the add on "Intercompany Integration Solution for SAP Business One" available
By and large, the intercompany consolidation function uses the basic functionality of SAP Business One to create the consolidated financial statements. You need to set up additional companies in SAP Business One, one per consolidation level. The new "consolidation" company is then only used for the financial consolidation reports.
The SAP add-on streamlines processes such as financial consolidation, but cross-company procurement between two or more companies that SAP Business One use. It is used in over 60 countries and supports subsidiaries that use SAP Business One. This also applies to those that use different currencies. This includes the following functions:
- Manage multiple subsidiaries, business units, legal entities and currencies
- base data Replicate and share
- Activities Consolidate, coordinate and display data in all business areas without manual synchronisation
- Application of standardised and transparent financial processes across all business units
- Simple and intuitive management of cross-divisional financial information
- Increased productivity through time savings and simplified transactions
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