Consolidation

Consolidation combines the financial results of multiple legal entities (subsidiaries, holding companies, joint ventures) into one set of group financial statements, eliminating intercompany transactions along the way.

How consolidation is performed

The mechanics follow a fixed sequence. Each entity closes its own books and produces a trial balance. Local accounts are mapped to the group chart of accounts, which is rarely a one-to-one mapping. Balances in other currencies are translated, typically using closing rates for balance sheet items and average rates for income statement items, with the difference landing in a translation reserve. Entities are then aggregated line by line.

Elimination follows. Every intercompany transaction has to be removed so the group does not report revenue it earned from itself: intercompany sales and purchases, internal loans and the interest on them, management fees, unrealized profit sitting in inventory that one entity sold to another. Where the parent owns less than all of a subsidiary, the share belonging to other owners is presented as a non-controlling interest. Ownership percentage also determines the method, since some holdings are equity accounted rather than fully consolidated.

Why consolidation breaks in practice

The recurring problems are structural. Entity submissions arrive in different formats and on different days, so the group close waits on the slowest one. Intercompany balances do not agree, because two entities booked the same transaction at different amounts or in different periods, and someone has to reconcile them under deadline pressure. Mapping tables live in a spreadsheet that one person maintains. Top-side adjustments get posted at group level with no trace back to any entity ledger, which is precisely the entry an auditor asks about first.

The common thread is that the group number stops being traceable. A consolidated revenue figure is defensible only if each contributing entity figure is, and if every elimination between them can be shown.

How Rexfin handles it

Rexfin is building consolidation as a platform-scope capability, with each entity’s contributing actuals carrying their own citation and reconciliation trail before they roll up into a group total. Mappings, translations, and eliminations run as deterministic steps over that governed data rather than as spreadsheet formulas, and access is scoped by role, so an entity controller sees their own books while the group view stays traceable entity by entity. See multi-entity planning for the forward-looking counterpart.