Consolidation: Definitions and Examples Explained

Edgar de Wit

For many finance professionals, consolidation is a recurring challenge. It sounds simple: combine the results of multiple entities into one report. But in practice, consolidation involves a number of rules, definitions, and nuances — especially for FP&A teams, where consolidation forms the foundation for reliable budgeting and planning, and for understanding consolidated profit and loss performance.

In this blog, we’ll outline the key definitions and provide practical examples.

What is consolidation?

Consolidation is the process of combining the financial results of multiple companies within a group into one unified view. The goal: to present the group as a single economic entity, rather than separate companies.

Consolidation typically involves:

• Aggregating financials: revenues, costs, assets, and liabilities
• Eliminating intercompany transactions: so internal sales and payments aren’t counted twice
• Currency conversion: translating results from different currencies into one group currency
• Applying ownership rules: for example, when a parent owns less than 100% of a subsidiary

Example 1: Simple group structure

A parent company owns two subsidiaries, each at 100%. Their results are fully added to the parent’s accounts. Any intercompany sales between the two subsidiaries are eliminated.

Example 2: Complex group structure

A company operates ten entities in multiple countries, some of which are owned by subsidiaries. Challenges include:

• Multiple currencies that must be consolidated into one reporting currency
• Partial ownership where only 60% of shares are held
• Intercompany loans that must be eliminated from both assets and liabilities

With a modern consolidation solution like XLReporting, these processes are automated — including intercompany eliminations and minority interest calculations.

Why consolidation matters for FP&A

Consolidation enables FP&A teams to:

• Build reliable plans – combining actuals and forecasts at the group level
• See a clear profit and loss – without duplicates or inconsistencies
• Make faster decisions – by harmonizing data from multiple systems

Conclusion

Consolidation is more than just adding numbers. It requires a structured approach that considers currencies, ownership, and intercompany eliminations. Done right, it provides a solid foundation for budgeting, planning, and forecasting.

With XLReporting, you can not only automate consolidation but also extend it with forecasting and scenario analysis — giving you control over both today’s results and tomorrow’s plans.