The future of consolidation (5/7): Group structure

By Allen White, Sigma Conso co-founder & Administrator

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The difficulty of a statutory consolidation is determined by the complexity of the group's structure, that is, several group and third-party shareholders in the companies of the perimeter, the existence of cross-holdings between companies, companies with their own shares or shares in the consolidating company, etc. This type of structure was common in the 1970s, particularly in family-held companies, less in listed companies and major groups. Software had to handle these complex structures very early on and the best provided lasting solutions.

However, the requirements of statutory consolidation, backed by auditor recommendations, led groups to avoid such complex structures. There is now a growing realisation that it's best to make things simpler whenever possible. Contrary to the time when the legislator required that companies, notably limited French companies, have seven shareholders, we now often come across international company legal forms that allow for a single shareholder.

This is the trend we have seen and which will continue given the requirements for transparency demanded over the past years. On the other hand, despite efforts to simplify, major international groups have hundreds of companies in their perimeters. For these large conglomerates, the consolidation problem results from the many sub-groups, called steps, which must sometimes also establish consolidated accounts, but often using different standards than the consolidating holding company.

This is a challenge all international consolidation software packages will have to deal with correctly.