The future of consolidation (1/6)

The future of consolidation

It would be very ambitious and risky on our part to consider the future of consolidation using the “crystal ball” approach. It would inevitably lead to some daydreaming. We’ll approach the topic more realistically, taking into account different aspects of consolidation which still leave room for potential improvements in time and resource savings over the coming years.

Following subjects will be handled:

(I) The structure of the data to consolidate and processing in consolidation
(II) IFRS and local GAAP
(III) Statutory consolidation and reporting: unified consolidation
(IV) Group structure
(V) Financial communication
(VI) Impact of future technological changes on consolidation

The structure of the data to consolidate and processing in consolidation

It’s surprising to note that, virtually since the beginning of the 1980s, the information required for statutory consolidation has been presented in the same format,

  • account balances,
  • the detail of the balance of some of the accounts (holdings and intercos),
  • variation items (flows),
  • analytical dimensions of certain account balances…

… and this is the case for different software packages from a given vendor and in the software of their competitors, sometimes even in very different locations. To such an extent that some software companies went as far as using the same coding as competing software on the pretext of providing greater convenience for their clients.

In our opinion, this clearly means that there is currently convergence in the approach because it perfectly meets consolidation requirements. As a result, we don’t see any significant improvement in data structure in the foreseeable future.

Basic consolidation processing (eliminations) hasn’t changed very much either since the early days of consolidation in the 1980s. There are, however, variations in some countries, but the best software on the market has included them as parameters. In this case too, and strictly in terms of statutory consolidation, the learning curve is becoming asymptotic and, therefore, we don’t expect any revolutionary change in processing. Of course, we aren’t immune to a complete, though highly unlikely, reworking with new principles the legislators may come up with.

In conclusion, and to confirm these comments, execution times for consolidation processing are now measured in minutes, even for groups with tens and even hundreds of companies in their perimeter. This is no longer an area for consolidation optimisation in the future.

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