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

The future of consolidation: Group structure

By Allen White, Sigma Conso co-founder & Administrator

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.

Articles in the “Future of Consolidation” series:

  1. The structure of the data to consolidate and processing in consolidation
  2. The reconciliation of intercompany balances: is there hope?
  3. IFRS and local GAAP
  4. Statutory consolidation and reporting: unified consolidation
  5. Group structure
  6. Financial communication
  7. Impact of future technological changes on consolidation

Consolidation using a spreadsheet versus consolidation software

“I currently do my consolidations on a spreadsheet. When will it become necessary to invest […]

Download the white paper
Share this article :
Discover Sigma Conso Consolidation & Reporting
Sigma Conso Consolidation & Reporting is a consolidation software package which unifies statutory consolidation and management reporting to provide a single version of the truth. The software is multilingual, multi-standard and multi-currency to meet the needs of international groups. Web native, quick to implement and fully configurable by customers, it provides the lowest possible cost of ownership.
Recent articles
IFRS 16 timeline: which deadlines do you need to adhere to? IFRS 16 is compulsory […]
User Day Sigma Conso 2017 – Report On the 17th of October, Sigma Conso has […]
X