History of consolidation: The 1980s, the beginnings of the computer age
The inconvenience of consolidation work and the late schedule couldn’t remain in place for long. There were still no PCs at the beginning of the 1980s, but some computer companies, forerunners of future software vendors, took on the challenge and began to provide solutions.
The largest groups quickly showed an interest in the new software. It isn’t hard to understand why! One software company came to the forefront in France in the early 1980s with its COMFI software (COnsolidation Modulaire et FInancière). Two functions stood out. On one hand, its concept of modularity covered the current “Segment Information” required by current IFRS standards when a group is active in different fields. On the other, the innovative software ran on a Singer mini-computer, the well-known sewing machine manufacturer of the time…
While the functionality of COMFI quickly won over large groups, technical support was a major concern. It wasn’t long before the software was completely rewritten in COBOL to run on an IBM 370 mainframe at service bureaus.
This was a significant step forward for the groups at the time. They now had software that handled all of the calculations inherent to consolidation. What is more, it was possible to enter adjustments online via terminals. So everything was perfect? Not really. The working method of service bureaus at the time consisted in collecting information during the day, processing it at night and sending the printed documents early the following day by taxi or courier.
In practice, a last adjustment sent at 10 in the morning had to wait for the arrival of several kilos of paper (listings) the next morning in which the consolidator sometimes noticed that the debits and credits for an adjustment had to be inverted!
It wasn’t until 1985-1986 that the first consolidation software for the PC made its appearance. This was a real gamble given that the PC XT had 64 K of RAM and used 360 Kb diskettes. It was quickly followed by the PC AT with the first hard drive (30 Mb). They were incredibly more powerful!
The software of this decade already included the concepts of flows. Traditional currency conversions and eliminations were handled correctly. However, functionality to easily document consolidated shareholders’ equity and the cash flow statement had obvious shortcomings or were missing altogether. It should be noted that the learning curve was far from being met at the time and many auditors had to finish the technical work themselves.
One other significant shortcoming was the lack of a consolidation bundle integrated with the software. The technology available didn’t allow for it yet and groups created paper bundles which they sent to their companies. The bundles were often close to a hundred pages long.
Their use was inconvenient in several ways. First, the large documents weren’t personalised with the numbers of each company, making justification of the figures sent for the previous consolidation somewhat precarious. Next, if entries were made by hand, the inclusion of the items in the consolidation software also required manual entry. Lastly, the intrinsic inconsistencies between the bundle tables weren’t detected at source, but only much too late at the consolidating company level, without any real possibility of getting a quick correction. Email exchanges were not yet available.
While consolidation software was a great improvement over pencil and eraser, poor data quality and drawn-out schedules were challenges for the following years.