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What is the Difference Between Financial Consolidations and Consolidated Reporting?

What is the Difference Between Financial Consolidations and Consolidated Reporting?

A customer recently questioned whether or not we would be doing consolidations as part of our implementation. I had previously mentioned that consolidations were not in scope. My customer then explained that nearly all of their entities (companies) rolled up into one overall reporting entity. Surely we were doing a consolidation. It was a fair question and a very common one.

Consolidated vs. Consolidation

Financial experts at all levels of the organization often use the terms Consolidated and Consolidation interchangeably when describing how they bring together their disparate entities for board reporting concerns. However, in context they can mean very different things.

Consolidation

Consolidation,in the Host Analytics world, refers to the collection of international multi-entity concerns with completely differing structures, currencies, fiscal years, charts of accounts, accounting structures, laws, guidelines etc.  This “consolidation” definition does not fit the profile of many US organizations, even as the word consolidation is bandied about.

Consolidated

Those organizations that have a singular currency, one chart of accounts across entities, share the same fiscal year, and are primarily governed by the same laws and guidelines, i.e. most U.S. Companies, generally have their reporting Consolidated.

So, when our clients collect their data from across entities in very similar constructs and roll them up (summarize them) in a hierarchical fashion through reporting and budgeting they are performing what is known as Consolidated Reporting and not a true Financial Consolidation.

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