The Consolidation, Close and Reporting Conundrum - Part 2
November 24, 2021
Copyright 2021 - AMCO Solutions | www.amco.one
By Darshana Sanghavi
Managing Director APAC, AMCO Solutions
Consolidation today is no longer the aggregation of financials of two or more companies in the group. For many organizations, consolidation of financial statements has assumed complexities of immense proportions.
Let’s talk about the remaining challenge areas from the previous blog that revolve around consolidation and reporting.
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Complex ownership structures
The life of the Group Consolidation Manager will be made much easier if all companies are owned fully by the same entity. However, minority interests, associates, joint ventures or equity method are very common.
Business groups are constantly looking at how to maximize returns and create better synergies. Organizational restructuring is the new normal. Inorganic growth in many organizations is fast-paced, and new entities may be getting added at the rate of three to five a month.
One of our large customers moved from multiple applications for different business segments to a single application in OneStream. As of today, they have successfully moved the following in OneStream. To learn more about this customer, reach out to us HERE.
This is the 2nd post in a 2-part blog series. Click the link for Part 1
- Complex ownership structures
- Currency complexities
- Intercompany eliminations
- Top level consolidation adjustments
- Multiple reporting requirements
- 8 Business Unit (BU) Cubes and 1 Group Cube (consolidation numbers from all BU’s + additional adjustments)
- Approx. 1.000 Reporting Entities (incl. adjusting entities) placed around the world, and with a quite complex ownership setup
- Approx. 1.500 users
- More than 300 Financial Reports
Currency complexities
Multi-currency data creates issues that are intensified in the consolidation process. Finance teams will be familiar with complications associated with:
- Calculating and tracking currency translation adjustments (CTAs) across balance sheet line items
- Need for historical currency overrides
- Ability to view data of any entity in any currency
- Analyzing currency impact on actuals vs budgets/forecasts
In our practice, OneStream can address these challenges by ensuring that:
- the required currency exchange rates, including historical translations, are captured and tracked for items such as equity and reserves
- In-built logics ensure that CTA is calculated consistently
One really cool feature of OneStream, that is on the wish list of finance users, is dynamic currency translations.
Intercompany eliminations
For consolidation groups on multiple ERP systems, the tracking and elimination of intercompany balances can often be a heart-burning exercise. Many organizations have dedicated intercompany matching teams that spend anywhere between one to three weeks to identify and resolve intercompany issues.
At times, the entire process of intercompany eliminations is further complicated by:
Multiple reporting requirements
Detailed analysis of actual data, segmental analysis, statutory and managerial reporting requirements, GAAP reporting requirements, cash flow statement – the list goes on and on.
Depending on the business dimensions across which the data is gathered and the various KPIs used for monitoring the performance, reporting requirements are quite diverse and ever increasing. Variance analysis and comparisons between actuals and budgets/forecasts are always the need.
Some of the ways OneStream is uniquely positioned to better address reporting requirements along with a direct excel link are
- Large numbers of intercompany enabled accounts in financial statements, causing confusion among users on what amounts are to be reported where
- Incorrect grouping of intercompany accounts to identify and eliminate corresponding partner transactions
- Lack of standardization on how intercompany mismatches can be resolved
- Impact of currency on intercompany mismatches and the need to eliminate profits on such transactions
- Different reporting rollups such as legal, managerial, segmental, geographical
- Complex ownership patterns
Can we even imagine taking care of these requirements efficiently, accurately and on-time using spreadsheets? OneStream simplifies and automates intercompany transaction matching as well as tracking and elimination of intercompany balances.
Top-level consolidation adjustments
The move from standalone to consolidated financial statements leads to the need to track goodwill adjustments, investment changes and deferred tax impacts, to name a few. It is difficult to know the history of such top-level adjustments carried forward by referring to spreadsheets prepared 10 years ago.
Adjustments at Parent as well as Consolidated level adjustments are built into the workflow design, which works as a one-place working space for users.
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- Guided reporting
- Extensible document
- Analytical blend
- Transactional drill down
- Interactive dashboards
OneStream can capture all the required details to give the business
the ability to do a deep dive of the numbers and generate required reports.
Closing Thoughts
Streamlining and optimizing consolidation, close and reporting help companies further drive competitive advantage through timely, accurate and actionable information. In our experience, OneStream enhances financial stewardship to meet and exceed expectations of varied stakeholders.
As consultants, our job is not to pick up spreadsheets as is and move to OneStream but instead use OneStream’s capabilities to enrich spreadsheets by automation and standardization, giving more flexibility for future changes.
- Darshana