When a company owns multiple entities, you don’t want to look at ten separate sets of financials just to understand how the business is doing. That’s why consolidated financial statements exist.
Consolidated financial statements give you a single version of the truth, across all entities. Instead of reviewing separate reports for each subsidiary, group finance teams can see the full picture in one place: assets, liabilities, revenue, expenses, and cash flow.
For public companies, consolidation is a regulatory requirement. But even in private groups, clean consolidated financials are essential for investor reporting, audit readiness, and internal decision-making.
In this article, we’ll walk through how to prepare consolidated financial statements step by step, what you need, what usually slows teams down, and how to make the process more accurate and efficient.
Read more: Financial Consolidation: Definition, Challenges & Solutions
What You Need Before You Start
Consolidation isn’t just about merging numbers, it’s about accuracy, compliance, and control over the full group picture. As PwC points out in their IPO readiness roadmap, companies preparing for public-company standards benefit most from consolidation systems that automate controls across GAAP, XBRL, and management reporting. But even for private groups, that level of control pays off in audit readiness and process efficiency.
When each entity submits data in its own format, with different charts of accounts, unclear intercompany logic, and untagged FX transactions, group finance ends up spending more time cleaning than consolidating.
Here’s what you need in place before you begin:
- A clear list of all entities to consolidate
Know exactly which companies are included, how they’re structured, and what ownership rules apply. - Aligned chart of accounts
If each entity uses its own structure, you’ll need to map everything to a group-level chart. Without this, you’ll waste days translating accounts manually. - Clean trial balances
Trial balances from each entity should be accurate, complete, and adjusted, no open items, no missing entries. - Agreed intercompany rules
You need a clear method for identifying, matching, and eliminating intercompany transactions. Ideally, these are tagged and tracked from the start. - Currency translation approach
If your group includes entities in different countries, you need to define FX rates and a consistent approach (spot, average, or closing rates). - Defined ownership and consolidation method
For each entity: are you fully consolidating, proportionally consolidating, or using the equity method? This decision affects how you report income and assets. - Deadlines and workflow
Everyone involved, from local accountants to group finance, needs to know when to submit data, how to handle changes, and who signs off.
Skipping prep is what turns a 2-day job into a 2-week clean-up. A few upfront steps save hours later.
Consolidated Financial Statements: Step by Step
Once you’ve locked in your group structure, mapped accounts, and collected clean data, the actual consolidation process begins. Here’s how to prepare consolidated financial statements:
1. Collect trial balances from all entities
Start with finalized, post-closing trial balances. These should already include local adjustments and reflect each entity’s final monthly or quarterly position. Partial or draft files create downstream issues, so don’t start until these are locked.
2. Translate foreign currency balances (if needed)
Convert foreign subsidiary balances into your group’s reporting currency.
Typically:
- Use average rates for P&L items
- Use closing rates for balance sheet items
- Set a standard approach and document it, especially if auditors are involved.
3. Map accounts to the group chart
Each entity’s local chart of accounts needs to be mapped to your consolidated COA. If this isn’t already standardized, you’ll need a clear mapping table. This is usually where the first major delays happen, and why standardization saves time.
4. Eliminate intercompany activity
Remove internal receivables/payables, sales/purchases, loans, interest, and dividends between group entities. These transactions don’t exist at group level and will distort your results if not eliminated cleanly.
Flag any mismatches, they’re often signs of data entry errors.
5. Apply ownership structure
If your parent doesn’t own 100% of an entity, adjust for minority interest.
- Full consolidation: Include 100% of financials, then reduce net income/equity for the non-controlling interest.
- Equity method: Only report your share of the net income, not full assets or liabilities.
As outlined in KPMG’s Consolidation Handbook, ownership structure and the choice of consolidation method have a direct impact on your reported financials, and mistakes here are a common source of audit findings.
6. Post group-level adjustments
Add consolidation journal entries, like group accruals, reclassifications, or audit-driven corrections. These are often made at the holding level and must be tracked separately from local books.
7. Review, reconcile, and validate
Check that:
- The consolidated balance sheet balances
- All eliminations are complete
- FX effects and ownership logic are correctly applied
- There are no unexplained variances from the prior period
This is your final gate before reporting to management, auditors, or external stakeholders.
Pro tip: Build a standard checklist for your consolidation. The goal isn’t just accuracy, it’s repeatability. That’s what makes monthly and quarterly closes faster over time.
Where Time Gets Wasted, and When Excel Starts Breaking
Even when the consolidation process is well-defined, it often takes longer than it should. Here’s where most teams lose time, and what that looks like in practice:
- Late or incomplete submissions
Trial balances arrive late or missing key entries. Group Finance ends up chasing files and plugging gaps last-minute.
Fix: Set hard deadlines. Use a workflow or checklist so everyone knows what’s due and when. - Manual intercompany eliminations
Matching entries in Excel works, until you’re dealing with five or more entities. Then it becomes a full-time job.
Fix: automate matching. Tag intercompany transactions at entry level to avoid clean-up later. According to the State of Finance 2026 report by Farseer, 38% of finance leaders say data alignment and intercompany reconciliation remain their biggest consolidation challenges, showing that even experienced teams struggle when processes rely on manual spreadsheets. - Manual chart mapping
If each subsidiary has a unique chart of accounts, you’ll spend hours aligning accounts before consolidation even starts.
Fix: Create a group-level mapping file or align COA structures during ERP upgrades. - No version control
Numbers change, files are emailed around, and nobody knows which version is final.
Fix: Work in a shared environment with traceable data and audit trails.
As HFS Research highlights, data inconsistency and manual reconciliations are key bottlenecks in the group close process. - You don’t trust your own numbers
When multiple “truths” live in disconnected Excel files, reconciliation takes longer than reporting, and confidence disappears. - You’re always behind or cutting corners
If meeting deadlines means skipping reviews or posting late adjustments, the process isn’t just slow, it’s risky.
Download our free Dynamic Menu Reporting Template to streamline Excel reports and simplify entity-level data review – no macros, no broken links, just cleaner inputs before consolidation.
Excel is fine until you need speed, scale, or audit reliability. The best teams don’t get faster by working harder, they reduce friction, clean their inputs, and automate what doesn’t need to be manual.
Get the process right first, then scale it with the right tools
Switching from Excel to a dedicated consolidation tool might seem like a big step, but it’s much easier if your process is already under control. According to KPMG, 90% of finance leaders see value in automating group financial reporting, yet many still rely on spreadsheets, limiting the impact of any automation efforts.
Start by standardizing inputs, align charts of accounts, use consistent trial balance formats, and define how you handle eliminations, FX translation, and ownership. Tools like Farseer can automate all of this, but only if the logic is clear.
Keep in mind to document your current process, it doesn’t have to be perfect, just consistent. That’s what makes automation work, and makes the entire consolidation process faster and more reliable.
And with finance teams moving fast in this direction, the risk of falling behind is real. As Gartner reports, 58% of finance functions were already using AI in 2024, a clear sign that automation is no longer optional, but expected.
Consolidated financial statements are critical, but they don’t have to eat up your entire month. If your process still depends on spreadsheets, manual eliminations, and late-night fixes, it’s probably time to rethink it.
Đurđica Polimac is a former marketer turned product manager, passionate about building impactful SaaS products and fostering connections through compelling content.
