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When your entities are in different countries, things get more complicated.
Every government in the world wants to collect more tax. Companies go through consolidation because outsiders don’t care about all your inter-company back and forth.
Scaling Up to Multiple Systems On purpose, we’ve used a simplified example.
In reality, it’s rare to have such a simple situation.
Let’s explain how this works with an example of a growing company.
ACME makes and sells widgets to wholesalers around the country. And these retail stores are set up as a different legal entity.
Manufacturing charged the retail division .00 per widget. And while auditors who follow strict rules of independence shouldn’t be doing your consolidation for you, smaller accounting firms generally handle such things in the normal course of business. Excel When all else fails, use Excel – the accountant’s Swiss Army knife. If you only have a few entities and don’t have to consolidate statements very often, then Excel is fine.
In this post, we’ll cover the basics of consolidation, some of the challenges that emerge and possible solutions.Focusing on the income statement, let’s say (for absolute simplicity) that ACME sells 1000 widgets at a price of .00 each and a cost of .00 each. This creates more complexity because the manufacturing entity must “sell” widgets to the new retail entity.