Consolidation: what is it?

Some companies are required by the Company Code to consolidate their annual accounts. But what exactly is consolidation? And to whom does the requirement apply?

More than simply adding up the annual accounts

Consolidation (or financial consolidation) is the accounting technique of aggregating the results of the parent company and its subsidiaries. The result is a profit and loss account and balance sheet as if it were one large company.

Consolidation is more than simply adding up all the items in the annual accounts. The receivables and operations between the various companies must also be eliminated.

The consolidated annual accounts must provide a true picture of:

  • The assets
  • The financial position
  • The profit or loss of the consolidated totality

This gives insight into the composition and size of the assets of the entire company.

Who is required to consolidate their accounts?

Any company with one or more subsidiaries is required to prepare consolidated annual accounts.

A group of companies under central management, without them being parent companies or subsidiaries of each other or subsidiaries of the same parent company, is also required to prepare consolidated annual accounts.

The law does allow for an exemption from consolidation for small groups. By small group is meant a group of companies that exceeds at most one of the following criteria on a consolidated basis:

  • Annual turnover (excl. VAT) of 29.2 million euro
  • Balance sheet total of  14.6 million euro
  • Annual average number of employees: 250 employees

Do you need to consolidate? Or simply want more information? Feel free to contact us. We consolidate the results of the parent company and subsidiaries, giving you a clear and orderly overview of the group's performance.