Consolidation of subsidiaries is completed through a sophisticated engine with configurable rules
Description
Consolidation of subsidiaries in Corporate Performance Management (CPM) software refers to the amalgamation of financial data from multiple subsidiary companies into the parent company's financial statements. This process requires a sophisticated engine with configurable rules to cater to different consolidation methods, legal requirements, and industry standards.
Example Use Case
Scenario: A global conglomerate operates numerous subsidiary companies worldwide, each with its unique set of financials. The conglomerate uses CPM software to track and maintain its group-wide financial performance.
Solution: With the aid of a sophisticated engine with configurable rules, the CPM software can aggregate and harmonize financial data from all subsidiaries, transforming them into consolidated financial reports for the parent company. This consolidation engine can be configured to follow various consolidation rules (like proportional consolidation or full consolidation), adhering to international accounting standards and the specific business needs of the conglomerate.
Considerations
This very broad requirement is intended to evaluate if a vendor has true financial consolidation functionality at all. Most products on the market are focused on planning, and only offer “consolidation” as a roll-up of data from the department level. That wouldn't include intercompany reconciliation, minority ownership calculations, varying account structures, varying dimensional structures, multi-currency, regulatory reporting and so on.
Questions to Ask a Vendor
- Financial Consolidation: Would you consider your offering a true financial consolidation platform, or is it simply rolling up values?
- Use Cases: Describe to us a financial consolidation use case that your product works well with. Do we fall into that? Also describe a use case that is not a fit for your product.
- Define Consolidation: When you say that your product offers consolidation, what exactly do you mean by that?