How does Multi-Company Consolidation Work?

This article is a step-by-step guide as to consolidating Companies or other Entities into a higher level Company.

Written By Grainne Reidy (Super Administrator)

Updated at September 14th, 2022

Introduction

Setting up Multi-Company Consolidation and Inter-Company postings can initially be a complex process. However, once implemented, processing is straight-forward.

Administration

There are several Administration System Layers: 

  • Practice, Franchise, or Corporate Administration Layer: This layer contains Multi-Company Consolidation.  It is primarily for Group Companies or Franchise Holders with several Subsidiaries or Entities, who require Consolidation at Group Company level. 
  • Other Administration System Layers: These layers are for Accountancy Practices or Franchisors with multiple Clients. They contain additional features and functions which are tailored to a particular Practice's management of its Clients. 

Why single companies set up multiple entities

The Practice, Franchise, or Corporate Administration Layer is Multi-Entity. A single Company can operate multiple entities, such as Locations, Branches, or Divisions, and treat them as if they were from separate companies. Although they could use Analysis Groups and Codes in the standard system, setting up discrete entities allows the use of individual sets of ledgers. A company can then consolidate these ledgers using Multi-Company/Multi-Entity Consolidation.

Example

In this example Group Company, RenuMe Spa Holdings Limited is the consolidating entity for three Subsidiary Companies:

  • RenuMe Spa Products Bristol
  • RenuMe Spa Products Leeds
  • RenuMe Spa Products Norwich



All three Subsidiary Companies plus the Holding Company must be set up in the System. The Holding Company must be set up in the Base Reporting Currency, regardless of the Base Currencies of the Subsidiaries. The subsidiary Companies can operate and report in their areas in the local currency. They can then be consolidated into the Holding Company which can report in a different currency.

See:

 Consolidation Overview (12.0) - AIQ Academy

Consolidation Group Setup (12.1) - AIQ Academy

How to run the consolidation process in AccountsIQ (12.2) - AIQ Academy

Consolidated Reporting (12.3) - AIQ Academy

GL Group Data Management (12.4) - AIQ Academy

How do I Set Up a New Company or Corporate Entity?‍ 
How do I Implement Extended Business Analysis?‍ 
How does the Practice/Group/Franchise Administration System Work? ‍ 
How do I use the Client Administration facilities to add Users and Control their Access Permissions? ‍ 

Delete

Pre-requisites

Note the following rules:

  • The list of General Ledger Categories (for example, Operating Revenues, Direct Costs, and Current Assets) and the General Ledger Sub Categories (for example, Payroll Liabilities, Facility Costs, and Capital & Equity) must be common across all the Subsidiary companies and the Holding company. If you use a General Ledger Code in more than one subsidiary, it must have the same Description in all. 
  • The Accounting Year Ends must be coterminous, and the Accounting Periods must have the same Calendar structure.
  • If you use Extended Business Analysis, then there should be a commonality of Dimensions and Elements across all subsidiaries and the Parent company. For the highest and intermediate levels in a multi-level consolidation, in the Consolidation Manager, under Consolidation Options, tick Centrally Manage Dimensions and Elements. This ensures that Dimensions and their Elements can only be created at the highest Consolidation level. All subsidiary companies will automatically inherit them, including any intermediate Holding companies. 
  • If you use Extended Business Analysis, it is not necessary to replicate BI-Codes across all subsidiaries. However, if more than one subsidiary uses a particular BI-Code, the BI code must have the exact same parentage in terms of Dimensions and Elements and the same Description. If not already present the Holding Company will automatically generate these BI-Codes.
  • The Holding Company must have the Base Currency of every subsidiary set up in its currency table.
Delete

Setting up the Consolidation Group Company

  1. Using Administrative Privileges, log into the Group Portal. 
  2. Click Consolidation Manager to open it.
  1. Under Entity Groups, select the holding company and click Create New Group.  
  2. In the Setup tab, enter the full name of the Group Company, select the Group Company Consolidation Entity from the dropdown, and add any relevant notes. 
  3.  To nominate the individual subsidiaries of the Group Holding Company, click Add New Entity to Group
  1. From the dropdown, select the subsidiary Companies you want to include in the Consolidation process. Enter the percentage ownership of the Subsidiary by the Parent Company and select the period that this ownership applies. 
  2. Click Save.  
  3. Repeat the process for each subsidiary.

Graphical user interface, text

Description automatically generated

  1. Under Consolidation Options, tick any that apply:
  • Consolidate General Ledger:   Tick if you want to consolidate the subsidiary General Ledger data into the Group Company. It is important that the General Ledger Categories and the General Ledger Sub-Categories match each other across all subsidiaries and parent. Otherwise, the Consolidation process will not function properly. However, it is not necessary to ensure compatibility at the basic GL Code level. This allows for differing Charts of Accounts in the subsidiaries, provided they quote a common set of GL Categories and Sub-Categories.
  • Consolidate Sales & Purchases:  Tick to consolidate the Sales and Purchase data into the Group Company. This will facilitate the production of Sales and Purchase Analysis Reports at Group level.
  • Consolidate Statistical Data: Tick to consolidate Statistical Data up to the Parent Company.
  • Centrally Manage Dimensions and Elements:  If you use Business Intelligence, tick to ensure that Dimensions and Elements can only be set up in the top Consolidation Group.
  1. Click Consolidate.
Delete

Example: Consolidating Companies with a single Base Currency

In this example the three subsidiary companies all have the same Base Currency; Sterling. They can deal with foreign currencies in their own operating environment but must convert to the base currency of Sterling for consolidation. 

  1. Set up the consolidation group company as outlined in the previous section. 
  2. The system will now run through a verification process. If there are inconsistencies, they will appear on screen. Click View Details

  1. Analyse the inconsistencies. There are four BI-Code inconsistencies in this Consolidation. The BI-Code Description is slightly different in a few instances. Normally these inconsistencies only occur the first time you run the verification process as, once corrected, they shouldn’t re-occur. If there are several anomalies, you can click Print Errors to produce a hard copy report.
  1. When you have rectified these issues, you should re-run the Consolidate process.

  1. Wait for the consolidation process to complete. Depending on volume this can take time. On completion, a confirmation message will appear. Click Close.
  1. You can run the Consolidation process as frequently as you like during a Period. 
     
Delete

Info

This process consolidates transactions in all prior open periods. Be careful with Back Posting and the Close Off of Periods. For example, you can Consolidate, Report, and Publish Profit and Loss and Balance Sheets in the Consolidating entity while the Subsidiary Companies continue to post into a Prior Open Period in their Ledgers. This can lead to inconsistencies between the Local and Central Reports. 

  1. You can now run reports such as the Consolidated Profit & Loss Split by Subsidiary (Summarised by GL Sub-Category).
Delete

Example: Consolidating Companies with Different Base Currencies

Delete

Info

AIQ recommends that, prior to Consolidation, each Subsidiary Company undergoes a Foreign Exchange Revaluation. 

To do this:

Log into the Subsidiary. Go to General > GL Journals > Foreign Exchange Revaluation Journal to calculate and post Realised and Un-Realised Currency Gains and Losses in each Subsidiary. 


In this example, four subsidiary companies (Australia, France, Italy, and USA) have different base Currencies. The Group Company has Sterling as its Base and Reporting Currency.

 

View subsidiary currencies

  1. Log into the Group Portal. 
  2. Click Consolidation Manager to open it. 
  3. Under Entity Groups, select the International Holding Company. 
  4. To view the currencies used, open the Exchange Rates tab.

Set up subsidiary base currencies in the holding company

  1. Log into the Holding Company. 
  2. Go to Setup > Codes Maintenance > Currencies

  1. Set up each of the Subsidiary Base Currencies in the Currency Table.

Edit subsidiary currencies exchange rates

  1. Log into the Group Portal. 
  2. Click Consolidation Manager to open it. 
  3. Go to the Exchange Rates tab. If any of the subsidiary Base Currencies have not been set up in the Holding Company Currency Table, they will not appear.

  1. Click Edit next to a subsidiary entity. The Rate of Exchange is 1 unit of Group Company Currency = xx.xxxxxx units of Subsidiary Company Currency. 
  • P&L Avg. Period Rate: Enter this against the Base Currency of the Group Holding Company. It will be used in the calculation of Period Profit and Loss Reports.
  • Bal. Sheet Period End Rate: Enter this against the Base Currency of the Group Holding Company. It will be used in translating Balance Sheets into the Group Base Currency.
  • Budget Rates, Revised Budget Rates: Enter if using budgets. Budgets are consolidated automatically by consolidation routine. This allows you to prepare more accurate consolidated group budgets and revised budgets at a pre-defined exchange rate including forecasted future rates. You can also prepare monthly consolidated budgets at the same rate to ensure consistency. 
    If you do not use budgets, these will default to the P&L Avg. Rate for the same period. These rates will only be used when consolidating budgets. They are not used when consolidating Actuals. 
  1. Click Update and proceed with the consolidation process as outlined previously.

See:

How do the Multi-Currency Features of the System Work?‍ 

Delete

Example: Multi-Level Consolidation of Group Companies and Subsidiaries

After basic level Consolidation, you can further consolidate Group Companies into higher level Group Companies (along with further un-consolidated subsidiaries as if required). 


To do this, RenuMe Spa Products Great Britain is used to consolidate:

  • RenuMe Spa Products Holdings (Consolidating Bristol, Leeds, Norwich, and Glasgow)
  • RenuMe Spa Products International Limited (Consolidating Australia, France, Italy, and USA).

 

 

Delete

Info

You cannot include a subsidiary company if it is already part of another consolidation.

  1. Consolidate all entities at a lower level in the hierarchy first; RenuMe Spa Products Holdings, then RenuMe Spa Products International. Do this in the same manner as the previous single-currency example, resolving any inconsistencies.  
  2. Use RenuMe Spa Products – Great Britain to consolidate RenuMe Spa Products Holdings and RenuMe Spa Products International.
  3. After Consolidation you can log into the RenuMe Spa Products - Great Britain Holding Company to create Reports.

Delete

Manage Currencies at Group Level

  1.  Log into the Group Portal. 
  2. Click Consolidation Manager to open it. 
  3. Under Consolidation Options, tick Manage Currencies at Group Level to centrally manage and control the daily Exchange Rates used by all Companies across the Group. This lets you maintain the Exchange Rates in the Group Currency Exchange Rate Table, download, and enforce them for all the Subsidiary Currency Tables.  
  4. Click Save.

 

 

Delete

Info

Only Currencies that are set up in the Group Consolidation Entity Tables are controlled centrally. There is still scope for Subsidiaries to set up and maintain other Currencies for Local Trading. If they do they should perform a Currency Revaluation before Consolidation. This ensures that non-centrally controlled currencies are converted at the latest exchange rate into the Base Currency of the Subsidiary before being consolidated at Group level. 

Update the Exchange Rates manually

Update the exchange rates manually in the Group Currency Table:

  1. Log into the group.  
  2. Go to Setup > Codes Maintenance > Currencies
  3. Update the details.

Update the Exchange Rates using TransferMate

  1. Log into the Group Portal. 
  2. Go to Group Management > Edit Group Users.
  3. Click the appropriate Group User Name.  
  4. In Edit Practice User, tick User can update Exchange Rates Across Consolidation Groups

Graphical user interface, text, application, email

Description automatically generated

  1. To access this facility, in the Group Portal, go to the relevant consolidating entity. Under Actions, select Update Exchange Rates Across Group

  1. In the screen that appears, edit the System Rates individually and click Update to Latest Rate. Alternatively click Update All to Latest Rates.

Example: Effects of updating Exchange Rates at Group level

When you update an Exchange Rate in this Group Currency Table, such as Sterling to Euro (Sterling being the Consolidation Group Company Base Currency in this example), it will not just change the STG/EUR Rate in all Subsidiaries.


Exchange rates are interdependent so any subsequent change in the relationship between £ Sterling and € Euro will impact the $ Dollar to € Euro relationship. In this example:

  • 1 £ Sterling = 1.25 € Euro
  • 1 £ Sterling = 1.55 $ Dollar
  • 1 $ Dollar = 0.80645 € Euro

Similar changes in the relationship between Sterling and the other Base Currencies will also cause modifications to ripple through other inter-currency relationships.


A Group Company Currency Table before and after exchange rate changes to the AUS Dollar:

Australian Subsidiary Company Currency Table before and after exchange rate change to the AUD Dollar in the consolidating company:

Managing exchange rates centrally

Normally, you should maintain Base Currencies centrally before setting up of the system. If this is not the case, you should be aware that in the Consolidation Manager:

  • Only ticking Manage Currencies at Group Level will not mean that the Currencies and Exchange Rates will flow upwards from the Currency Table of the Subsidiary Companies into the Group Exchange Currency Table. 
  • In the Consolidation Exchange Rates tab, you must manually enter the Currencies and Exchange Rates together with the P&L Avg. Period Rate and the Bal. Sheet Period End Rates (both Current and Historical) centrally for each Currency.

See:

How do the Multi-Currency Features of the System Work?‍ 

 

Delete

Manage Dimensions and BI-Codes at Group Level

If you want to centrally manage and control Hierarchical Extended Business Analysis centrally from the Group:

  • In the Consolidation Manager, under Consolidation Options, tick Manage Dimensions and BI-Codes at Group Level 

Now you can only maintain Dimensions and their Elements in the highest level Group Consolidation Company. The Subsidiary Companies will be denied access to the Setup and Revision of these Tables. However, the subsidiary companies still have control over the BI-Codes they wish to set up in their own company. If a BI-Code is set up in more than one Company, then its Parentage and Descriptions must be consistent throughout.


After Consolidation, any Extended Business Analysis Reports for the Group Company will be in the Group Currency. This means if you report on a Subsidiary Company, it will be in the Base Currency of the Group. However, the same Report in the Subsidiary Company will use its own Base Currency.

Delete