Record to report / R2R – General Accounting – Consolidations
Consolidations form a big and a critical process for the CFO’s office. You saw some critical challenges in this process, which make it complex.
So what is the process all about
- Each unit will need to send its trial balance and a draft final account set to the back office
- The back office should have a repository of all instructions, special treatment of foreign exchange differences, handling of in-transit losses, a mapping chart to equate the ledger account nomenclature differences, etc.
- All information received needs to be tabulated and verified with the previous period / corresponding previous period
- Any unusual trends to be investigated and informed to the CFO’s group
- Once all clarifications are closed, adjustment entries needed have to be given effect to in the consolidations and in the books for the related unit / head office
- Needless to say that all documentary evidence to be retained by the back office, which can prove the rationale for the adjustments
- Consolidations to be done in the client provided application / as agreed. For some smaller businesses, even MS Excel can be a good tool
- The results to be immediately shared with the CFO group
- All possible disclosures required by the legal structure applicable will need to be highlighted and documented in the relevant forms and shared with the CFO group.
This process will go through a multiple set of iterations, as based on the business knowledge and the board of director’s instructions, changes will surely be mandated. These may need discussion with auditors, and in some cases, approvals by the relevant taxation / compliance authorities.
Normally, since this is a periodic activity, a back office can use the same set of resources, who did the book closures. It is important that each team has a few subject matter / taxation / accounting experts, who can guide the team on critical points and can also act as the interface with the CFO group. These resources should be at a leadership level.
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