Record to report / R2R – General Accounting – Consolidations

So you saw various steps / activities in an accrual back office process.

Another interesting process, very close to the CFO’s operations is Consolidation. For big companies, having a large number of offices, especially spread around the globe, this becomes a colossal activity for the CFO’s office. Most of the large companies today have grown by acquisition, and a very small percentage of these have actually migrated the acquired company to its own ERP / Accounting systems. There are legacy systems, which are difficult or very expensive to migrate. Thus the onus for building a common set of accounting statements actually falls on the CFO organization.

I had done a due diligence on a media major six years back, spread across the world, and this entity had as many as two hundred and twenty five legacy systems. The expectation was to move some accounting functions to the back office, work with the ERP groups to migrate them on a common platform, and also each quarter / year, build procedures for consolidation of individual unit accounts to reflect in the larger organization, as they needed to publish their accounts as per US laws, as per IFRS in Europe, they had the Indian compliances, the Chinese requirements were stringent and rigid, and not to mention South Africa and other countries as well.

After six years, only about 30% of those legacy systems have actually migrated, and the offshore unit strongly has built a wrapper application to collate the information from these, which still needs a lot of manual intervention and correction.

So you can imagine how large an engagement of this nature can be.

Next post I will talk of various challenges, which make this difficult to handle.


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