Consolidation Mechanics
A complete numerical walkthrough of multi-entity group consolidation: foreign currency translation, CTA generation, intercompany eliminations, and Non-Controlling Interest — the processes Exasum automates for you.
The Group Structure
A US-based parent (reporting in USD) holds two foreign investments:
UK Participation
German Subsidiary
| Rate Type | EUR / USD | GBP / USD |
|---|---|---|
| Opening (Jan 1) | 1.05 | 1.20 |
| Average (Full Year) | 1.10 | 1.25 |
| Closing (Dec 31) | 1.15 | 1.30 |
| Historical (at Acquisition) | 1.00 | 1.20 |
15% UK Participation — Revaluation
At 15% ownership with no significant influence, the UK investment is not consolidated line-by-line. It appears as a single asset on the Parent's balance sheet, measured at Fair Value and retranslated at each reporting date.
| Item | GBP | Rate | USD |
|---|---|---|---|
| Original Investment | £ 1,000 | 1.20 | $ 1,200 |
| Year-End Fair Value | £ 1,000 | 1.30 | $ 1,300 |
| FX Gain (Revaluation) | $ 100 |
UK Sub declares a total dividend of £100. Parent's 15% share = £15, translated at the average rate.
| Item | GBP | Rate | USD |
|---|---|---|---|
| Dividend (15% share) | £ 15 | 1.25 | $ 18.75 |
80% German Sub — Currency Translation & CTA
For the 80% subsidiary, we perform Full Consolidation: translate 100% of the subsidiary's trial balance from EUR to USD, then split ownership between Parent (80%) and NCI (20%).
| Account | EUR |
|---|---|
| Cash | € 5,000 |
| Inventory | € 2,000 |
| Intercompany AP (to Parent) | (€ 1,000) |
| Share Capital | (€ 2,000) |
| Retained Earnings (Opening) | (€ 1,000) |
| Revenue | (€ 10,000) |
| COGS | € 6,000 |
| Operating Expenses | € 1,000 |
Balance sheet items at closing rate, P&L at average rate, equity at historical rate.
| Account | EUR | Rate Type | USD |
|---|---|---|---|
| Cash | € 5,000 | Closing (1.15) | $ 5,750 |
| Inventory | € 2,000 | Closing (1.15) | $ 2,300 |
| Intercompany AP | (€ 1,000) | Closing (1.15) | ($ 1,150) |
| Net Assets | € 6,000 | $ 6,900 | |
| Share Capital | (€ 2,000) | Historical (1.00) | ($ 2,000) |
| Retained Earnings | (€ 1,000) | Opening (1.05) | ($ 1,050) |
| Revenue | (€ 10,000) | Average (1.10) | ($ 11,000) |
| COGS | € 6,000 | Average (1.10) | $ 6,600 |
| Opex | € 1,000 | Average (1.10) | $ 1,100 |
| Equity + P&L | € 6,000 | $ 6,350 |
The $550 arises because net assets grew in USD value purely due to the EUR strengthening from 1.05/1.10 up to 1.15. This is recorded in OCI within shareholder equity.
Intercompany Eliminations
The US Parent sold goods to the German Sub during the year. From a group perspective, this is an internal transfer — not real revenue. These transactions must be completely eliminated.
Parent holds a $1,150 receivable; Sub holds a $1,150 payable. From the group's perspective, you can't owe yourself money.
The $2,000 sale never happened from the group's viewpoint. Additionally, 50% of the goods are still in inventory, carrying $250 of internal markup that must be stripped out.
Non-Controlling Interest (NCI)
The Parent owns 80%, so 20% belongs to external minority shareholders. We must carve out their proportional share of every equity line item.
| Component | 100% Amount | NCI (20%) |
|---|---|---|
| Share of Net Income | $ 3,300 | $ 660 |
| Share of CTA | $ 550 | $ 110 |
| Share of Historical Equity | $ 3,050 | $ 610 |
| Total NCI on Balance Sheet | $ 1,380 |