Consolidated Financial Statements – The Most Common Challenges and How to Overcome Them

Intercompany transactions, including the sale of goods between group companies, loans, dividends, intercompany receivables and payables, must be fully eliminated from the consolidated financial statements. The objective is simple: the financial statements should present the group as a single entity, so no internal transaction should increase either revenue or assets in the consolidated balance sheet.

In practice, this is one of the most challenging tasks. In groups with dozens of companies, the number of intercompany transactions can reach thousands each month. Differences in exchange rates used by the parties to the transaction, different posting dates, or manual balance matching using spreadsheets are a straightforward path to errors.

OneStream includes a built-in Intercompany Matching module. The system automatically compares the balances reported by both parties to the transaction, flags discrepancies, and generates elimination entries according to the configured logic, without manual intervention. The period close cannot move forward until all differences have been explained or approved by the responsible users.

From a process perspective, a good starting point is to maintain a standardized register of intercompany transactions and require all group companies to confirm their balances before the period close. Any differences that remain after the matching process should be escalated and resolved before the consolidation date, not afterwards.

Corporate groups, especially those that have grown through acquisitions, often operate several, and sometimes even a dozen, ERP systems in parallel. Each of them has its own chart of accounts, reporting structure, and data export formats. Before consolidation, all of this data must be mapped to a unified group chart of accounts.

Manually transferring and transforming data in spreadsheets is still the most common practice in smaller groups, and at the same time one of the main sources of errors and operational risk.

OneStream addresses this challenge through a data transformation layer built directly into the platform. Mappings between local charts of accounts and the group chart of accounts are configured once and then applied automatically every time data is loaded. When a new company joins the group (for example, through an acquisition), its financial data can be integrated into the existing consolidation model within weeks rather than months, without the need to modify the local ERP systems.

Groups operating in multiple countries must translate the financial data of their subsidiaries into the presentation currency of the consolidated financial statements. This task is more complex than it may seem. Different balance sheet items are translated using different exchange rates (the closing rate for assets and liabilities, the historical rate for equity, and the average rate for the income statement). Exchange differences resulting from the translation are recognised in equity as a separate item.

Errors in currency translation are among the issues most frequently identified by auditors. They are usually caused by applying the wrong exchange rate to a specific balance sheet item or by failing to update exchange rate tables after a revision.

OneStream supports all required currency translation methods natively within its consolidation engine. Exchange rates are maintained centrally and applied automatically to the appropriate financial statement items, eliminating the risk of individual entities using incorrect exchange rate tables. Translation differences are calculated in real time and presented by entity, making verification and reconciliation before period-end close straightforward.

Some companies within the group may maintain their accounting records in accordance with local GAAP, while the consolidated financial statements are prepared under IFRS. The differences between these standards are significant and include, among others, the valuation of investment properties, lease accounting (IFRS 16 vs. local GAAP), the recognition of provisions, and the accounting treatment of financial instruments.

Before consolidation, each subsidiary must provide financial data adjusted to the group’s accounting policies. In practice, this means preparing consolidation reporting packages with the required adjustments. The more entities there are within the group, the greater the scale of this exercise.

OneStream enables the creation of interactive reporting packages that are accessible through a web browser, allowing subsidiaries to enter financial data and adjustments in accordance with the group’s accounting policies. The forms include built-in validation rules that immediately identify inconsistencies before the data is transferred to the central consolidation model. The entire process takes place within a single platform, without the need to exchange files by email.

It is also essential to prepare detailed instructions for the consolidation reporting package, including standard adjustment templates and clear guidance on the required accounting adjustments. Internal training for the finance teams of subsidiaries, together with regular reviews of the group’s accounting policies, helps maintain data consistency throughout the year.

The time available to complete the consolidated financial statements is often measured in days. Investors, management boards, auditors, and regulators expect results quickly, while consolidation processes based on spreadsheets exchanged between employees via email are highly susceptible to version control issues, data overwrites, and simple mistakes made under time pressure.

Industry reports indicate that most finance departments still rely on spreadsheets for financial reporting processes, despite being aware of the risks associated with this approach. The main barriers to change are habit and the perceived cost of implementing EPM/CPM solutions.

OneStream offers a built-in Task Manager module that enables organizations to define a closing schedule with clear responsibilities, monitor progress in real time, and escalate delays. The consolidation manager can easily identify which entities have submitted their data, which are awaiting approval, and which have reported discrepancies, making it possible to respond proactively before an issue delays the entire consolidation process.

Consolidated financial statements are subject to statutory audit and must comply with regulatory requirements which, depending on the parent company, include company law, local accounting regulations, IFRS, and, for listed companies, additional requirements imposed by financial regulators and EU transparency directives. Auditors expect the entire process to be fully documented, including the source of every figure, who approved it, and what adjustments were made.

In manual, spreadsheet-based processes, reconstructing the audit trail is extremely difficult. Missing documentation for consolidation adjustments or the inability to explain the origin of a specific figure are among the most common audit findings.

OneStream records a complete audit trail for every operation performed during the consolidation process, including eliminations, adjustments, currency translations, and approvals. Its integrated workflow enables organizations to define a multi-level approval process while automatically recording every user action. The platform is designed to support compliance with SOX, IFRS, and US GAAP, significantly simplifying collaboration with external auditors.

From a process perspective, it is good practice to maintain a log of all consolidation adjustments, including the author, date, and justification for each change. Any adjustments made after the initial close should be recorded as separate journal entries rather than overwriting the original source data.

All of the challenges described above are interconnected rather than independent. Inconsistent source data makes intercompany eliminations more difficult. Time pressure often results in adjustments being made without proper documentation. Without a centralised solution, every new issue tends to be resolved on an ad hoc basis in spreadsheets.

The path to an efficient consolidation process requires progress on two parallel fronts: processes and technology. From a process perspective, the key priorities are standardised reporting packages, a unified group chart of accounts, and a detailed closing schedule with clearly defined responsibilities. From a technology perspective, organisations need a dedicated consolidation platform that integrates data from multiple sources, automates eliminations and currency translation, and provides both auditors and management with complete visibility into the consolidation process.

OneStream stands out thanks to its unified architecture. Data integration, reporting packages, consolidation, close process management, and reporting all operate within a single platform, eliminating the need to combine multiple separate products. The result is not only a shorter financial close cycle but, more importantly, a higher level of confidence in financial data – both within the organisation and externally.