Consolidation is not to be feared

When a company expands, whether by establishing new subsidiaries or through the acquisition of a competitor, sooner or later it will encounter consolidation. Consolidation is an essential accounting process that involves aggregating the financial data of parent and subsidiary companies, or the consolidation group (hereinafter referred to as "the group"), as if they were one large company.
Consolidated reporting isn’t only necessary for annual reports and financial audit. It's advisable to periodically review the consolidated data of a group in order to get a clearer overview of the entire business and make better management decisions.

The obligation to consolidate is derived from the Accounting Act, and the law also provides exceptions to which this obligation does not extend. For example, in a situation where more than 90% of an Estonian company belongs to a Polish parent company and the data of the Estonian company and its subsidiaries are consolidated in Poland, the Estonian entity is exempt from consolidation in Estonia.

 

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Why should one consolidate?

Even when not legally mandated, a company may voluntarily consolidate its financial data. Consolidated statements offer a clearer and more transparent overview of a group’s financial data, potentially attracting investor interest in your company. This is because the report reflects only the transactions conducted with third parties, showcasing the company's independent and autonomous economic activities.

Consolidation can be time-consuming because compiling unified reports requires collecting and processing a large volume of financial data from various sources and often from different accounting software, where the original accounting setup might not have been done on the same basis. Additionally, a multi-tiered group structure and a large number of group entities can further complicate consolidation. Considering the very unique and specific transactions that can be made within a group, this requires considerable prior experience and good theoretical knowledge from the accountant or financial manager.

We do time-consuming and complicated consolidation for you

At Grant Thornton Baltic we have accountants and financial advisors with extensive experience in organising and streamlining the accounting of consolidation groups.

We can assist you in gathering the data necessary for consolidation, preparing consolidation tables, and making the consolidation process more efficient.

  • We compile consolidated financial statements based on information provided by the client.
  • We evaluate the company’s current consolidation process.
  • We assist with the preparation of a consolidated report as part of a financial audit.
  • We help set up systems that allow accountants to efficiently consolidate financial data on an ongoing basis.

 

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As per Section 29 of the Accounting Act, consolidation is not required for:

  1. A small consolidating entity where only one of the consolidated indicators on the balance sheet of an accounting year may exceed the following terms and conditions: total assets 4,000,000 euros, sales revenue 8,000,000 euros and average number of employees 50 persons.
  2. A consolidating entity whose consolidated indicators without the deduction of the mutual transactions are not larger than the balance sheet total and net turnover indicators of a small consolidation group plus 20%.
  3. A consolidating entity if the total amount of the balance sheet totals of each of the consolidated entities added together does not exceed 5 per cent of the balance sheet total of the consolidating entity and if its sales revenue does not exceed 5 per cent of the sales revenue of the consolidating entity.
  4. A company whose shares are fully or at least 90% owned by a consolidating entity registered in the European Union, which is required to prepare and publish the audited annual report of the consolidation group.

These are the most common examples of exceptions based on which a consolidated report does not have to be prepared. The complete list of exceptions is given in § 29 of the Accounting Act.

TESTIMONIAL

Professional and dedicated work

Our cooperation with Grant Thornton Baltic started in 2021, when I needed help in preparing a consolidated annual report and organizing the consolidation process. The Wildix group has 11 subsidiaries located in seven countries. The consolidation process is therefore complicated. Our accountants wouldn't have enough time for consolidation in addition to their daily work, and they don't have the experience.

With the help of Grant Thornton Baltic's accounting project manager Triinu Randmäe, we implemented new consolidation software and got the consolidation process in order. Triinu Randmäe brought with her exceptional professionalism, skill and dedication, which were clearly noticeable at every stage of the work. Her attention to detail, thoroughness and open communication ensured that the entire process ran smoothly and efficiently. Thanks to her diligent work, our annual reports are clear, accurate and representative. We are truly happy and grateful to have been able to work with such a great specialist.

This experience confirmed to us that the decision to choose Grant Thornton Baltic as a partner was the right one, because you are characterized by professionalism, quality, and willingness to give advice on very diverse topics. Our cooperation started in accounting, but later we have also asked for tax and legal advice, including labor relations, and every time we have received adequate and quick help. I commend your entire team for their quality work and look forward to our continued cooperation.

Andrei Katsuba
CFO of Wildix OÜ

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Related specialists

Gaily Kuusik
Gaily Kuusik
Partner, Head of Business Process...
Tallinn, Estonia
View full profile
Triinu Randmäe
Triinu Randmäe
Accounting project manager, sworn auditor
Tallinn, Estonia
View full profile
Artur Suits
Artur Suits
Partner in charge of advisory services
Tallinn, Estonia
View full profile

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