Definition
Financial consolidation combines the accounts of a parent company and its subsidiaries into one set of group figures, as if they were a single business.
What is financial consolidation, step by step?
Consolidation adds up each entity’s balances by account, translates foreign-currency entities into the group currency and removes transactions and balances between group companies, through intercompany elimination, so internal sales don’t inflate the totals. Where the parent owns less than 100%, the outside owners’ share is shown as non-controlling interest.
Example: a family group combines its UAE trading company (in AED) and its Saudi distributor (in SAR) into one AED view at month-end.
Done in spreadsheets, it can take days and is error-prone. See running a UAE and a Saudi company in one system.