This article discusses various challenges faced by the corporate accounting at the company that controls other entities in preparing and presenting the Consolidated Financial Statements (CFS). Consolidation is performed according to different accounting standards, i.e., Indian AS, IFRS/IAS, US GAAP, and so on.

Most local accounting principles also require business segment reporting from companies listed on stock exchanges. These requirements may differ with each level in the hierarchy within a group of complex corporate structure. The office of the CFO have to perform several tasks with each merger or acquisition while dealing with the challenges of first consolidation.

The Companies Act makes it mandatory for holding companies to publish CFS  of subsidiaries. Presentation of CFS by the holding company is in addition to the mandatory presentation of its individual financial statements as the holding company. Companies, to which the provisions of the New Companies Act apply, are now increasingly controlling entities such as partnership firms, special purpose vehicles, variable interest entities, jointly controlled entities, associations, and others, which are non-corporate bodies and the responsibility for proper maintenance of records in such cases rests with that of the holding company.

It is imperative to quickly adjust plans and forecasts, close the books more quickly, help ensure compliance with regulatory and financial standards and get the information needed to make more secure decisions. This situation has created several challenges to the holding company in the exercise of consolidating the financial statements of the group entities.

Several holding companies control different types of entities for which they would not have published CFS, the new Companies Act makes it mandatory for such holding companies to perform consolidation for the first time. Under the new Companies act, those parent companies with their subsidiaries though existing for a long time, but were not consolidating until now, will have to consolidate and when they do, each one of them is going to carry out a ‘first consolidation’ task.