Case Studies: Introduction of consolidation processes for a major software Group

Our client is a provider of software to the financial resources industry. The Group operates in the US, EU and the Far East. The Group had grown rapidly by acquisition and was struggling to comply with requirements to produce consolidated and subsidiary financial statements.

In March 2006, Paul Pascan was appointed by the client to investigate the current processes and to introduce formal procedures to perform and control the consolidation process and the production of consolidated and subsidiary financial statements.

Paul quickly identified the gaps in the current processes Including problems with ledger balances which had not been reconciled to earlier financial statements for many years.

Paul headed a project team comprising two client staff and an FD Solutions- contracted Financial Controller prior to the client recruiting their own person. The first step was to extract all current information available by individual company. Ledgers were examined for completeness and reconciled to prior-period financial statements. This ensured that a stable base for the preparation of management and statutory accounts. Group balances were reconciled.

We extracted the necessary information directly from source ledgers using ODBC functionality to ensure that clearly identified source information was used.

A consolidation data collection template was created for each subsidiary and for the various acquisitions. This was designed to collect and collate financial and relevant contractual information and to identify necessary fair-value adjustments.

Individual company figures were compiled in Excel then used as source information for a structured consolidation model building up through five sub-groups and automatically picking up currency adjustments. Each sub-group had an appropriate ‘eliminations’ template to deal with group trading, group balances, group statistics and fair-value/goodwill adjustments arising from acquisitions.

This process was strictly controlled and culminated in a consolidation model which provided full support for the consolidated financial statements prepared in Word. This controlled structure also enabled the Big Four auditor to quickly grasp the group structure and the key issues. All financial statements were agreed and filed, and penalties ceased.

The consolidation model and statutory financial statement processes were handed over to the client’s new team within an induction process. Ongoing advice and training was provided for a period.