FlexiEPM is an advanced consolidation system that streamlines the preparation of consolidated financial statements for Capital Groups. Thanks to a clear checklist and automated step-by-step processes, you will complete all necessary tasks tailored to your company’s specific needs.
The system offers practical examples for each stage of consolidation, providing comprehensive support at every step of the process.
The first step of consolidation is to prepare individual reporting packages containing the Income Statement and the Balance Sheet for all companies.
The first version of these packages is created automatically by importing data from the companies’ finance and accounting systems. General ledger trial balances are mapped to a uniform group chart of accounts, forming the basis for consistent reporting.
Integrating charts of accounts into a unified reporting structure is a key stage of the consolidation process, enabling the preparation of individual packages regardless of each entity’s chart specifics and accounting system used.
We recommend creating a detailed group chart of accounts for the Income Statement and the Balance Sheet, which allows precise analytics for selected items. This facilitates subsequent steps of the consolidation process, such as preparing the Cash Flow Statement, notes, and reconciling intercompany transactions.
Using FlexiEPM allows you to automate the processing of data from finance and accounting systems. System rules ensure consistent presentation of the Income Statement, Balance Sheet, and other elements of the Capital Group’s financial statements, based on trial balances imported from the accounting records.
Depending on the technical capabilities of the accounting systems used by the entities, integration can be performed via direct connection to the system, or by importing CSV/XLSX reports exported by the source systems’ built-in mechanisms. FlexiEPM integrates perfectly with any GL or ERP solution.
FlexiEPM mapping tables make it easy to manage the conversion of local company charts of accounts to the group chart of accounts.
Accountants can import individual data themselves, in line with the permissions granted to them.
Data from the entities’ accounting records may require additional transformations. The need for local adjustments arises, among other cases, when a company keeps its books under local accounting standards (e.g., the Accounting Act), while the consolidated financial statements are prepared under IFRS/IAS.
In this way, local adjustments allow you to include all transformations necessary to obtain individual consolidation packages consistent with the Capital Group’s accounting policies.
The system enforces double-entry registration of adjustments on reporting accounts, which guarantees consistent data presentation.
The system successfully implements automatic transformations and adjustments at the level of individual data. Offsetting positions in the company’s financial statements (e.g., deferred tax assets and liabilities) is performed automatically based on defined rules.
Transparent registration of adjustments makes it possible to identify data originating from the trial balance and the local adjustments entered. Each adjustment is saved together with complete information on who recorded it in the system and when.
In the next step, we obtain individual financial statements containing the Income Statement and the Balance Sheet. The data should be prepared in accordance with the Capital Group’s accounting policies.
The prepared statements, together with notes and intercompany reconciliations, form the basis for preparing the consolidated financial statements of the Capital Group.
Individual consolidation packages most often include data for the financial year and the preceding year. The balance sheet date for the subsidiary’s financial statements may precede the balance sheet date for the consolidated financial statements by no more than three months.
The group chart of accounts ensures uniform presentation of data in consolidation packages and in the consolidated financial statements, and guarantees consistency of the figures presented.
FlexiEPM integrates, in a central database, the data of all entities and reporting periods. Current-year and comparative data are displayed in reports automatically, without taking additional steps to prepare them.
The process can be run on a monthly cycle to provide managers with up-to-date management information on the results of the entities and the Group. Thanks to reporting automation, preparing individual data does not materially burden the accounting teams in the companies.
To obtain complete individual packages, the notes must be completed. The scope of disclosures may include a dozen or several dozen tables containing details for the values presented in the financial statements.
We recommend preparing the notes as a separate step performed after reconciling the Income Statement and the Balance Sheet. The system enables automatic generation of notes, provided that the appropriate analytical accounts exist in the trial balance and the group chart of accounts. For example, the analytics of operating cost items or other finance income in the structure of the Income Statement may fully correspond to the scope of disclosures required by the relevant notes.
In addition, analytical breakdowns of financial statement items help automate preparation of the Cash Flow Statement. With more detail available, it is easier to design the formulas to calculate the items of the Cash Flow Statement.
The system allows flexible design of explanatory notes. The software lets you create appropriate forms and use them during the consolidation of financial statements.
System rules enable automatic generation of selected notes based on the analytics of reportable Income Statement and Balance Sheet items. FlexiEPM will also automatically populate note forms with opening balance data and comparative figures.
Accountants preparing notes in the system can directly check their consistency with the Income Statement, the Balance Sheet, or other notes.
Validation reports make it possible to verify the consistency of data used in the consolidation process. An appropriate set of controls is necessary to ensure correct presentation of data in separate and consolidated financial statements.
Cross-checks for financial statement items (Income Statement, Balance Sheet, Statement of Changes in Equity, Cash Flow Statement) and explanatory notes should be defined on the consolidation package checklist.
A good practice is to include a dedicated control report in the process as an independent step. In this way, all stakeholders can easily and quickly verify the consolidation package in one place.
Central system mechanisms are responsible for implementing validation and control rules. All process participants can easily check data accuracy at the individual and consolidated levels.
Managing the consolidation process, you can build and modify statement validation rules yourself. This lets you tailor the set of controls to the structure of the Group’s financial statements and notes.
When consolidating foreign subsidiaries, it is necessary to translate their individual packages into the Capital Group’s functional currency. This process includes converting local data presented in foreign currencies in accordance with the principles set out in the reporting rules.
The Balance Sheet is translated at the closing rate as at the balance sheet date, while the Income Statement and the Cash Flow Statement are translated using arithmetic average monthly rates.
Translation also covers changes in balance sheet items, using rates applicable at the beginning and end of the period. Currency translation of equity requires historical or arithmetic average rates, which can be challenging, especially when equity changes occur. Exchange differences arising from applying different FX rates to particular items are recognized in the appropriate positions of the statements and notes.
The FlexiEPM consolidation system automatically translates data of foreign subsidiaries into the Group’s currency. Translation is performed based on centrally entered FX rates.
The software implements all required currency translation scenarios. The system uses closing, average, and historical rates to properly present data in the Capital Group’s currency. The software calculates translation differences and presents them in the appropriate positions of the statements and notes.
The next step in the consolidation process is the reconciliation and elimination of intercompany transactions. Preparing the Group’s consolidated financial statements requires eliminating balances as well as revenues and expenses arising from transactions between related parties.
For many companies, the key difficulty in this step of financial consolidation is intercompany reconciliation. This step precedes the elimination of intercompany balances and turnovers.
It is the responsibility of the person conducting consolidation to ensure that intercompany transactions have been reported consistently by the seller and the buyer. This is necessary for correctly posting consolidation eliminations.
Information on balances and turnovers with related entities can be imported from the general ledger trial balance or directly from documents or accounting entries.
The system automatically generates adjustments to eliminate intercompany transactions. Eliminations are recorded with full details in the repository of consolidation adjustments.
The program reconciles transactions between consolidation entities based on rules. Ready-made reports present reconciliation results and enable quick identification and correction of any differences.
Adjustments and eliminations are a key element of financial statement consolidation, usually performed centrally by those responsible for the consolidated reports. Their aim is to eliminate all economic events between entities within the Capital Group.
Typical adjustments include, among others: elimination of subsidiaries’ equity and investments in associates, removal of unrealized margin on intercompany inventories, adjustments to minority interests’ profits and losses, and adjustments related to intragroup sales of fixed assets. Importantly, many adjustments need to be repeated in each reporting period, regardless of when the transaction occurred.
It should be noted that for many economic events, the need to post a consolidation adjustment arises not only in the year the transaction occurred. Such adjustments must be repeated in each reporting period.
Consolidation eliminations may be generated automatically based on rules or entered manually, depending on the nature and complexity of the economic events.
A consolidation system must allow for entering manual adjustments. This functionality is essential for correctly eliminating certain economic events involving consolidated entities. In FlexiEPM, accountants enter consolidation adjustments (debit/credit postings) on the group chart of accounts.
Grouping adjustments into journals allows their presentation in a summarized consolidation worksheet layout.
FlexiEPM includes built-in mechanisms for copying manual adjustments between periods. These enable correct transfer to equity of adjustments that change net profit.
Mechanisms handling consolidation adjustments implement scenarios for full consolidation, proportionate consolidation, and the equity method.
The final step of the process is to prepare the consolidated financial statements document. The final package contains all elements: the Income Statement, Balance Sheet, Cash Flow Statement, Statement of Changes in Equity (Fund), additional information and notes, and the introduction to the statements. The outcome is the statements document in MS Word or PDF format.
Entities entered in the register of entrepreneurs of the National Court Register (KRS) that do not prepare financial statements in accordance with International Accounting Standards (IAS) prepare financial statements electronically in .xml format, in line with the structure and format specified in detail by the Ministry of Finance.
Financial statements of issuers whose securities are admitted to trading on a regulated market, and entities that are not issuers of securities admitted to trading on a regulated market, prepared in accordance with International Accounting Standards, are prepared in XHTML format using the XBRL tagging language and taxonomy.
The end product of the reporting process in FlexiEPM is a reporting package in MS Excel or PDF format. It contains all elements of the consolidated financial statements.
The solution makes it easy to convert financial statements to .xml format in line with the Ministry of Finance requirements.
The reporting module extends the software functionality with the ability to update the statements template (MS Word) with data from the reporting package (MS Excel), ensuring automation of the final step in the consolidation process.
The system’s open interface and the ability to prepare consolidated financial statements as Excel, Word, and PDF files make it easy to integrate the solution with any XBRL reporting tool.
Data transparency should be the foundation for all earlier steps in preparing the consolidated financial statements. That is why it is so important to gradually build consolidation documentation that will make it easy to explain the figures presented in the individual and consolidated financial statements.
Given the importance of this matter, audit reports are available in the system. Audit documentation should be collected step by step at all earlier stages of the process.
The analytics report on reporting accounts shows the positions that make up the final values presented in the Income Statement and the Balance Sheet. The statement presents details of balances on the ledger accounts of individual companies and all adjustments entered into the system at the local and group levels.
The second predefined FlexiEPM audit report template is a listing of all consolidation adjustments. The listing contains all eliminations and adjustments included in the system’s consolidation journals.
Validation reports (Step 5) and the intercompany reconciliation report (Step 7) are part of the audit documentation, which professionally presents the consolidation control trail applied by the Capital Group.
#KNOWLEDGE BASE
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Streamline your planning, controlling, reporting, and consolidation processes in a single system.
Eliminate errors and reduce time-consuming tasks through integration and automation.
