The term consolidation signifies the combination and clearing of individual financial statements of all companies belonging to a group into one definitive consolidated financial statement. Consolidation requires an offset of performance and delivery-related interrelationships, as well as capital and financial interrelationships between all the companies, within the basis of consolidation. This is necessary because, according to the one-entity theory, a group must be viewed as a single operational unit.
Some of the individual consolidation measures include
- capital consolidation,
- debt consolidation,
- elimination of intercompany profit and loss as well as
- expense and revenue consolidation.