Harmonizing Accounting Data

Since consolidation consists of aggregating accounts, give or take some adjust-
ments, it is important to ensure that the accounting data used are consistent;
i.e., based on the same principles.

Usually, the valuation methods used in individual company accounts are
determined by accounting or tax issues specific to each subsidiary, especially
when some of them are located outside the group’s home country. This is particu-
larly true for provisions, depreciation and amortisation, fixed assets, inventories
and work in progress, deferred charges and shareholders’ equity.
These differences need to be eliminated upon consolidation. This process is
facilitated by the fact that most of the time consolidated accounts are not prepared
to calculate taxable income, so groups may disregard the prevailing tax regulations.

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