Consolidation adds up the statements of a parent and the entities it controls, then eliminates everything that happened inside the group: intercompany revenue and cost, due-to and due-from balances, and intercompany profit still in assets. Sureties typically evaluate a construction group on a consolidated (or combined) basis.
Why it matters
Without eliminations, the group’s revenue and assets are overstated by its internal transactions. Bonding capacity and covenants are often measured on consolidated numbers.
Worked example
EquipCo billed OpCo $10,000 of equipment rent (sample data). Eliminations: Dr Equipment Rental Revenue $10,000 / Cr JC – Equipment $10,000, and Dr Due To $10,000 / Cr Due From $10,000. The group’s revenue and cost each drop by $10,000.
Common mistakes
- Eliminating balances that don’t match, and plugging the difference.
- Posting eliminations into an operating entity’s own books.
How os.construction handles it
In the accounting preview’s design, eliminations live in a separate elimination book, so no entity’s own ledger changes, and intercompany balances must net to zero first. Consolidation is Planned. See Financial reports.