Consolidation logic

Consolidation accounting is an important part of accountancy. Hardly anything is as simple as it seems, and consolidation accounting has the essential logic that sorts this complexity into its component parts and allows for a rigorous way to 'roll-up' granular activities into a consolidated summary. This is a normal part of corporate accountancy used in organizations. A large number of economic activities taking place in many different places and maybe in different businesses, but using consolidation logic may be brought together into a single summary for all of them.

The same consolidation logic can be used for all the economic activities that are going on in a place, a community. The economic activities may be implemented by different organizations but the impact of all of them applies to the place. A consolidating statement shows how different activities contribute to the total impact. The logic used for this is very similar to the logic used for consolidation in the organization.

About consolidations

The reason why consolidation accounting is an integral part of this paper is simply that a community is impacted by many different economic entities and activities, and the way in which these interact has already been defined comprehensively in the accounting principles associated with consolidations.

Very few transactions are simple an have impact only on the direct participants ... most have other ramifications which are important in the money accounting of the business world, but have even more importance in the context of the combined flows of value and money around the community.

Consolidation

The consolidation technique makes it possible for complex organizations to aggregate their financial reporting so that a single report gives a fair representation of the underlying operations.

As the organization becomes more complex, the scope for planned misrepresentation increases. What is powerful and useful for the corporate style GAAP accounting is equally of importance and useful in developing metrics for community impact analysis.

For organization accounting the idea of consolidation is to be able to present in one report the combined activities and results of many entities or units.

For TVM Value Accountancy the idea of consolidation is the same. A simple consolidation report can summarize the outcome of man different activities and organizations in a community.

Consolidating statements

In GAAP accounting a consolidating statement is used to help analysts understand how the data for the consolidated reports were aggregated, and to give a profile of the performance of the organization.

The same sort of report is useful in the community to show what entities in the community are creating wealth and which are not.

In organization accounting, consolidating statements show how different units make up the consolidated results.

For TVM Value Accountancy a consolidating statement shows similar information. A consolidating statement shows what is working and what is not.

Rules about consolidations

In GAAP accounting there are strong rules about how consolidations are done ... but the strong rules are also complex and subject to many views about what is permitted. Where there is complexity it is possible for clarity to disappear.

Some of the same issues arise in TVM Value Accountancy where the focus is on activities in a community. Under TVM Value Accountancy, the aim is to highlight alternatives rather than to argue simply for the one approach. The principles of consolidation accounting are quite clear. However law and practical complexity make consolidation accounting difficult, and in turn less and less useful. For TVM Value Accountancy the basic principles of consolidation accounting apply.

TVM Value Accountancy aims to keep complexity to a minimum so that reports can be easily understood and have value to the public.