The Hidden Risks in Group Consolidation – And Why You Need an Experienced Audit Partner
As companies grow and expand through subsidiaries or joint ventures, preparing accurate group consolidated financial statements becomes more important than ever. These statements provide a full view of the financial health of the group and are critical for investors, lenders, and regulators.
In Singapore, group consolidation is required under the Singapore Financial Reporting Standards (SFRS 110) for companies with one or more subsidiaries. However, many business owners are unaware of the risks involved — especially when consolidations are done manually or without professional guidance.
In this article, we explore the common risks in group consolidation, the requirements under Singapore regulations, and how working with the right audit partner can reduce errors and improve financial clarity.
Why Group Consolidation Matters
Group consolidation combines the financial results of a parent company and all its subsidiaries into one set of statements. This process ensures that your group’s financial performance is presented as one single economic entity.
Accurate consolidated reporting is vital because:
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It provides a clear financial picture to stakeholders
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It helps avoid regulatory penalties
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It supports funding, audit, and grant applications
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It builds confidence with investors and financial institutions
Common Risks in Group Consolidation
1. Intercompany Transactions Are Not Properly Eliminated
When companies within the same group trade with each other, those internal transactions must be removed from the consolidated statements. If not, revenue and assets may be overstated.
What this leads to: Financial results that look stronger than they really are — and audit findings during review.
2. Subsidiaries Use Different Accounting Policies
Sometimes, subsidiaries record expenses or revenue differently. Without aligning accounting policies across the group, the consolidated statements become unreliable.
Why it matters: Auditors may raise concerns or qualify your financials if they detect inconsistencies.
3. Errors in Currency Translation
If your group includes overseas subsidiaries, you must convert their financials into SGD using proper exchange rates. Many companies get this wrong, especially when rates fluctuate.
The risk: Misstatements in revenue, equity, and profit that can trigger audit or tax issues.
4. Late or Incomplete Subsidiary Reports
Delays in receiving financials from subsidiaries can cause consolidation problems. This slows down audit timelines and may result in late filings.
The impact: Missed reporting deadlines and extra audit fees.
5. Manual Spreadsheets Are Still Used
Some companies still rely on Excel for consolidating multiple entities. While flexible, spreadsheets are prone to formula errors, data duplication, and version control issues.
The danger: Material errors that go unnoticed until it’s too late — and potentially non-compliance.
Singapore’s Requirements for Consolidated Financial Statements
Under SFRS 110, parent companies must prepare group financial statements unless exempted. These statements must:
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Eliminate all intra-group balances and transactions
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Use uniform accounting policies across all entities
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Include accurate foreign currency conversion
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Be backed by supporting documents and schedules
If these requirements aren’t met, companies may face audit qualifications or penalties from ACRA.
How USAFE Helps Businesses with Group Consolidation
At USAFE, we help businesses streamline and strengthen their group consolidation processes. We work with clients who have operations in Singapore, Malaysia, and beyond.
Our services include:
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Preparing accurate and compliant consolidated financial statements
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Reviewing intercompany eliminations and accounting policies
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Handling foreign currency translation under SFRS 21
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Drafting clear consolidation working papers
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Coordinating with subsidiaries for timely submissions
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Supporting both statutory and voluntary audits
We also guide clients who want to switch to cloud-based software to simplify consolidation and reduce human error.
Final Thoughts
Group consolidation is more than a financial task — it’s a reflection of how your business operates as a whole. When done well, it builds confidence among stakeholders. When done poorly, it raises red flags during audits, tax reviews, and investor due diligence.
If your group has subsidiaries or overseas operations, let’s ensure your financial statements are accurate, audit-ready, and aligned with regulatory standards.
Need help with consolidation and group reporting?
Reach out to the team at USAFE — your trusted partner for audit, compliance, and growth.
Disclaimer: This article is for informational purposes only and does not constitute any professional advice. Feel free to contact us to consult with our professional advisors team for personalized advice and guidance.
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