Consolidation elimination

The items removed are a short and repeatable list: one entity's receivable against the other's payable, an intragroup sale against the matching purchase, unrealised profit sitting in inventory that has not left the group, loans between entities and the interest on them, and dividends received from a subsidiary. The principle is simple, because a group reports as if it were one business and a business cannot sell to itself. The difficulty is operational: both sides have to agree to the cent before anything can be removed.

That makes intercompany reconciliation a precondition rather than a follow-up task. The causes of mismatch repeat across groups: cut-off timing, where a shipment is booked in March by one entity and April by the other; the two sides translating the same foreign currency invoice at different rates; a credit note processed on one side and never received on the other; and the same transaction recorded twice under two document references. When those causes are not found, the elimination entry gets forced to balance and the imbalance travels into the consolidated statements.

Two clarifications matter. An elimination does not create a difference; it exposes one that already existed, which is why a group with a clean elimination pack usually has disciplined reconciliation underneath it. And an elimination is not netting: netting settles mutual balances legally or in cash between two entities, while an elimination is a reporting adjustment that leaves both statutory ledgers untouched. In Türkiye a further practical detail helps, since intragroup sales generally travel as e-Fatura through the tax authority's system, both sides hold the same document number and matching starts from a shared reference rather than a description field.