Chart of Accounts Mapping Across Two Xero Organisations: The First Step in a Group Consolidation

This article assumes a group of Australian-domiciled entities reporting in AUD, with wholly owned subsidiaries, all on Xero. Foreign subsidiaries add AASB 121 foreign currency translation, and partly owned subsidiaries add non-controlling interests. Both are outside the scope of this article.

Same name, same code, not the same account

An ASX or NSX junior explorer with a listed head company and a tenement-holding subsidiary, both keeping their books in Xero, has two Xero organisations, one for each entity. Each one has its own chart of accounts, set up at its own time and added to as that entity's needs changed. Before the two trial balances can be added together, every account in each one has to be matched to a line in a group chart. That set of matches is the chart of accounts map, and the group numbers can only be as right as the map is.

AASB 10 paragraph B86(a) sets the test. Consolidation procedures start by combining "like items" of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries. The map is where you decide, account by account, what counts as alike.

Why a name or a code is not enough

Code 400 in the head company and code 400 in the subsidiary are two separate accounts in two separate ledgers. The same is true of two accounts with the same name. Three patterns break a match made on name or code alone.

The first two are mapping decisions. The third is an accounting policy question, and the map is where it surfaces.

When the account type disagrees, check the policy first

AASB 6 paragraph 9 requires an entity to determine an accounting policy specifying which expenditures are recognised as exploration and evaluation assets. AASB 10 paragraph 19 requires a parent to prepare consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances. Where a member of the group uses different policies, paragraph B87 requires appropriate adjustments to that member's financial statements in preparing the consolidated financial statements.

So if the two organisations treat the same kind of exploration cost differently, mapping both accounts to one group line does not fix the difference. It adds an expense to an asset. The difference needs a consolidation adjustment, recorded in the consolidation working papers, before the balances are combined. Flag the account in the map so the adjustment is made again next quarter.

Building the map once

1. Export both charts. Export the chart of accounts from each Xero organisation, with each account's code, name and type, and put the two lists side by side.
2. Write the group chart. The group lines are the lines the consolidated statements will show, plus the working lines the eliminations need.
3. Map by type first, then by content. An asset account maps to an asset line, an expense account to an expense line. Within a type, read what the account actually holds, not what it is called. Where that is unclear, run the Account Transactions report for the account in Xero and look at what has been posted to it.
4. Give intercompany accounts their own lines. The loan receivable in the head company, the loan payable in the subsidiary, the investment in the subsidiary and the subsidiary's share capital each map to a dedicated line. Paragraph B86(b) offsets the parent's investment in each subsidiary against the parent's portion of that subsidiary's equity. Paragraph B86(c) requires intragroup assets, liabilities, equity, income, expenses and cash flows to be eliminated in full. Both entries are easier to check when those balances are not mixed into "Other receivables" or "Issued capital".
5. Write down the reason. Add one line for each match that is not obvious, saying why this account maps to that group line. That line is what an auditor reads, and what the next person to run the consolidation needs.

Two checks every time the map is used

Every account with a balance is mapped

An account added in either organisation since the last run has no line in the map yet. If the build skips it, its balance drops out of the group numbers. Check each organisation's trial balance against the map before combining, and stop on any account with a balance and no line.

The mapped trial balance still nets to zero

In a double-entry ledger, total debits equal total credits, so each organisation's trial balance nets to zero. Regrouping the same balances under group lines does not change the total, so the mapped version must net to zero too. If it does not, a balance was dropped, counted twice or had its sign flipped in the mapping. We explain why the trial balance is the right starting point in Where a Group Consolidation Starts: The Trial Balance, Not the Profit and Loss.

Keep the map as a standing document

Build the map once, then maintain it. Add a line whenever either organisation adds an account, and date each change. A map that is rebuilt from memory under a reporting deadline is a map whose matches can change from one quarter to the next without anyone deciding they should. A dated map lets you show your auditor which account went to which line in any quarter, and why.

Syed Samir Ahmad
Founder, Genius Accounting Solutions
CA ANZ | Xero Partner