Consolidation of accounts in Luxembourg

Consolidating is not adding accounts together. It means rebuilding the financial statements of a group as though it were a single entity: eliminating internal transactions, harmonising accounting policies, dealing with goodwill and non-controlling interests, and holding to a timetable often set by a parent company that does not know Luxembourg law.

As an accounting firm based in Luxembourg, Ease Advisory takes charge of consolidation under Lux GAAP as well as IFRS, for Luxembourg groups and for subsidiaries that have to feed a foreign group's reporting package. That capability comes from a Big Four background, on group audit and consolidation engagements.

Does your group have to consolidate?

A Luxembourg parent company that controls one or more subsidiaries must in principle prepare consolidated accounts. Two exemptions limit that obligation, and the first applies to the great majority of the groups we meet.

Article 1711-4 of the law on commercial companies exempts the parent company where the group does not exceed at least two of the following three thresholds:

The second column corresponds to the simplified test: the thresholds may be assessed by adding the accounts together without performing a full consolidation, the two financial criteria then being increased by 20%.

Two points often change the answer:

• crossing a threshold, upwards or downwards, only takes effect after two consecutive financial years;
• the exemption falls away as soon as a security of any group company is admitted to trading on a regulated market.

These thresholds were raised by the Grand-Ducal Regulation of 25 October 2024, applicable to financial years beginning on or after 1 January 2023. They previously stood at EUR 20 and 40 million: groups that were required to consolidate until then no longer are, and many still do not know it.

The sub-group exemption

A Luxembourg parent company that is itself held by a company which consolidates may be exempted. The conditions are cumulative:

• it and its subsidiaries are included in the consolidated accounts of the higher parent company;
• those consolidated accounts are audited;
• they are filed with the Luxembourg Trade and Companies Register, together with the auditor's report;
• the notes to the annual accounts state the exemption, along with the name and registered office of the consolidating company.

Where the parent company is governed by the law of a Member State and holds at least 90% without holding all of the shares, the exemption requires the agreement of the other shareholders. In addition, shareholders representing 10% of the capital of an SA or an SCA, or 20% in a SARL, may require consolidated accounts to be prepared, provided they request it at least six months before the financial year end.

If the consolidating company is governed by a law outside the European Union, the equivalence of its reporting framework must be checked. IFRS and US GAAP are recognised as equivalent.

What we take care of

• the full preparation of the consolidated accounts: balance sheet, profit and loss account, notes and cash flow statement;
• the first consolidation: defining the scope, the date control was obtained, goodwill, and the choice and documentation of methods;
• harmonisation adjustments and intercompany eliminations, including unrealised internal profits in inventory and fixed assets;
• the consolidation package expected by a foreign parent, in its format and to its timetable;
• the move from Lux GAAP to IFRS and recurring group reporting;
• filing the consolidated accounts with the Trade and Companies Register;
• one-off assignments and interim cover, when a position is vacant or a closing overruns.

We also provide training in consolidation of accounts, for teams taking the process back in house.

Lux GAAP or IFRS

The choice of framework is not neutral: it determines the treatment of goodwill, financial instruments, leases and deferred tax, and therefore the consolidated result itself. We work in both frameworks, and regularly on mixed groups where the statutory accounts are under Lux GAAP and group reporting under IFRS. Our article on the use of IFRS in Luxembourg sets out what makes one or the other mandatory.

What derails a consolidation timetable

• a scope settled too late, or an acquisition during the year that was not anticipated;
• intercompany balances not reconciled between entities: the leading cause of delay, and the most avoidable;
• accounting policies that are not harmonised across subsidiaries, discovered at consolidation time;
• deferred tax dealt with last, when it depends on every preceding adjustment;
• a reporting package format changed by the parent after the year end.

Who it is for

• Luxembourg groups crossing the thresholds and consolidating for the first time;
• the Luxembourg subsidiaries of foreign groups that have to deliver a reporting package to a tight timetable;
• the holding companies and SOPARFIs holding participations that fall within the scope of consolidation;
• groups that simply want to know whether they are exempt, and to document it properly.

Consolidation works alongside the bookkeeping and reporting we provide separately: when both are handled by the same firm, the closing timetable shortens appreciably.

A scope to define, a package to produce or an exemption to verify? Contact Ease Advisory : first conversation free and without obligation.