How does “Financial Consolidation” differ from “Financial Reporting”?

Financial consolidation involves the aggregation of financial data from various subsidiaries or business units into a single set of financial statements. This process focuses on combining the financial results of various components to provide a comprehensive view of the entire organization's financial performance. It primarily aims to ensure that all financial information is captured accurately from different segments and presented as a unified report.

In contrast, financial reporting is the process of presenting financial data in a structured format, typically meant for external stakeholders like investors, regulators, and management. This includes the preparation of financial statements that summarize the financial position and performance of the organization.

Understanding this distinction teases out the essence of the financial processes: consolidation is about bringing together information, while reporting is about how that information is communicated and presented. Therefore, the answer indicates that consolidation serves as the foundational step of combining financial data, whereas reporting is the step of presentation.