Successful businesses commonly encounter opportunities to grow through acquisitions – by buying up competitors or other businesses. When your business acquires a controlling stake in another, accounting rules require you to consolidate your financial statements. This is the case regardless of whether you absorb the new company or leave it operating as a separate business.

BDO can help if you need assistance in:

  • Accounting for business combinations and transactions involving subsidiaries and associates
  • Gathering the data required for consolidation from group entities
  • Designing the group reporting required for consolidation purposes

Estonian legislation defines a consolidating entity as a parent or any other accounting entity that has control of another accounting entity (consolidated entity). Control is presumed to exist when the parent or other accounting entity:

  • Owns more than 50% of the voting power of an entity
  • Has the right arising from the law or a contract to appoint or remove the majority of the members of the executive management or a higher governing body (by exercising the rights of a founder or by the decision of the general meeting)

However, in certain circumstances consolidating entities are not required to prepare consolidated financial statements.


A company that is an Estonian or EU publicly traded company   Public interest entity (Auditors Activities Act § 13), excl. a company that is an Estonian or EU publicly traded company     Other consolidating entities

The total amount of the balance sheet totals of each of the consolidated entities added together does not exceed 5 per cent of the balance sheet total of the consolidating entity and its sales revenue does not exceed 5 per cent of the sales revenue of the consolidating entity

  Shares belong to an entity of a Contracting State who prepares and discloses the consolidated and audited annual report
  At least 90 per cent of the shares belong to an entity of a Contracting State, who prepares and discloses the consolidated and audited report
    Consolidated indicators (with mutual transactions) does not exceed the balance sheet total and net turnover indicators of a small consolidation group, plus 20%
    Consolidated indicators do not exceed the terms and conditions of a small consolidation group













Indicators of groups are:

Category Assets (million) Sales revenue (million) Average number of employees Other conditions
Small consolidation group* 4 8 50   n/a
Medium-sized consolidation group* 20 40 250   Not a small      consolidation group
Large consolidation group At least two of the medium-sized consolidation group criteria have been exceeded

*only one of the consolidated indicators may exceed the conditions


In addition to the above a consolidated entity need not be recorded line-by-line in a report of the consolidation group if:

  • the consolidating entity was unable during the accounting period to exercise dominant influence over the consolidated entity
  • the procurement of the information necessary for the preparation of the report with regard to the consolidated entity requires extremely unreasonable costs or long delays
  • the shares of the consolidated entity are held exclusively with a view to their subsequent

Helen Kutser-Sannik

Accounting and Reporting Services Senior Manager
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