1 Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure Authorized © 2023 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, completeness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries.Nothing herein shall constitute or be construed or considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved.Rights and PermissionsThe material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given.Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Icons made by noomtah, Freepik, Vector Stall and Afian Rochmah Afif from Flaticon at www.flaticon.comCover design: Kora Reichardt Consolidation of Financial Statements at Different Levels of GovernmentTechnical NoteDecember 2022 1ContentsGlossary 5Acknowledgements 7Preface 8Executive Summary 91. INTRODUCTION 111.1. Context 111.2. Objective of the Technical Note 121.3. Motivations for preparation of the Technical Note 121.4. Limitations of the Technical Note 131.5. Structure of the Technical Note 132. CONSOLIDATION AND COMPILATION ACCORDING TO IPSAS AND GFSM 2014 142.1. The scope of consolidation and compilation according to IPSAS and GFSM 2014 142.2. Delineation of the economic entity according to IPSAS 202.3. Delineation of the public sector, the general government sector, and their subsectors according to GFSM 2014 222.4. Consolidation process according to IPSAS 252.4.1. Phase 1: Initial setup, maintenance, and preparatory work 252.4.1.1. Step 1: Delineation of the economic entity through the principle of control 252.4.1.2. Step 2: Use of a unified and harmonized CoA to report information 262.4.1.3. Step 3: Application of the same accounting policies 262.4.1.4. Step 4: Application of the same cut-off date of financial statements 262.4.1.5. Step 5: Development and update of a consolidation system or algorithm 262.4.2. Phase 2: Financial data consolidation 272.4.2.1. Step 6: Collection of entities' data 272.4.2.2. Step 7: Checking of the consistency of the data collected 272.4.2.3. Step 8: Performance of consolidation adjustments 272.4.2.4. Step 9: Verification of the results obtained 28CONTENTS 2Contents2.4.3. Phase 3: Financial reporting 282.4.3.1. Step 10: Generation of the consolidated financial statement 282.5. Compilation process according to GFSM 2014 283. INTERNATIONAL EXPERIENCES 303.1. Brazil 303.1.1. Context 303.1.2. Consolidation process 313.1.3. Compilation process 313.2. Georgia 323.2.1. Context 323.2.2. Consolidation process 333.2.3. Compilation process 333.3. Spain 343.3.1. Context 343.3.2. Consolidation process 343.3.3. Compilation process 353.4. Switzerland 363.4.1. Context 363.4.2. Consolidation process 363.4.3. Compilation process 373.5. Lessons learned and good practices 384. INTEGRATED CONSOLIDATION AND COMPILATION PROCESS 404.1. Phase 1: Initial setup according to the statistical framework 424.1.1. Step 1: Delineation of the general government and public sector, and their subsectors through the sector classification 424.2. Phase 2: Maintenance and preparatory work according to accounting standards and statistical framework 424.2.1. Step 2: The development of a CoA harmonized with the accounting and statistical frameworks 424.2.2. Step 3: Ensuring the use of the same accounting policies 424.2.3. Step 4: Ensure the same cut-off date for financial statements 434.2.4. Step 5: Development and updating systems or bridging algorithms for consolidation and compiling 43 3Contents4.3. Phase 3: Financial data consolidation according to accounting standards 434.3.1. Step 6: Collecting of entities' da