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Intercompany eliminations in Finland: what is removed and how

Karma Accounts · Published 10 November 2026

Intercompany eliminations (konsernieliminoinnit) turn the added-together accounts of a parent and its subsidiaries into consolidated financial statements. The Accounting Act (kirjanpitolaki, KPL 6:7) requires the group to be shown as if it were one company, so five things are removed: internal sales and purchases, internal receivables and debts, internal dividends, unrealised internal margin in the group's assets, and the parent's shares against the subsidiary's equity at acquisition. Whether a group must consolidate at all is covered in consolidated financial statements in Finland; this article is about how the eliminations are done.

What gets eliminated in consolidated financial statements

Before eliminating, check that both companies booked each item at the same amount, says the Accounting Board (kirjanpitolautakunta, KILA) in its guideline on consolidated statements (28.3.2017, 5.1). Eliminations may be left out only where they are not needed for a true and fair view (KPL 6:7.4).

Most eliminations leave the group profit unchanged, because the same amount leaves income and expenses. Three change it:

• Internal dividends are removed from income and added to retained earnings from previous years (KILA 5.2). Group equity stays the same.
• Unrealised margin: profit on goods one company sold another that are still in stock is removed from inventory and equity. Margin in the opening stock comes off retained earnings, the change in the year off the result, in change in inventories (KILA 5.3). It is eliminated in full whatever the ownership, and the same applies to a fixed asset sold inside the group, with the depreciation on the margin.
• Group goodwill depreciation, from the share elimination below.

Eliminating the parent's shares against the subsidiary's equity

Under the acquisition method (hankintamenomenetelmä, KPL 6:8) the cost of the shares is set off against the group's share of the subsidiary's equity on the date it became a subsidiary, so only equity earned after that stays in group equity (KILA 6.2.1). The group's whole share of that equity is eliminated whatever the price; the difference is dealt with below. It comes off share capital first, then other restricted equity, then free equity (KILA 6.2.4).

• Cost above equity. The difference (konserniaktiiva) is allocated to the assets and liabilities it comes from, such as a building worth more than its book value, up to fair value, and a deferred tax liability is recorded on the allocated part, which increases goodwill by the same amount (KPL 6:8.3, KILA 6.2.5). The rest is group goodwill (konserniliikearvo), depreciated over its useful life, or within at most ten years if that cannot be estimated reliably (KPL 6:8.5).
• Cost below equity. The negative difference (konsernipassiiva) is allocated the same way (KPL 6:8.4). An unallocated part may be shown as a group reserve (konsernireservi) before liabilities only if a matching cost or loss is expected in the subsidiary, and is taken to income when that cost or loss is booked or is matched by realised income (KPL 6:8.6). If no reason for it can be found, it goes to income at once (KILA 6.2.6).
• A subsidiary the parent founded: the cost is usually the equity paid in, so there is no difference: share capital or the invested unrestricted equity reserve (SVOP) is set off against the shares. A private Oy needs no share capital, so the money often goes to SVOP (Limited Liability Companies Act, OYL 1:3 and 8:2).

Minority interest when you own less than 100 %

Only the group's share of the acquisition-date equity is eliminated, counted from the shares, not the votes (KILA 6.2.1). The other owners' share of the subsidiary's equity is a separate line after equity, and their share of its profit a line before profit for the year (KPL 6:7.2–3, Accounting Ordinance, kirjanpitoasetus, KPA 3:2 and 3:3). Internal margins are still eliminated in full (KILA 7.3).

A worked example: the elimination entries

The companies and figures are invented. Parent Oy bought all of Sub Oy on 31 December 2023 for 150 000 euros. Sub's equity was 100 000 euros: share capital 2 500, retained earnings 97 500. Book values matched fair values, so goodwill is 50 000 euros, depreciated over an estimated ten years. In 2026:

• Sub sold goods to Parent for 60 000 euros at a 25 % margin; 20 000 euros of them are still in Parent's stock, so 5 000 euros of margin is unrealised. The opening stock had none.
• Parent charged Sub a management fee of 2 000 euros a month, 24 000 euros; December's is unpaid.
• Parent lent Sub 100 000 euros on 1 January at 5 %; the 5 000 euros of interest was paid on 31 December.
• Parent owes Sub 12 000 euros for goods.
• In May, Sub paid Parent a dividend of 30 000 euros from its 2025 profit.

In practice the entries are made in the consolidation workings (yhdistelylaskelmat), not in the companies' ledgers, so entries 1 and 2 are repeated every year; that is why the 2024–2025 depreciation comes off retained earnings. The group balance sheet shows goodwill of 35 000 euros, no shares in Sub, no intercompany balances and inventory 5 000 euros lower. In a spreadsheet, the income statement entries (2, 6 and 8, together −40 000 euros) must also reduce profit for the year in the balance sheet, or it will not balance.

The example leaves out tax. Where consolidation changes the result and a future tax effect is obvious, taxes are adjusted (KPL 6:11), and a depreciation difference (poistoero) and tax-based reserves are split into equity and deferred tax liability (KPL 6:7.5).

Group bookkeeping: making eliminations easy at month end

There is no separate group ledger: each company keeps its own books and the group figures are built from them. The eliminations are easy when the books are ready for them:

1. One chart of accounts, or one group mapping. The schemes already require separate lines for receivables from, debts to and income from group companies (KPA 1:1 and 1:6), and the same accounting policies are required (KPL 6:4).
2. A counterparty code on every intercompany entry, so balances can be listed company by company.
3. Monthly matching of balances, sales, fees and interest, with differences fixed in the same month, as part of the month-end close.
4. One cut-off rule. A December fee that Sub books in January leaves 2 000 euros unmatched. A Finnish subsidiary must have the parent's financial year (KPL 6:5); a foreign one closing up to three months apart may be combined without interim accounts (KPL 6:5.2). Then only the part in both statements is eliminated, and the rest is shown in accruals (KILA 5.2).
5. Currency. A foreign subsidiary's balance sheet is translated at the closing rate and its income statement at the average rate (KPL 6:6). A difference from eliminating internal income and expenses stays in the group result (KILA 11.2.2).
6. Written agreements for loans, fees and rent, priced at arm's length: see transfer pricing for small groups. Book each dividend in both companies in the same month.
7. Keep the workings for ten years (KPL 6:19 and 2:10), signed by their preparer (KILA 13.6).

Frequently asked questions

What are intercompany eliminations?

They remove the transactions and balances between group companies, and the parent's investment in each subsidiary, so the consolidated statements show the group as one company (KPL 6:7 and 6:8).

Do intercompany eliminations change group profit?

Sales, fees and interest do not. Internal dividends, unrealised margin and goodwill depreciation do.

Does a group keep its own set of books?

No. Each group company keeps its own books, and the consolidated statements are built from their statements in the consolidation workings.

Are the eliminations booked in the companies' own books?

Usually not. They are made in the consolidation workings each year.

What if intercompany balances do not match?

Find the difference before consolidating: usually an invoice booked in different months, a missing accrual or a currency difference.

What we do

We keep the books of each group company, match intercompany invoices and balances every month, and prepare the eliminations and consolidated statements when the group needs them, priced by written quote once we have seen the structure. See limited company accounting or request a quote.

Sources

• Finlex: Accounting Act 1336/1997, chapter 2 section 10 and chapter 6, consolidated text including 555/2026 (in Finnish)
• Finlex: Accounting Ordinance 1339/1997, chapter 1 sections 1 and 6, chapters 3 and 4 (in Finnish)
• Finlex: Limited Liability Companies Act 624/2006, chapter 1 section 3 and chapter 8 section 2 (in Finnish)
• Finnish Accounting Board (KILA): general guideline on preparing consolidated financial statements, 28.3.2017 (in Finnish)

Please note: this is general information about Finnish rules, not advice for your own situation, and the rules change. Ask us before you act on it.

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