Why should years be consolidated sequentially; i.e., first 2018, then 2019, then 2020?

• A. Rollforward calculations are populated with correct results.
• B. It reduces data storage requirements.
• C. It improves currency rate stability.
• D. It avoids intercompany elimination.

Answer: (A)

The main idea is that rollforward calculations rely on using the previous period’s closing balances as the starting point for the next period. Consolidating years in sequential order (2018, then 2019, then 2020) ensures the opening balances for each year are accurate reflections of all prior consolidation adjustments, eliminations, and currency translations. This allows the system to automatically carry forward the correct totals and produce correct rollforward results for each subsequent year.

If you consolidate out of order, the opening balances for the later year may not incorporate the necessary eliminations and adjustments from the earlier year, leading to incorrect consolidated figures and rollforward entries. The other options don’t address how the rollforward uses prior-year data: data storage needs, currency stability, or intercompany elimination are not directly solved by processing years in sequence.