Financial reporting and taxation for groups of related entities, particularly corporations, are divided into two methods, single entity approach and consolidation. Here's what makes them different:

Single Entity Approach

• Treats the entire group of related entities as a single entity for accounting or tax purposes.
• Internal transactions between entities within the group are ignored since they are considered internal.
• Frequently used to streamline reporting by making intercompany transactions simpler and presenting a unified financial picture.

Consolidation Approach

• Blends financial statements of multiple entities, but still acknowledges them as distinct entities under one roof.
• Eliminating intercompany transactions is necessary to prevent double-counting income or expenses.
• Used in consolidated financial reporting, where a parent company reports financials of its subsidiaries while keeping them separate.

Essentially, the single entity approach views the group as one organization, while consolidation maintains the distinct identities of the subsidiaries while combining their financials.