A manufacturer sells goods to its own distribution subsidiary, which sells them to an outside customer. Adding both sales invoices together would count the same chain of activity twice when describing sales to customers outside the group.
Consolidated accounts present the group as a reporting whole under the applicable accounting rules. The IFRS for SMEs educational material on consolidation explains elimination of intragroup balances and transactions. The detailed treatment belongs to the relevant reporting framework and qualified accounting judgment.
Follow a simple fictional sale
Suppose company A transfers an item to group company B for 70 currency units. B then sells it to an external customer for 100. The two entities may record their own transactions, but adding 70 and 100 is not a meaningful measure of the group’s external revenue from that item.
The example leaves out taxes, costs, timing and other accounting details. Its purpose is to show why internal activity needs to be distinguished before totals are interpreted.
Read the heading above the number
A segment presentation may show revenue including internal transactions, external revenue and reconciliation adjustments. Keep those labels attached. Do not compare a segment’s gross activity with consolidated revenue as though they were defined identically.
A branch within one legal entity is also not the same thing as a separately incorporated subsidiary. Organisational labels such as division, region and group company need to be read in the report’s own context.
When asking management about growth, specify whether you mean sales to outside customers or activity between parts of the organisation. Internal transfers can be operationally useful without representing new demand from the market.
Keep a short map of who sold to whom and which entities are included in the reporting group. That map often makes a complicated revenue note easier to understand than starting with the largest total on the page.