Consolidation We’re acquiring new entities and changing how we consolidate financials. In my diagram, US Sub E legally owns 100% of US Sub F, NZ Sub D and Spain Sub C. For reporting purposes, besides running typical consolidated financials for the entire group of US Sub E, we would like to run a consolidated report just for the US companies which are US Sub E (the legal parent) and US Sub F (one of the legal subsidiaries). Please ignore the rest of the level 2 entities and the top parent in this case. That being said, what I’m planning to do: 1. Create a dummy consolidating subsidiary that includes US Sub E, US Sub F and an elimination subsidiary. This is US Consolidating Entity 2 in my diagram. This will allow us to run consolidated financials just for the US entities. Take note that US Sub E and US Sub F became sister companies here although they are legally parent and child of each other. 1. Create another dummy consolidating subsidiary that includes NZ Sub D, Spain Sub C and the dummy consolidating entity 2 from the above. This is US Consolidating Entity in my example. This will allow us to run the “normal” consolidated reports (parent and its children including eliminations). Is this really the best way to handle the subsidiary setup and hierarchy? Won’t this cause an issue with other NS features including tax, inventory, etc. considering that we do not follow exactly the legal hierarchy of the entities in NS?

I don't think you need "US Consolidated Entity 2". If you put US Sub E there, you still achieve your desired result.

But how would I be able to run consolidated financials (with proper eliminations) for Sub E and Sub F only if do that?

On the Financial Reports, you will have two options: "Sub E" and "Sub E (Consolidated)". You always have the option of running the parent by itself or the parent with all of its children.