In order to understand and plan Dynamics 365 Finance organisation and consolidation setup it is essential to capture the details of all legal entities that form your organisation and their relationships.
These are typically represented by a Legal Entity structure diagram such as the example provided below.
Organisational legal entity structures can be modelled in Dynamics 365 Finance using Organisation Hierarchy capabilities.
Organisation Hierarchies can be leveraged to enable extended consolidated financial reporting capabilities as outlined via the URL below.
Dynamics 365 Finance Consolidations functionality does not require or reference Organisation Hierarchies to perform a consolidation.