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What are Consolidated Financial Statements? Definition Meaning Example

what are consolidated financial statements

In sum, the reason I like including both income numbers is that anything that increases disclosure is a positive, especially when investing money. Then, investors can make up their own minds as to management’s competence and the success of the overall business of the company. As you can see, it’s almost like we combined all the entities into one and disregarded any existing intercompany accounts that were on the books of the individual companies. A minority interest is a partial ownership stake in a company where the majority of shares are controlled by a larger parent company.

what are consolidated financial statements

Buildings and building improvements are depreciated over their estimated economic lives principally using the straight-line method. Machinery, equipment, furniture and fixtures are depreciated over their estimated economic lives principally using the straight-line method. Leasehold improvements are amortized over the lease term using the straight-line method. Expenditures for maintenance, repairs and renewals of minor items are expensed as incurred. Recognise any resulting difference as a gain or loss in profit or loss attributable to the parent.

Annual improvements — 2006-2008 cycle

For example, company A buys goods for one price and sells them to another company inside the group for another price. Thus, company A has earned some revenue from selling, but the group as a whole didn’t make any profit out of that transaction. Until those goods are sold to an outsider company, the group has unrealised profit. As a way to test and provide assurance on whether software tools are able to create and / or consume filings which are in line with all ESEF requirements.

Can you imagine taking statements from your ERP, CRM, Excel Sheets, and having them all in one place? It allows you to compile data sources from across the business, its multiple departments, and even multiple entities for easy reporting to a parent company, shareholders, and management.


When you are compiling a consolidated financial statement, the ownership percentage of the parent company matters. You must adjust the accounts on the general ledger to represent the ownership percentage of the parent company. Use the company’s goodwill account to post the balancing entries to your adjustments. Subsidiary holdings must be shown as a stock asset on the parent company’s financial statements and shareholders’ what are consolidated financial statements equity on the subsidiary’s financial statements. Standalone financial statements are not required for companies owned 100 percent by the parent but may be used for internal management purposes. A consolidated financial statement takes the financial results of the subsidiaries and includes them in a single financial statement for the parent company, as if the parent company and the subsidiaries were one entity.

How do you prepare a consolidated financial statement?

Consolidation Procedures

While preparing a consolidated financial statement, the parent company's financial statements and its subsidiaries must be combined line by line by totaling together similar items such as assets, liabilities, income, and expenses.

There is no exemption for a subsidiary that operates under severe long-term restrictions impairing the subsidiary’s ability to transfer funds to the parent. Such an exemption was included in earlier versions of IAS 27, but in revising IAS 27 in December 2003 the IASB concluded that these restrictions, in themselves, do not preclude control. There are two main type of items that cancel each other out from the consolidated statement of financial position. See “Basis of Presentation” included in Note 1 for a discussion of the Reorganization on March 30, 1998 that resulted in the formation of Sypris.

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