Accounting consolidating financial statements

An investor determines whether it is a parent by assessing whether it controls one or more investees.

An investor considers all relevant facts and circumstances when assessing whether it controls an investee. An investor that holds only protective rights cannot have power over an investee and so cannot control an investee [IFRS , IFRS ].

This creates a total income and expenses for the entire group of companies, including the parent.

A parent company with a controlling interest in a subsidiary consolidates the financial statements of its subsidiary into its own financial statement.

A combined financial statement shows financial results of different subsidiary companies from that of the parent company.

This avoids misrepresenting transactions that distort actual results of the parent company and subsidiary.

Both combined and consolidated financial statements add the subsidiary companies' income and expenses to the parent company.

Consolidated financial statements aggregate the financial position of a parent company and its subsidiaries.

This allows an investor to check the overall health of the company in a holistic manner rather than viewing the individual company's financial statements separately.The complete financial statement of one subsidiary is shown separately from another as a stand-alone company.The benefit of combined financial statements is that it allows an investor to analyze the results and gauge the performance of the individual subsidiary companies separately.Please read our cookie notice for more information on the cookies we use and how to delete or block them.The full functionality of our site is not supported on your browser version, or you may have 'compatibility mode' selected.In other words, the consolidated financial statements agglomerates the results of the subsidiary businesses into the parent company's income statement, balance sheet and cash flow statement.

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