What do consolidated financial statements report

Reporting a consolidated financial statement must follow a particular guideline. The major reporting requirements for consolidated financial statements are;. Ownership interest is important when compiling consolidated financial statements, this is to say that only the financial statements of subsidiaries or companies owned by a parent company are included in a consolidated financial statement.

Given that the percentage of ownership in subsidiaries vary, there are different ways ownership can be calculated. Either the cost method or equity method of financial reporting can be used. Consolidated financial statements are however not used for either equity method of financial reporting or the cost method. Please turn off compatibility mode, upgrade your browser to at least Internet Explorer 9, or try using another browser such as Google Chrome or Mozilla Firefox. IAS plus.

Login or Register Deloitte User? Welcome My account Logout. Search site. Toggle navigation. Navigation Standards. Navigation International Accounting Standards. Quick Article Links. Overview IAS 27 Consolidated and Separate Financial Statements outlines when an entity must consolidate another entity, how to account for a change in ownership interest, how to prepare separate financial statements, and related disclosures.

Key definitions [IAS Parent: an entity that has one or more subsidiaries. Identification of subsidiaries Control is presumed when the parent acquires more than half of the voting rights of the entity. 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. There is no exemption for a subsidiary that had previously been consolidated and that is now being held for sale.

Which of the following investments are accounted for as subsidiaries in the consolidated accounts of Green Co Group? Elimination of intra-group trading balances Entities within the same group will often trade with each other and this can lead to some intra-group balances which need to be eliminated. This is required because of the single economic entity approach to consolidated financial statements. The following illustration demonstrates such a scenario:.

Scarlett Co has a corresponding payables balance. However, the intra-group balances at the year-end need to be eliminated, as the consolidated accounts need to show the group as a single economic entity. The group statement of financial position should only include amounts owed and owing to entities outside the group. When these balances are eliminated, the consolidated figures become:. Answer A completely omits the elimination of the intra-group balances and answer B does not cancel the corresponding payable within liabilities.

Consolidated financial statements reflect control, not ownership. Adjustments for unrealised profits Another common adjustment that you could be asked to deal with is the removal of unrealised profit. This arises when profits are made on intra-group trading and the related inventories have not subsequently been sold to customers outside the group. Until inventory is sold to entities outside the group, any profit is unrealised and should be eliminated from the consolidated financial statements.

The following illustration demonstrates this in the context of the consolidated statement of profit or loss. The following extracts are from the individual statements of profit or loss of the two companies for the year ended 30 September 20X Half of these items remained in the inventory of Silver Co at the year end. The other adjustment that requires careful consideration is the intra-group trading. In the consolidated statement of profit or loss we must always consider two steps:.

This must be eliminated, irrespective of whether the items remain unsold at the year end. This is because the consolidated statement of profit or loss needs to show revenue and cost of sales which reflect group performance with external, non-group, entities only. Had the question asked for the consolidated cost of sales figure, the next step would have been to identify the provision for unrealised profit PUP. Note that although we refer to this as a provision, it is not a liability but an adjustment to the asset, inventory.

This process usually involves bringing together information from the GL and other data and combining it into a single chart of accounts, making sense of it, and then reporting on it. Consolidated financial statements tell an organization a lot about how they are performing. This is where consolidated financial statements come in- they bring together the numbers of the parent company, alongside the numbers of the subsidiaries, to present an accurate and complete picture of financials.

The manual process of copying and pasting numbers from multiple reports is a repetitive mistake-prone task. It requires gathering data from across the organization, numbers that are continuously changing — making it a difficult, timely process. Luckily there are now software types that assist in the consolidation of financial statements that have value in their ability to automate and speed up these processes. Consolidation software then transforms these numerous data sets into actionable insights all with a mere click-of-a button.

Utilizing a solution that allows for a unified interface across multiple accounting processes and departments enables the production of truly consolidated financials easily and instantly. Not only does the automation of these processes guarantee accuracy but the time saved gives the finance department time to do what they were hired for — analyzing the data.

Other variations of this title include consolidated statements of income or consolidated reports of operations. When it comes to businesses with subsidiaries, there are two main ways to create unified business statements- they can combine them, or consolidate them.

A combined financial statement lists together all the activities of a group of related companies. Though it is combined, the financial statements of each entity are listed separately-each subsidiary or group has its own tab.