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Last updated on 2024年9月23日

How can you present consolidated financial statements for corporate accounting?

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If you work in corporate accounting, you may need to prepare consolidated financial statements for your company and its subsidiaries. Consolidated financial statements are a set of financial reports that combine the assets, liabilities, income, and expenses of two or more related entities. They provide a comprehensive picture of the financial performance and position of the group as a whole, rather than the individual units. In this article, you will learn how to present consolidated financial statements for corporate accounting, following some basic steps and principles.

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Anus Maqbool - ACMA, APFA

GM Finance | Head of Finance | Financial Controller | Finance Transformation Expert | Strategic Finance Partner | GCC &…
Emie Tugadi

Operations Controller @ Generika Drugstore | Financial Controlling

1 Identify the parent and the subsidiaries

The first step is to identify the parent company and the subsidiaries that are included in the consolidation. The parent company is the entity that has control over the other entities, either by owning more than 50% of their voting shares, or by having the power to direct their activities. The subsidiaries are the entities that are controlled by the parent company, either directly or indirectly. You need to list all the parent and subsidiary entities, and their respective ownership percentages, in a table or a diagram.

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Ivan Besigye

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Have Strong internal Control Accountants must implement and maintain a strong system of internal controls. Accounting department structure best practices includes segregation of duties. The segregation of subsidiaries accounts would include having at least two different ledgers handling cash vs. recording transactions in the books.

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2 Eliminate intercompany transactions and balances

The next step is to eliminate any intercompany transactions and balances that occur between the parent and the subsidiaries, or among the subsidiaries. These transactions and balances are internal to the group, and do not affect the external users of the consolidated financial statements. For example, you need to eliminate any sales and purchases, dividends and loans, receivables and payables, and inventory transfers that happen within the group. You also need to adjust any unrealized profits or losses that result from these transactions.

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Emie Tugadi

Operations Controller @ Generika Drugstore | Financial Controlling
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For easy reference and elimination a separate GL account must be created for an intercompany account and must be properly tagged as intercompany.

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Ivan Besigye

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Critical Thinking Skills Good critical thinking is the ability to see the forest and the trees; to see the big picture and the smallest details. Considering a problem or subject from all angles allows you to apply accounting practices to both new and old financial information to pinpoint issues and identify solutions within ethical standards.

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3 Add up the assets and liabilities

The third step is to add up the assets and liabilities of the parent and the subsidiaries, after eliminating the intercompany transactions and balances. You need to use the same accounting policies and methods for all the entities, and align their reporting dates and currencies, if they are different. You also need to account for any goodwill or non-controlling interest that arise from the consolidation. Goodwill is the excess of the purchase price over the fair value of the net assets of the subsidiary. Non-controlling interest is the portion of the equity of the subsidiary that is not owned by the parent company.

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4 Add up the income and expenses

The fourth step is to add up the income and expenses of the parent and the subsidiaries, after eliminating the intercompany transactions and balances. You need to use the same accounting policies and methods for all the entities, and align their reporting dates and currencies, if they are different. You also need to account for any income or loss attributable to the non-controlling interest, which is the share of the net income or loss of the subsidiary that is not earned by the parent company.

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5 Prepare the consolidated statement of financial position

The fifth step is to prepare the consolidated statement of financial position, which shows the assets, liabilities, and equity of the group as of a specific date. You need to follow the same format and structure as the parent company's statement of financial position, and include all the items that are relevant to the group. You also need to disclose any significant information about the consolidation, such as the names and ownership percentages of the subsidiaries, the goodwill and non-controlling interest balances, and the accounting policies and methods used.

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Ivan Besigye

Profesional
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Ability to Analyze Data An organization’s financial data is one of its greatest assets. It can inform decisions in nearly every area of operations and is crucial for ensuring the ongoing success of the company. That’s why being able to compile and analyze raw financial data is a critical skill that every accountant needs.

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6 Prepare the consolidated statement of comprehensive income

The sixth and final step is to prepare the consolidated statement of comprehensive income, which shows the income and expenses, and the other comprehensive income, of the group for a specific period. You need to follow the same format and structure as the parent company's statement of comprehensive income, and include all the items that are relevant to the group. You also need to disclose any significant information about the consolidation, such as the income or loss attributable to the non-controlling interest, and the accounting policies and methods used.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Anus Maqbool - ACMA, APFA

GM Finance | Head of Finance | Financial Controller | Finance Transformation Expert | Strategic Finance Partner | GCC & Pak Experience | Member Lahore Branch Council - ICMAP | Linkedin Community Top Voice
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Presenting consolidated financial statements in corporate accounting involves combining the financial data of a parent company and its subsidiaries to create a comprehensive view of the entire group's financial performance. To do this, follow these steps: 1. Aggregate financial data: Sum the assets, liabilities, revenues, and expenses of all entities in the group. 2. Eliminate intercompany transactions: Exclude transactions between affiliated companies to avoid double-counting. 3. Apply uniform accounting policies: Ensure consistency in accounting methods across the group. 4. Present consolidated statements: Issue consolidated balance sheets, income statements, and cash flow statements.

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How can you present consolidated financial statements for corporate accounting?

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1 Identify the parent and the subsidiaries

2 Eliminate intercompany transactions and balances

3 Add up the assets and liabilities

4 Add up the income and expenses

5 Prepare the consolidated statement of financial position

6 Prepare the consolidated statement of comprehensive income

7 Here’s what else to consider

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