It’s More Than Just Adding Up Numbers To those who aren’t familiar, financial consolidation might sound like simply adding up numbers. In financial consolidation, there are specific calculations and adjustments made as the numbers are consolidated from the subsidiary level to the parent company level.This includes the following: There are also different methods of consolidation.Then when the subsidiary company reports its net income, the parent company reports revenue equal to its share of the subsidiary’s profits.So if a subsidiary has 0,000 in profit and the parent owns 30% of the subsidiary, the parent company would increase the value of the investment asset by ,000 and record the ,000 in revenue as an increase to retained earnings.Find out more Financial Statements The Consolidated Financial Statements for the fiscal year 2016 include the consolidated income statements, the consolidated statements of comprehensive income, the consolidated statements of financial position and much more.Key financial reports generated from consolidated financial results include the income statement, balance sheet, and statement of cash flows.
When a company owns a stake that is less than controlling but still allows it to exert significant influence over the business, it must use the equity method of accounting.
These transactions can be simple or complex, but generally involve the acquirer buying a majority of the stock of the target company.
This majority position enables the acquirer to exercise control over the other company.
Assume that Premier’s “separate” (before consolidating) balance sheet immediately after purchasing 100% of Sledge’s stock appears below.
Notice the highlighted Investment in Sledge account.