Combining and consolidating financial statements

14-Feb-2019 05:14

Consolidation occurs when a parent company owns more than 50 percent of a subsidiary.

Combination occurs when a group of companies are owned with no clear parent in the group.

After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large corporation, or parent company.

However, when reporting financial information, the parent company is required to submit financial statements that combine their information with that of their subsidiaries.

It’s probably easiest to buy into the concept in very clear-cut situations.

Consolidated financial statements report the aggregate of separate legal entities.However, because the subsidiaries are considered to form one economic entity, investors, regulators, and customers find consolidated financial statements more beneficial to gauge the overall position of the entity.The consolidated financial statements only report income and expense activity from outside of the economic entity.A parent company can operate as a separate corporation apart from its subsidiary companies.Each of these entities reports its own financial statements and operates its own business.

Consolidated financial statements report the aggregate of separate legal entities.

However, because the subsidiaries are considered to form one economic entity, investors, regulators, and customers find consolidated financial statements more beneficial to gauge the overall position of the entity.

The consolidated financial statements only report income and expense activity from outside of the economic entity.

A parent company can operate as a separate corporation apart from its subsidiary companies.

Each of these entities reports its own financial statements and operates its own business.

A financial statement that merges the assets, liabilities, net worth, and operating figures of two or more affiliated companies.