Consolidated Balance Sheet

The consolidated balance sheet of a company or industry may be used as an important tool in evaluating its performance. The accounting procedure in preparing the consolidated balance sheet is very simple. It is to take the various balance sheets of the company have shown above and put them in a single balance sheet.

The Consolidated Balance Sheet is a financial report that indicates the financial position of a company’s assets, liabilities and equity. The report shows the amounts of assets, liabilities and equity on a company’s balance sheet, summarizes the company’s current financial condition, and provides a basis for measuring its financial performance.

What’s one of the first things that come to mind when you’re talking about Balance Sheets? Usually a bunch of numbers, right? Well, let’s put some words around that. In this tutorial, we’ll define what a Balance Sheet is, show how it’s used in different contexts, and we’ll also go over some ways that you can manipulate the numbers to fit your needs (and to impress your boss).

Home » Bookkeeping » Consolidated Balance Sheet

Jun 18, 2020
Bookkeeping by Adam Hill

If a parent company holds less than a 20% stake, it must use equity method accounting. Consolidation involves taking multiple accounts or businesses and combining the information into a single point.

Consolidated and Separate Financial Statements

GAAP also states that comparative financial statements are preferred for annual reports. Consolidated financial statements are required when there are two or more affiliated companies. When a parent company either directly or indirectly controls a majority interest of a subsidiary, consolidated financial statements must be presented. Consolidated financial statements present the results of operations, statement of cash flows, and financial position of the combined entity.

These minority stockholders benefit from the subsidiary’s income and financial strengths; they suffer from the subsidiary’s losses and financial weaknesses. Thus, the subsidiary’s creditors and minority stockholders are more interested in the subsidiary’s individual financial statements than in the consolidated statements. Because of these factors, annual reports always include the financial statements of the consolidated entity, and sometimes include the financial statements of certain subsidiary companies alone, but never include the parent company’s financial statements alone. In addition, any dividends declared from those retained earnings can’t be included in the parent company’s net income.

If a company reports internationally it must also work within the guidelines laid out by the International Accounting Standards Board’s International Financial Reporting Standards (IFRS). Both GAAP and IFRS have some specific guidelines for entities who choose to report consolidated financial statements with subsidiaries. Private companies have very few requirements for financial statement reporting but public companies must report financials in line with the Financial Accounting Standards Board’s Generally Accepted Accounting Principles (GAAP). Both GAAP and IFRS have some specific guidelines for companies who choose to report consolidated financial statements with subsidiaries. The parent must enter some end-of-period adjustments when preparing consolidated financial statements.

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. These documents are called consolidated financial statements and allow the health of the group to be assessed as a whole, rather than piece-by-piece. An important item to understand in regard to consolidated financial statements is the concept of minority interest. A minority interest exists when a parent company owns a majority interest in a subsidiary, but not 100% of the outstanding shares.

consolidation

In financial accounting, consolidated financial statements provide a comprehensive view of the financial position of both the parent company and its subsidiaries, rather than one company’s stand-alone position. Consolidated financial statements are of limited use to the creditors and minority stockholders of the subsidiary. The subsidiary’s creditors have a claim against the subsidiary alone; they cannot look to the parent company for payment. Minority stockholders in the subsidiary do not benefit or suffer from the parent company’s operations.

Each separate legal entity has its own financial accounting processes and creates its own financial statements. These statements are then comprehensively combined by the parent company to final consolidated reports of the balance sheet, income statement, and cash flow statement. Because the parent company and its subsidiaries form one economic entity, investors, regulators, and customers find consolidated financial statements helpful in gauging the overall position of the entire entity. Private companies will usually make the decision to create consolidated financial statements including subsidiaries on an annual basis.

Consolidated accounting is used to group the financial information of a parent company and one or more subsidiary companies. A parent company owns the majority of voting shares of a subsidiary company or otherwise has contractual control of the subsidiary. The parent prepares consolidated financial statements by making adjusting entries and eliminating intercompany transactions. The parent files a combined tax return when it owns at least 80 percent of the subsidiary’s voting shares. Many large companies are partially or entirely made up of smaller companies that they’ve acquired throughout the years.Consolidated Balance Sheet is a simple spreadsheet that shows the consolidated balance sheet of a business. The purpose of this report is to provide a quick overview of the financial positions of the businesses.. Read more about consolidated balance sheet questions and answers and let us know what you think.{“@context”:”https://schema.org”,”@type”:”FAQPage”,”mainEntity”:[{“@type”:”Question”,”name”:”What is included in consolidated balance sheet?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” The consolidated balance sheet is a financial statement that includes the assets, liabilities, and equity of all the companies in a group.”}},{“@type”:”Question”,”name”:”What is the difference between balance sheet and consolidated balance sheet?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” Balance sheet is a financial statement that shows the assets, liabilities, and equity of a company. Consolidated balance sheet is a financial statement that combines the assets, liabilities, and equity of two or more companies.”}},{“@type”:”Question”,”name”:”How is a consolidated balance sheet prepared?”,”acceptedAnswer”:{“@type”:”Answer”,”text”:” A consolidated balance sheet is prepared by consolidating the assets, liabilities, and equity of all the entities in a group.”}}]}

Frequently Asked Questions

What is included in consolidated balance sheet?

The consolidated balance sheet is a financial statement that includes the assets, liabilities, and equity of all the companies in a group.

What is the difference between balance sheet and consolidated balance sheet?

Balance sheet is a financial statement that shows the assets, liabilities, and equity of a company. Consolidated balance sheet is a financial statement that combines the assets, liabilities, and equity of two or more companies.

How is a consolidated balance sheet prepared?

A consolidated balance sheet is prepared by consolidating the assets, liabilities, and equity of all the entities in a group.