Definition of consolidating financial statements

14-Sep-2017 03:14

Since the companies are going to be combined on the financials, no investment accounts are needed, as this would double count the subsidiaries in the reports.This might sound a little complicated at first, so I’ll break it down into steps.All of the subsidiary company's assets and liabilities appear on the parent company's balance sheet, and all of the subsidiary company's revenue, expenses, gains and losses appear on the parent company's income statement.The companies' financial results, therefore, are consolidated on a single set of statements.This account is no longer needed on a set of consolidated financial statements because we are treating all of the companies as if they were the one company.

In other words, it’s a report that combines all the activities of a parent companyand its subsidiaries on one report.

Second, the individual assets and liabilities of the parent and subsidiaries are combined to make a single balance sheet.