Sample consolidating balance sheet
Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they let you gauge the overall health of an entire group of companies as opposed to one company's standalone position.
Consolidated financial statements report the aggregate of separate legal entities.
A parent company can operate as a separate corporation apart from its subsidiary companies.
There are many reasons for these transactions, and this helps to explain their frequency.
One business may acquire another to eliminate a competitor, to gain access to critical technology, to insure a supply chain, to expand distribution networks, to reach a new customer base, and so forth.
There are three ways to calculate the ownership interest between companies.
This majority position enables the acquirer to exercise control over the other company.Each of these entities reports its own financial statements and operates its own business.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.Financial statements that reflect the total economic entity.For example, on a consolidated income statement a corporation having several subsidiaries would report the total of all of its companies' sales that were made to customers outside of its group.