Definition of consolidating financial statements

18 Apr

This information for each subsidiary is then combined using consolidation software to create consolidated financial reports that represent the financial position of the parent company as a whole.

Consolidated financial statements are often used for reporting to investors, government agencies or applying for loans and grants.For a consolidated balance sheet, loans to the subsidiary from the parent are removed, along with any sales and purchases between the two entities.By eliminating these accounts, duplications are avoided and the statements more closely reflect the financial position of a single entity.In this article, we will review consolidated financial reports in more detail including the unique benefits they offer. Consolidated financial reports are prepared by any parent company that owns one or more subsidiaries.For example, it is common for one company to purchase smaller companies that can complement the primary business and make it even stronger.