How to Consolidate Financial Statements. Many large companies are partially or entirely made up of smaller companies that they’ve acquired throughout the years. After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large financial statements book pdf, 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. Consolidated financial statements can be created easily using the following steps. Determine which holdings to report as subsidiaries. For the purpose of consolidated statements, a company is only considered a subsidiary if the parent company holds a controlling interest in that company. This is because this share value would give them majority voting power in the subsidiary. The parent has majority voting rights by agreement with the subsidiary’s board.