Accounting consolidating financial statements

This provides the opportunity for investors to view results in a complete and accurate manner.Thus, this approach is more holistic than combined financial statements. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas.Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.In this approach, the financial results of the parent and the holding companies are presented as a single entity.Here, only the proportion of results of the holding company that belong to the parent will be recorded.(Since the sales of electricity from NEP to MGC and the sales of gas from MGC to NEP are not earned outside of the economic entity they are eliminated.) The consolidated income statement will also report all of the expenses that were incurred outside of the economic entity.

As companies pursue expansion strategies, they may acquire controlling or non-controlling stakes in other companies.Such acquired stakes should be recorded in the financial statements.If a company holds a stake in another company it is referred to as the ‘parent company’.If the subsidiary is ‘wholly owned’ (stake is 100%).Then the results will be fully incorporated into the financial statements.

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