Consolidated financial statements

Why does it matter in a group?

Consolidated financial statements are the accounts that owners, lenders and boards of a group actually read. They add up the parent and its subsidiariesSubsidiaryA company that is controlled by another company, its parent.Open the glossary entry line by line, then remove what the companies did with each other through elimination entriesElimination entryA group-level entry that removes balances and transactions between group companies.Open the glossary entry, so the figures show dealings with outsiders only. A parent that controls other companies presents them in addition to its own statements, unless a narrow exemption applies.¹ They are one set of statements for the group as a whole, so a reader does not need to open each company’s accounts.

A small example

A parent has revenue of GBP 5,000,000 and its subsidiary GBP 3,000,000. The parent sold services of GBP 400,000 to the subsidiary. Group revenue is 5,000,000 plus 3,000,000 less 400,000, which is GBP 7,600,000.