When consolidated financial statements are prepared?
James Williams
Updated on February 10, 2026
94, consolidated statements must be prepared (1) when one company owns more than 50 per cent of the outstanding voting common stock of another company, and (2) unless control is likely to be temporary or if it does not rest with the majority owner (e.g. the company is in legal reorganization or bankruptcy).
On which principle consolidated financial statements are prepared?
A consolidated financial statement needs to be prepared on the basis of legal-entity based financial statements of the parent company and its subsidiaries which belong to the business faction, and prepared in accordance with the GAAP.
Is it mandatory to prepare consolidated financial statements?
According to the new Companies Act 2013, all listed and unlisted companies, having one or more subsidiaries, including associate companies and joint ventures must compulsorily prepare the Consolidated Financial Statements (CFS).
How does a consolidated financial statement need to be prepared?
A consolidated financial statement needs to be prepared on the basis of legal-entity based financial statements of the parent company and its subsidiaries which belong to the business faction, and prepared in accordance with the GAAP. 3.
What does consolidated financial statement mean in IAS 27?
According to IAS 27 “Consolidated and separate financial statements”, consolidated financial statements are the financial statements of a group presented as those of a single economic entity.
How are parent and subsidiary financial statements prepared?
In accordance with the substance over form principle of accounting, the parent and the subsidiary must be presented as a single economic entity. The accounting procedures be adopted for preparation of consolidated financial statements depends on a number of factors:
How does a Consolidated Statement of profit or loss work?
Even though this question requires an extract from the consolidated statement of profit or loss, the principle is still the same as Illustration (2) – consolidate the group as if it is a single economic entity by adding in 100% line by line, and showing group performance with all non-group entities.
