Consolidating 100 owned subsidiary when is dating considered a relationship
The first stage of consolidating these results is simply to add them up.
This is done in the first two columns of the table below.
Three very important concepts in group accounting are goodwill, internal transactions and non-controlling interest.
This is any excess of the amount paid for an acquisition over the value of the net assets acquired.
For this reason, a fundamental principle of consolidation is to remove internal items from the group figures.
This avoids group accounts showing misleadingly high levels of activity or assets.
Our consolidation adjustments to remove internal transfers (of £40m) ensure consolidated group sales are not overstated.
Sometimes the group owns less than 100% of a subsidiary, say 90%.
Internal items are ones between members of the same group, for example, any sales and purchases between Holdco and Sub.
So we need to be able to fully understand group accounts. Different sets of accounts are used for different purposes.
The individual accounts show the position and the performance of each individual company, but not the group as a whole.
There is no indication of the actual assets and liabilities of the subsidiaries that the parent controls.
Process Consolidation adds together the assets, liabilities and results of the parent and all of its subsidiaries.
The consolidated accounts combine all the information from the subsidiaries under the parent’s control.