Consolidated Financial Statements
Consolidated financials are the statements where all assets, liabilities, income, expenses, cash flows and equity of a company and its subsidiaries are combined. They’re composed of the consolidated income statement, balance sheet and note disclosures and are meant to gauge how the parent company is doing as a whole. Consolidating the financial statements of child companies is often a complex undertaking, as subsidiaries can operate in different geographical regions, under different reporting languages and different currencies. This means that the consolidated financial statement must be prepared in a way that enables an apples-to-apples comparison between subsidiaries.
The goal of consolidated financial statements is to present an enterprise as a single entity, which means that intra-group transactions and intra-group balances need to be eliminated. Only then can an enterprise in its entirety be fairly evaluated and understood.