Consolidated financial statements
In one sentenceStatements that present the parent company and its subsidiaries as if they were one business, by adding up their items and eliminating the transactions and balances between them.
Simply put
If your company controls another company, the reader wants to see the whole group. That is why assets, liabilities, revenues and expenses are added together item by item.
The important step is eliminating intra-group transactions: a sale from the parent to the subsidiary is not a sale for the group, so it is not counted twice.
Worked example
A parent company has sales of 5,000,000 SAR, its subsidiary 2,000,000 SAR, and the parent sold goods worth 500,000 SAR to the subsidiary during the year.
Parent sales5,000,000
Subsidiary sales2,000,000
− Sales between group companies(500,000)
Consolidated sales = 5,000,000 + 2,000,000 − 500,0006,500,000 SAR
Don't confuse it with
SubsidiaryThe subsidiary is the controlled company, and the consolidated statements are the report that combines it with the parent.