Consolidating income statements

For investors, a company's financial statements offers insight into the health of the company.

Depending on the size of a company and the complexity of its business, the financial statements may be a bit confusing, particularly if the company has several subsidiaries with overseas operations.

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Inventory sales in downstream transactions (from parent to subsidiary) are accounted for as internal transfers between departments of a single entity: Financial consolidation is more than just adding up numbers from separate financial statements.

Many companies nowadays rely on technology to avoid the trouble that accompanies handling NCI, ICE, and more.

Tracking intercompany transactions is perceived as one of the most common problems with financial consolidation Intercompany transactions are transactions that happen between two entities of the same company.

Not adjusting intercompany transactions results in consolidated financial statements that do not offer a true and fair view of the group’s financial situation.

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Consolidated financial statements are the "Financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent (company) and its subsidiaries are presented as those of a single economic entity", according to International Accounting Standard 27 "Consolidated and separate financial statements", and International Financial Reporting Standard 10 "Consolidated financial statements".

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Consolidated financial statements aggregate the financial position of a parent company and its subsidiaries.

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