Consolidated Financial Statement

What is the Consolidated Financial Statement?

Consolidated Financial Statements is the financial statements of the overall group which represents the sum total of its parents and all of its subsidiaries and includes all three key financial statements – income statement, cash flow statement and balance sheet.


A parent company, when it owns a significant stake in another company, the latter is called a subsidiary. Even if both have separate legal entities and both record their financial statements, they need to prepare a consolidated financial statement to help the investors get a better understanding.

Let’s take an example to understand this.

Consolidated Financial Statement

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For eg:
Source: Consolidated Financial Statement (

Consolidated Financial Statement Example

Here is the example of Colgate

Colgate Consolidated Statements of Income

Consolidated Financial Statements - Colgate

source: Colgate SEC Filings

Consolidated Balance Sheet of Colgate

Consolidated Financial Statements - Colgate BS

source: Colgate SEC Filings

Consolidated Cash Flow Statement of Colgate

Consolidated Financial Statements - Colgate CF

source: Colgate SEC Filings

In the next section, we will see how we can format a consolidated financial statement so that the investors understand the direction of a company and its subsidiary. We will look at both International Accounting Standards, which are applicable worldwide except GAAP, which is applicable in the USA.

Preparing Consolidated Financial Statement under IAS 27

Circumstances when the parent company doesn’t need to present consolidated statements:

First, let’s talk about where the parent companyParent CompanyA holding company is a company that owns the majority voting shares of another company (subsidiary company). This company also generally controls the management of that company, as well as directs the subsidiary's directions and more doesn’t need to prepare and present the consolidated statements –

  • If the parent company is a fully or partially owned subsidiary, then the presentation of consolidated statements is not required. But that is subject to the fact that if the owners don’t question the parent company for not representing the consolidated statements.
  • If the parent company’s stock or debt isn’t traded in any public market, for example, stock exchange, over-the-counter market, etc., then it’s not required for the parent company to present consolidated financial statements.
  • If the parent company is on the brink of filing its financial statements with a security commission for issuing any type of instruments in the public market, then it would not be required for the parent company to present a consolidated balance sheet.
  • Lastly, if any parent of this parent company presents the consolidated statements according to the mandate of International Financial Reporting Standards (IFRS), then it would not be necessary for this parent to present any consolidated statements for public use.
Checklist for Preparation of Consolidated Financial Statements

Preparing Consolidated Financial Statement under US GAAP

If you are in the USA or follow GAAP, here are the few things you should consider while preparing consolidation financial statement –


Usually, there are few limitations that we need to consider if we think from the investor’s view –


Consolidated Financial Statement depicts what a group of companies is heading toward. It gives a clear picture of the existing and potential investors about the company and its future. But they always don’t help, until you take a detailed approach. You need to check the mentioned notes in the financial statementFinancial StatementFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all more to investigate the transaction and understand why the entry has been recorded. This will help you know a company accurately.

Consolidated Financial Statement Video


Recommended Articles

This has been a guide to what is Consolidated Financial Statements and its meaning. Here we discuss how to prepare consolidated financial statements under IAS and US GAAP along with examples and its limitations. You can also go through the following advanced accounting articles –