Key Financial Accounting Areas
What is a consolidation?
Consolidation occurs when the parent owns more than 50 percent of the voting common stock of the subsidiary. The objective of consolidation is to present as one economic unit the financial position and operating results of a parent and subsidiaries. The consolidation shows the group as a single company with one or more branches or divisions rather than as separate companies.
The companies making up the consolidated group keep their individual legal identities. Adjustments and eliminations are for the sole purpose of financial statement reporting.
When is a consolidation not valid?
A consolidation is negated, even if more than 50 percent of voting common stock is owned by the parent, in these instances:
How is a consolidation accounted for?
Intercompany eliminations include those for intercompany payables and receivables, advances, and profits. ...