Each subsidiary must prepare its own financial statements including balance sheet, income statement, statement of cash flows and statement of retained earnings.This information for each subsidiary is then combined using consolidation software to create consolidated financial reports that represent the financial position of the parent company.The objective of IFRS 10 is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.[IFRS 10:1] The Standard: [IFRS 10:1] An investor controls an investee when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee * Added by Investment Entities amendments, effective 1 January 2014.Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee.
Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they let you gauge the overall health of an entire group of companies as opposed to one company's standalone position.
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Consolidated financial statements report the aggregate of separate legal entities.
A parent company can operate as a separate corporation apart from its subsidiary companies.