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Consolidated financial statement
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{{Short description|Concept in accounting}} {{Refimprove|date=November 2013}} {{Accounting}} A '''consolidated financial statement''' ('''CFS''') is the "[[financial statement]] of a group in which the [[assets]], [[liability (financial accounting)|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 the definitions stated in [[International Accounting Standard]] 27, "Consolidated and separate [[financial]] statements", and [[International Financial Reporting Standard]] 10, "Consolidated financial statements".<ref>{{cite web |url=http://www.iasplus.com/en/standards/ias/ias27-2011 |title=IAS 27 — Separate Financial Statements (2011) |publisher=IAS Plus (This material is provided by Deloitte Touche Tohmatsu Limited (“DTTL”), or a member firm of DTTL, or one of their related entities. This material is provided “AS IS” and without warranty of any kind, express or implied. Without limiting the foregoing, neither Deloitte Touche Tohmatsu Limited (“DTTL”), nor any member firm of DTTL (a “DTTL Member Firm”), nor any of their related entities (collectively, the “Deloitte Network”) warrants that this material will be error-free or will meet any particular criteria of performance or quality, and each entity of the Deloitte Network expressly disclaims all implied warranties, including without limitation warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility and accuracy.) |website= www.iasplus.com |access-date=2013-11-29}}</ref><ref>{{cite web |url=http://www.iasplus.com/en/standards/ifrs/ifrs10 |title=IFRS 10 — Consolidated Financial Statements |publisher=IAS Plus (This material is provided by Deloitte Touche Tohmatsu Limited (“DTTL”), or a member firm of DTTL, or one of their related entities. This material is provided “AS IS” and without warranty of any kind, express or implied. Without limiting the foregoing, neither Deloitte Touche Tohmatsu Limited (“DTTL”), nor any member firm of DTTL (a “DTTL Member Firm”), nor any of their related entities (collectively, the “Deloitte Network”) warrants that this material will be error-free or will meet any particular criteria of performance or quality, and each entity of the Deloitte Network expressly disclaims all implied warranties, including without limitation warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility and accuracy.) |website= www.iasplus.com |access-date=2013-11-29}}</ref> == Consolidated statement of financial position == While preparing a consolidated financial statement, there are two basic procedures that need to be followed: first, cancelling out all the items that are accounted as an asset in one company and a liability in another, and then adding together all uncancelled items. There are two main type of items that cancel each other out from the consolidated statement of financial position. * "Investment in [[subsidiary]] companies" which is treated as an asset in the parent company will be cancelled out by "share capital" account in subsidiary's statement. Only the parent company's "share capital" account will be included in the consolidated statement. * If trading between different companies in one group happen, then the payables of one company will be cancelled by the receivables of another company. === Goodwill arising on consolidation === [[Goodwill (accounting)|Goodwill]] is treated as an intangible asset in the consolidated statement of financial position. It arises in cases where the cost of purchase of shares is not equal to their par value. For example, if a company buys shares of another company worth $40,000 for $60,000, there is a goodwill worth $20,000. Proforma for calculating goodwill is as follows:<ref>{{Cite book|title=Fia foundations of financial accounting ffa (acca f3).|author=BPP Learning Media|date=2016|publisher=BPP Learning Media|isbn=9781472745903|location=[Place of publication not identified]|oclc=951710877}}</ref> '''''Goodwill''''' Fair value of consideration transferred Plus fair value of non-controlled interest at acquisition Less ordinary share capital of subsidiary company Less share premium of subsidiary company Less retained earnings of subsidiary company at acquisition date Less fair value adjustments at acquisition date === Non-controlled interest === If the parent company does not buy 100% of shares of the subsidiary company, there is a proportion of the net assets owned by the external company. This proportion that is related to outside investors is called the non-controlling interest (NCI). The proforma for calculating the NCI is as follows: '''''Non-controlling interest''''' Fair value of NCI at acquisition date Plus NCI's share of post-acquisition retained earnings or other reserves == NCI at the reporting date == === Intra-group trading === In a group of companies, they can have trade relations with each other. For example, company A buys goods for one price and sells them to another company inside the group for another price. Thus, company A has earned some revenue from selling, but the group as a whole did not make any profit out of that transaction. Until those goods are sold to an outsider company, the group has unrealised profit. ==See also== *[[Associate company]] *[[Business valuation]] *[[Consolidation (business)]] *[[Enterprise value]] *[[Minority interest]] ==References== {{reflist}} ==Further reading== * Alexander, D., Britton, A., Jorissen, A., "International Financial Reporting and Analysis", Second Edition, 2005, {{ISBN|978-1-84480-201-2}}, *Roy Dodge: [https://archive.org/details/groupfinancialst0000dodg/mode/2up?view=theater Group Financial Statements], [[London]]: [[Chapman & Hall]], 1996 {{Authority control}} [[Category:Financial statements]]
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