Parent & Subsidiary Company Consolidation Techniques and Procedures

In a company, of course, it has various subsidiaries, either one subsidiary or several subsidiaries. Moreover, various companies and even their own subsidiaries will present consolidated financial statements. This type of financial report itself is often used to compile the financial statements of a number of sister companies which become one entity in the financial statements. Consolidated financial statements are documents that detail the financial activities of a business with subsidiaries or parent companies. A holding company is a business that oversees the activities of another business and often has a share in the ownership of that business. For example, some food brands have different companies with the same name to differentiate their products.In simple terms, the accounts of different companies belonging to the same management or owner are consolidated to present the overall financial position of the group. This report requires considerable effort to build, because it must exclude the impact of any transaction between the entities being reported on.Accordingly, if there is a sale of goods between a subsidiary and a parent company, then this inter-company sale must be eliminated from the consolidated financial statements. Another common inter-company write-off is when the parent company pays interest income to a subsidiary whose cash is used to make investments; This interest income should be eliminated from the consolidated financial statements