Difference between consolidated consolidating financial statements

31-Mar-2015 14:34 by 4 Comments

Difference between consolidated consolidating financial statements

Many practitioners though, in Canada and elsewhere, haven’t seen a need to draw the line that way, and the ASC seems to be communicating in effect that there’s certainly some place for the concept, without defining exactly its limits.

Consolidating shows detailed information by business unit of what makes up a total number, however Consolidated just shows the total figure.

What if the two entities have been subject to quite different day to day strategies and management?

What if the entity wants to combine of subsidiaries that it owns, rather than all of them?

The presentation could easily cross a line though into conveying a financial history that never really existed – that is into the territory of pro forma financial statements – rather than providing an easier way to understand a series of separate histories that .

Most of us would probably agree on certain aspects of implementing the combination – for example, that all the combined entities should apply consistent accounting policies – but in the absence of guidance on the matter, maybe you couldn’t count on that either.

Suppose a single entity has two long-held wholly-owned subsidiaries, both of which it also manages, each of which holds cash and various straightforward financial assets, earning interest income and each bearing a similar management fee; it then decides to combine the two entities into one, and prepares combined financial statements as if this had always been the case.

Based on those simple facts, it doesn’t seem to me the combined statements would obscure anything potentially significant about the entities’ histories or prospects – there’s no advantage to looking at two sets of statements rather than one.

(And could segment disclosures in the notes compensate for that?

) In all these situations, combining the separate histories into one could obscure combined ones.

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What if combining the statements would make it harder to understand liquidity or other challenges existing in one of the entities?

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