Consolidated group definition
/What is a Consolidated Group?
A consolidated group is comprised of a parent company and all of its subsidiaries. Consolidated financial statements are issued for a consolidated group. The group may also file a consolidated tax return with the Internal Revenue Service.
Example of a Consolidated Group
An example of a consolidated group is The Walt Disney Company and its subsidiaries. Disney, as the parent company, owns multiple subsidiaries such as Pixar, Marvel Studios, Lucasfilm, ESPN, and 20th Century Studios. When Disney prepares its consolidated financial statements, it combines the financial results of all these subsidiaries into a single report, eliminating intercompany transactions to provide a complete picture of the company’s overall financial health. This ensures that investors and stakeholders see Disney’s total revenues, expenses, assets, and liabilities as one unified entity rather than as separate companies.
Accounting for a Consolidated Group
In order to present consolidated financial statements, a parent company has to complete the following steps:
Convert the financial statement currency of each subsidiary to the home currency of the parent entity.
Identify and eliminate all intercompany transactions between the various entities.
Account for any non-controlling interests in the various entities.
Produce combined financial statements.
Terms Similar to Consolidated Group
A consolidated group is also known as an affiliated group.
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FAQs
How are foreign subsidiaries treated in a consolidated group?
Foreign subsidiaries are included in the consolidated group if the parent has control over them. Their financial statements are translated into the parent’s reporting currency using applicable exchange rates, with assets and liabilities translated at period-end rates and income statement items at average rates. Translation adjustments are recorded in other comprehensive income rather than current earnings.