Consolidating balance sheet definition
Thus, profit/loss will be visible to the parent’s shareholders only, and not to the minority interest’s.
: This is a transaction between two subsidiaries of the same company.
When one company owns a significant stake in another business -- generally defined as at least 20 percent -- it must account for that stake in its books using either consolidation or the equity method of accounting.
In general, a controlling stake is one that involves ownership of more than 50 percent of a business.
The total amount of unrealised profits/loss to be eliminated in intercompany transactions does not vary regardless of whether the subsidiary is wholly-owned (non-controlling interest, NCI, does not exist) or partially owned.
However, if the subsidiary is partially owned (i.e., NCI exists), the elimination of such profit/loss may be allocated between the majority and minority interests.
These balance sheets are both compiled on a gross basis.
The aggregated balance sheet thus includes assets and liabilities vis-a-vis other MFIs.
Inventory sales in downstream transactions (from parent to subsidiary) are accounted for as internal transfers between departments of a single entity: Financial consolidation is more than just adding up numbers from separate financial statements.