Consolidating foreign subsidiaries ifrs
Voevodin's Library: subsidy, swaps, systematic risk, tariff, tax credit, tax haven, tax treaty, technical analysis, temporal method, theocratic totalitarianism, time draft, time-based competition, timing of entry, total quality management, totalitarianism, trade creation, trade deficit, trade diversion, trade surplus, trademark, transaction costs, transaction exposure, transfer fee, transfer price, translation exposure, transnational corporation, transnational financial reporting, transnational strategy, Treaty of Rome, tribal totalitarianism, turnkey project, unbundling, uncertainty avoidance, universal needs, value creation, values, vehicle currency, vertical differentiation, vertical foreign direct investment, vertical integration, voluntary export restraint (VER), wholly owned subsidiary, World Bank, World Trade Organization (WTO), worldwide area structure, worldwide product division structure, zero-sum game A consolidated financial statement combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one.Most multinational firms are composed of a parent company and a number of subsidiary companies located in various other countries.
Economically, all the companies in a corporate group are interdependent.
For example, if the Brazilian subsidiary of a US parent company experiences substantial financial losses that suck up corporate funds, the cash available for investment in that subsidiary, the US parent company, and other subsidiary companies will be Transactions among the members of a corporate family are not included in consolidated financial statements; only assets, liabilities, revenues, and expenses with external third parties are shown.
By law, however, separate legal entities are required to keep their own accounting records and to prepare their own financial statements.
Thus, transactions with other members of a corporate group must be identified in the separate statements so they can be excluded when the consolidated statements are prepared.
The process involves adding up the individual assets, liabilities, revenues, and expenses reported on the separate financial statements and then eliminating the intragroup ones.
For example, consider these items selected from the individual financial statements of a parent company and one of its foreign subsidiaries: The $300 receivable that the parent includes on its financial statements and the $300 payable that the subsidiary includes on its statements represent an intragroup item.