consolidated financial statements investment & finance definition

Financial statements produced when one company, a parent, owns 50 percent or more of another company, which is its subsidiary. Once the 50 percent threshold is crossed, the subsidiary’s balance sheet, income statement, cash flow statement, and any other financial statements are combined with those of the parent company into a single set of statements. For a consolidated balance sheet, loans to the subsidiary from the parent are removed, along with any sales and purchases between the two entities. By eliminating these accounts, duplications are avoided and the statements more closely reflect the financial position of a single entity. For consolidated income statements, inter-company sales and related expenses, as well as income and expenses related to loans, receivables, or other debt, also are eliminated. These entries to consolidate the financial statements are called eliminations.