Consolidated vs consolidating financial statements

nonconsolidation decision; use the quantitative approach if qualitative methods don’t result in a definitive conclusion.

Where neither approach provides an answer, use a combination of the two.

Consolidated financial statements are the "Financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent (company) and its subsidiaries are presented as those of a single economic entity", according to International Accounting Standard 27 "Consolidated and separate financial statements", and International Financial Reporting Standard 10 "Consolidated financial statements".

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

CPAs SHOULD RECONSIDER A DECISION ABOUT WHETHER an entity is a VIE if its situation changes so its equity investment at risk is no longer adequate, some or all of the equity investment is returned to investors or the entity undertakes additional activities, acquires additional assets or receives an additional equity investment that is at risk. 46(R) is causing reporting entities to make new decisions about whether affiliated entities need to be consolidated into their financial statements.

The primary beneficiary is the reporting entity, if any, that receives the majority of expected returns or absorbs the majority of expected losses.46, to address consolidation requirements for businesses that are affiliated with VIEs. 46(R) addresses the consolidation of business enterprises where the usual consolidation condition—ownership of a majority voting interest—does not apply.It focuses on controlling financial interests achieved by means other than voting.When provided by related parties, such support is considered provided by the primary reporting entity.In many cases involving private companies, these additional support arrangements exist between and among affiliated entities and indicate there is not sufficient equity at risk for the VIE to operate on a stand-alone basis.CPAs can help reporting entities evaluate the sufficiency of equity at risk using qualitative or quantitative methods.


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