In preparing consolidated financial statements, the financial statements of the parent and its subsidiaries should be combined on a line-by-line basis by adding together like items of assets, liabilities, income and expenses and then certain adjustments are made.
- The consolidation adjustments required will vary depending on the circumstances. The adjustments include (but are not restricted to);
- The elimination of the cost of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary;
- recognition of goodwill or capital reserve, depending on whether the cost of the parent’s investment in each subsidiary is greater than or less than the parent’s portion of equity of each subsidiary at the date on which investment in the subsidiary is made;
- the identification of the minority interest in the profit or loss of consolidated subsidiaries for the reporting period;
- the identification of the minority interest in the net assets of consolidated subsidiaries for the reporting period;
- the elimination of all intra-group balances and intra-group transactions, and the resulting unrealised profits and losses;
- adjustment of the consolidated results for dividends related to outstanding cumulative preference shares of a subsidiary that are held by minority interests regardless of whether the dividends have been declared.
