Consolidated financial statements present the assets, liabilities, equity, income, expenses and cash flows of a parent and its subsidiaries as those of a single economic entity. Under IFRS 10, a parent that controls other entities prepares them by combining the companies line by line and eliminating everything that happens inside the group.
What are consolidated financial statements?
A group is a parent and its subsidiaries. Each company keeps its own books and may file its own statements, but owners and lenders of the parent need to see the group as a whole. IFRS 10 defines consolidated financial statements as the statements of a group in which the parent and its subsidiaries are presented as a single economic entity, and requires a parent that controls one or more entities to present them.
Control decides which companies are in. Under IFRS 10, an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement and can affect those returns through its power over the investee. Holding most of the voting rights usually gives control, but contracts and other rights can too, so each company is assessed on its facts.
How are consolidated financial statements prepared?
- Align the inputsUse the same accounting policies and the same reporting date for every company, adjusting where a company differs.
- Translate foreign companiesTranslate each company that reports in another currency into the group’s presentation currency. See foreign currency translation.
- Combine line by lineAdd together like items of assets, liabilities, equity, income, expenses and cash flows (IFRS 10, paragraph B86(a)).
- Eliminate the investmentOffset the parent’s investment in each subsidiary against its share of that subsidiary’s equity, with goodwill accounted for under IFRS 3 (paragraph B86(b)).
- Eliminate intragroup itemsRemove in full the balances, transactions, income, expenses and cash flows between group companies, including profit still held in inventory or fixed assets inside the group (paragraph B86(c)). See intercompany transactions.
- Show the minority sharePresent non-controlling interests within equity, separately from the parent owners’ equity (paragraph 22).
What does consolidation change in the numbers?
Why do consolidated statements matter for finance teams in the GCC?
In Saudi Arabia, SOCPA applies international standards to companies listed on the financial market from financial statements starting 1 January 2017, and to other entities from periods beginning 1 January 2018. Groups in the region often own companies in several countries, on different systems and in different currencies, so the hard part is usually gathering consistent numbers and agreeing intercompany balances before the elimination step. Our guide to group consolidation and intercompany eliminations walks through it.
Questions people ask
Are associates and joint ventures consolidated?
Not line by line. Associates are accounted for using the equity method under IAS 28, and joint ventures generally are too: one investment line and a share of the investee’s results. Only subsidiaries, which the parent controls, are consolidated in full.
Does every parent have to prepare consolidated statements?
IFRS 10 requires a parent to present them, with limited exemptions, for example for some intermediate parents whose own parent publishes consolidated statements. Check the conditions with your auditor before relying on one.
What is the difference between consolidated and combined statements?
Consolidated statements follow control under IFRS 10 and start from a parent. The IFRS Conceptual Framework (paragraph 3.12) uses combined financial statements for a reporting entity made of two or more entities that are not all linked as parent and subsidiary, such as sister companies under common ownership, often prepared for a specific purpose such as a transaction.
Official and primary sources, read on the date shown. Rules change: confirm with the authority or your adviser before you act.
- IFRS Foundation: IFRS 10 Consolidated Financial Statements (standard page) (read 9 October 2026)
- AASB 10 Consolidated Financial Statements (August 2011), which incorporates IFRS 10: Appendix A definitions and paragraphs 4, 22, B86, B87 and B92 (read 9 October 2026)
- AASB Conceptual Framework for Financial Reporting (May 2019), which incorporates the IASB Conceptual Framework: paragraph 3.12 on combined financial statements (read 9 October 2026)
- IFRS Foundation: IAS 28 Investments in Associates and Joint Ventures (standard page) (read 10 October 2026)
- SOCPA: Overview of Professional Standards (application of international standards in Saudi Arabia) (read 9 October 2026)