What is a Consolidated Group?

A consolidated group is comprised of a parent company and all of its subsidiaries. Consolidated financial statements are issued for a consolidated group. The group may also file a consolidated tax return with the Internal Revenue Service.

Example of a Consolidated Group

An example of a consolidated group is The Walt Disney Company and its subsidiaries. Disney, as the parent company, owns multiple subsidiaries such as Pixar, Marvel Studios, Lucasfilm, ESPN, and 20th Century Studios. When Disney prepares its consolidated financial statements, it combines the financial results of all these subsidiaries into a single report, eliminating intercompany transactions to provide a complete picture of the company’s overall financial health. This ensures that investors and stakeholders see Disney’s total revenues, expenses, assets, and liabilities as one unified entity rather than as separate companies.

Accounting for a Consolidated Group

In order to present consolidated financial statements, a parent company has to complete the following steps:

Convert the financial statement currency of each subsidiary to the home currency of the parent entity.
Identify and eliminate all intercompany transactions between the various entities.
Account for any non-controlling interests in the various entities.
Produce combined financial statements.