Accounting consolidating

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The companies' financial results, therefore, are consolidated on a single set of statements.Internally, the parent is free to treat the subsidiary as a completely separate entity, but it must consolidate its finances in statements prepared for outside observers, such as banks, regulators and potential investors.Generally accepted accounting principles requires a company to use consolidated accounting when it owns a controlling stake in another business.In general, a controlling stake is one that involves ownership of more than 50 percent of a business.

Please note here that in the above statements of financial position, .In consolidated accounting, the parent company essentially treats the subsidiary company as if it doesn't exist.All of the subsidiary company's assets and liabilities appear on the parent company's balance sheet, and all of the subsidiary company's revenue, expenses, gains and losses appear on the parent company's income statement.Consolidated financial statements combine a parent company's information with one or more subsidiary companies to produce one master document.Investors, lenders or regulatory agencies often require a company to provide consolidated financial statements as part of an application review or audit.

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