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Consolidated financial statements

FAR Chapter 4 · Area I · Blueprint I.A.6

When one company controls another, investors want to see the group as a single business. The Blueprint asks you to prepare consolidated statements, including adjustments, eliminations and noncontrolling interests, and to correct errors in them. The detailed accounting for a business combination is tested in BAR. FAR tests the mechanics: what to add together, what to cancel, and how to show the part of the subsidiary you do not own.

In this chapter

1. When to consolidate
2. The acquisition-date elimination
3. Noncontrolling interest after acquisition
4. Intercompany balances and sales of inventory
5. Consolidated net income, and downstream versus upstream
6. Intercompany sales of equipment and land
7. Changes in ownership, combined statements and error checks

This chapter has 7 lessons, 50 practice MCQs with explanations and 30 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Adjustments and eliminations
• wholly owned subsidiaries
• noncontrolling interests

Chapter 3: Statement of cash flows · Chapter 5: Not-for-profit financial statements