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Preparing Consolidated Financial Statements

What is the basic idea underlying the preparation of consolidated financial statements? How might consolidated statements help an investor assess the desirability of purchasing shares of the parent company? Are consolidated financial statements likely to be more useful to the owners of the parent company or to the noncontrolling owners of the subsidiaries? Why? Explain.

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Consolidated financials allow financial statement users to assess the overall health and financial position of the parent and subsidiaries simultaneously. If a parent company has many subsidiaries, it would take users a great deal of time to analyze every subsidiary financial statement. The consolidated statement offers a snapshot of the parent and all subsidiaries. It is an ...

Solution Summary

This solution discusses the mechanics of consolidated financial statements. This solution discusses why these statements are useful to investors and other users, and if the consolidated statements are more useful to the owners of the subsidiary or to the noncontrolling owners.