Consolidated financial statements are a very crucial part of the accounting processes for group companies. Simply put, it can be defined as the preparation of accounts by a parent company where the records of its subsidiaries are also mentioned.
However, in practicality, the entire process is far more complex than simply adding all the corresponding figures together. This is because even a small misunderstanding of all the issues can lead to significant tragic errors. And so, we have drafted this article to help the companies make their way through this minefield and avoid big risks.
Why are Consolidated Company Financial Statements Important?
The overall purpose of consolidated company financial statements is to provide a complete picture of the organization’s position in the financial year. The parent company and its subsidiaries are required to maintain their own discrete financial statements. However, since they are connected and controlled by a common team, it automatically ensures that the parent organization is under obligation to show its financial position as if it was a single entity.
How does Consolidated Company Financial Statement Help Businesses?
Even though each and every company is responsible for its individual set of financial statements, individuals may often wonder, should we actually compile a consolidated version? Well, to answer your question, yes! There are many different reasons as to why a group of companies should make it a point to prepare consolidated financial statements. Here are some of them:
- Complete Overview
Consolidated company financial statements enable potential investors, business owners, and other interested parties to get a complete understanding of the organization’s situation. At a single glance, they get to understand the overall situation of the company and how each subsidiary is affecting its financial position.
- Reducing the Volume of Paperwork Required
It is obvious that consolidated company financial statements reduce the amount of paperwork required. Without it, anyone looking to get an overview of the group companies would have to go through an insane amount of paperwork for each of the subsidiaries as well as the parent group. It also saves time as it is quicker to glance at the data as a whole and grasp the entire state of the company.
- Simplifies the process
Consolidated financial statements, especially where software is used, makes the entire process of analysis considerably simplified. Furthermore, cross-sale effects are accounted for correctly. This produces much crisper and clearer data that is necessary for analysis and decision making.
If you are looking to get your hands on a software that can help you with your company consolidated financial statements, Dun & Bradstreet is perfect for you. They provide you with an interface called D&B Direct for Finance which helps you get accurate financial insights, automates the decision-making process and streamlines the entire process. It seamlessly integrates into your ERP/CRM applications and cuts through complexities to deliver all financial data within your accounting applications.