Consolidation Adjustments
Expert-defined terms from the Advanced Certificate in Consolidation Reporting (United Kingdom) course at London School of Business and Administration. Free to read, free to share, paired with a globally recognised certification pathway.
Accounting Equation is a fundamental concept in accounting that represent… #
In the context of Consolidation Reporting, the accounting equation is crucial in understanding the impact of consolidation adjustments on a company's financial statements. Related terms include Balance Sheet, Financial Statements, and Accounting Standards. The accounting equation is used to prepare the consolidated balance sheet, which presents a comprehensive picture of the group's financial position.
Accounting Standards refer to the rules and regulations that gover… #
In the United Kingdom, the relevant accounting standards are set by the Financial Reporting Council (FRC) and include FRS 102 and IFRS. Accounting standards provide guidance on the recognition, measurement, and disclosure of consolidated financial statements. For example, IFRS 10 provides guidance on the preparation of consolidated financial statements, including the requirements for control and the treatment of non-controlling interests.
Acquisition Method is a method of accounting for the acquisition of a sub… #
In consolidation reporting, the acquisition method is used to account for business combinations, where one company acquires control of another company. Related terms include Business Combination, Acquisition, and Consolidation. The acquisition method requires the recognition of goodwill, which is the excess of the consideration paid over the net asset value of the subsidiary.
Amortization is the process of allocating the cost of an intangible</i… #
Amortization is used to match the cost of an asset with the benefits it provides over time. Related terms include Depreciation, Impairment, and Intangible Assets. For example, if a company acquires a subsidiary with a trademark, the cost of the trademark would be amortized over its useful life.
Asset is a resource owned or controlled by a company, and is recognized i… #
In consolidation reporting, assets are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Liability, Equity, and Balance Sheet. Assets can be classified as current or non-current, and include items such as property, plant, and equipment, inventories, and receivables.
Associate is a company that is not a subsidiary but is influenced … #
In consolidation reporting, associates are recognized as investments in the consolidated balance sheet. Related terms include Subsidiary, Joint Venture, and Equity Method. For example, if a company has a significant investment in another company, but does not have control, it would be accounted for as an associate.
Balance Sheet is a financial statement that presents a company's financia… #
In consolidation reporting, the consolidated balance sheet presents a comprehensive picture of the group's financial position. Related terms include Income Statement, Financial Statements, and Accounting Equation. The balance sheet is used to prepare the consolidated financial statements, which provide stakeholders with a comprehensive view of the group's financial performance and position.
Business Combination is a transaction or event in which one compan… #
In consolidation reporting, business combinations are recognized as subsidiaries, and their financial statements are consolidated with those of the parent company. Related terms include Acquisition, Mergers, and Consolidation. For example, if a company acquires a subsidiary through a share purchase, it would be accounted for as a business combination.
Capital is the equity invested in a company by its owners , and is… #
In consolidation reporting, capital is combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Share Capital, Reserves, and Equity. Capital can be classified as share capital, reserves, or retained earnings.
Cash is a liquid asset that is readily available for use in a comp… #
In consolidation reporting, cash is combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Accounts Receivable, Inventory, and Current Assets. Cash includes items such as bank balances, cash on hand, and short-term investments.
Consolidated Financial Statements are financial statements that present t… #
In consolidation reporting, consolidated financial statements provide stakeholders with a comprehensive view of the group's financial performance and position. Related terms include Parent Company, Subsidiary, and Control. The consolidated financial statements include the consolidated balance sheet, income statement, and cash flow statement.
Consolidation Adjustments are entries made to the financial statements of… #
In consolidation reporting, consolidation adjustments are used to prepare the consolidated financial statements, which provide stakeholders with a comprehensive view of the group's financial performance and position. Related terms include Elimination, Intercompany, and Control. Consolidation adjustments include items such as the elimination of intercompany sales and purchases, and the recognition of goodwill.
Control is the ability of one company to direct the financial and… #
In consolidation reporting, control is used to determine which companies are included in the consolidation. Related terms include Parent Company, Subsidiary, and Consolidation. Control can be achieved through ownership of shares, voting rights, or other means.
Cost of Acquisition is the amount paid by a company to acquire another co… #
In consolidation reporting, the cost of acquisition is used to determine the amount of goodwill recognized. Related terms include Acquisition, Business Combination, and Goodwill. The cost of acquisition includes items such as the purchase price, acquisition costs, and any other amounts paid to acquire the subsidiary.
Current Asset is an asset that is expected to be realized or sold… #
In consolidation reporting, current assets are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Non-Current Asset, Inventory, and Accounts Receivable. Current assets include items such as inventories, accounts receivable, and cash.
Depreciation is the process of allocating the cost of a tangible a… #
Depreciation is used to match the cost of an asset with the benefits it provides over time. Related terms include Amortization, Impairment, and Tangible Assets. For example, if a company acquires a subsidiary with a building, the cost of the building would be depreciated over its useful life.
Elimination is the process of removing intercompany transactions f… #
In consolidation reporting, elimination is used to prepare the consolidated financial statements, which provide stakeholders with a comprehensive view of the group's financial performance and position. Related terms include Consolidation Adjustments, Intercompany, and Control. Elimination includes items such as the elimination of intercompany sales and purchases.
Equity is the residual interest in a company's assets after deduct… #
In consolidation reporting, equity is combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Share Capital, Reserves, and Retained Earnings. Equity can be classified as share capital, reserves, or retained earnings.
Equity Method is a method of accounting for an investment in anoth… #
In consolidation reporting, the equity method is used to account for associates and joint ventures. Related terms include Associate, Joint Venture, and Investment. The equity method requires the recognition of the investor's share of the investee's profits and losses, and the adjustment of the investment account accordingly.
Financial Statements are reports that provide information about a company… #
In consolidation reporting, financial statements are combined and presented as a single entity, reflecting the group's overall financial position and performance. Related terms include Balance Sheet, Income Statement, and Cash Flow Statement. Financial statements include the balance sheet, income statement, and cash flow statement.
Goodwill is the excess of the cost of acquisition over the net asset valu… #
In consolidation reporting, goodwill is accounted for as an intangible asset, and is subject to annual impairment testing. Related terms include Acquisition, Business Combination, and Intangible Assets. Goodwill is tested for impairment annually, and any impairment loss is recognized in the consolidated income statement.
Impairment is the process of recognizing a loss in the value of an… #
Impairment is used to match the cost of an asset with its recoverable amount. Related terms include Amortization, Depreciation, and Intangible Assets. For example, if a company recognizes goodwill on the acquisition of a subsidiary, and the goodwill is impaired, the impairment loss would be recognized in the consolidated income statement.
Income Statement is a financial statement that presents a company's reven… #
In consolidation reporting, the income statement is combined and presented as a single entity, reflecting the group's overall financial performance. Related terms include Balance Sheet, Financial Statements, and Cash Flow Statement. The income statement includes items such as revenue, cost of sales, and operating expenses.
Intangible Asset is an asset that is not physical in nature, and i… #
In consolidation reporting, intangible assets are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Goodwill, Patents, and Copyrights. Intangible assets include items such as goodwill, patents, and copyrights.
Intercompany is a transaction or event that occurs between compani… #
In consolidation reporting, intercompany transactions are removed from the financial statements to present the group's financial position and performance as a single entity. Related terms include Elimination, Consolidation Adjustments, and Control. Intercompany transactions include items such as intercompany sales and purchases.
Investment is a payment made by a company to acquire an interest i… #
In consolidation reporting, investments are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Associate, Joint Venture, and Equity Method. Investments can be classified as current or non-current, and include items such as shares, loans, and bonds.
Joint Venture is a business arrangement between two or more compan… #
In consolidation reporting, joint ventures are recognized as investments in the consolidated balance sheet. Related terms include Associate, Equity Method, and Investment. Joint ventures are typically established to achieve a specific business objective, and the parties to the joint venture share the costs and benefits accordingly.
Liability is a debt or obligation that a company is required to se… #
In consolidation reporting, liabilities are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Asset, Equity, and Balance Sheet. Liabilities can be classified as current or non-current, and include items such as accounts payable, loans, and bonds.
Minority Interest is the interest of non #
controlling shareholders in a subsidiary, and is recognized in the consolidated balance sheet. In consolidation reporting, minority interest is presented separately from the parent company's equity, reflecting the non-controlling shareholders' claim on the subsidiary's assets. Related terms include Non-Controlling Interest, Subsidiary, and Consolidation. Minority interest is typically presented on the consolidated balance sheet, and is adjusted for the non-controlling shareholders' share of the subsidiary's profits and losses.
Non #
Controlling Interest is the interest of non-controlling shareholders in a subsidiary, and is recognized in the consolidated balance sheet. In consolidation reporting, non-controlling interest is presented separately from the parent company's equity, reflecting the non-controlling shareholders' claim on the subsidiary's assets. Related terms include Minority Interest, Subsidiary, and Consolidation. Non-controlling interest is typically presented on the consolidated balance sheet, and is adjusted for the non-controlling shareholders' share of the subsidiary's profits and losses.
Non #
Current Asset is an asset that is not expected to be realized or sold within a company's normal operating cycle, and is recognized in the consolidated balance sheet. In consolidation reporting, non-current assets are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Current Asset, Property, and Plant and Equipment. Non-current assets include items such as property, plant, and equipment, and intangible assets.
Parent Company is a company that has control over one or more subs… #
In consolidation reporting, the parent company's financial statements are combined with those of its subsidiaries to present the group's financial position and performance as a single entity. Related terms include Subsidiary, Control, and Consolidation. The parent company is typically the company that has the majority of the voting rights and can direct the financial and operating policies of the subsidiary.
Property, Plant, and Equipment are tangible assets that are used i… #
In consolidation reporting, property, plant, and equipment are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Depreciation, Amortization, and Tangible Assets. Property, plant, and equipment include items such as buildings, machinery, and vehicles.
Reserve is an amount set aside by a company to cover a specific li… #
In consolidation reporting, reserves are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Provision, Liability, and Equity. Reserves can be classified as current or non-current, and include items such as provisions for bad debts and depreciation.
Retained Earnings are the profits of a company that are retained w… #
In consolidation reporting, retained earnings are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Dividend, Equity, and Share Capital. Retained earnings are typically used to finance the company's operations and invest in new assets.
Subsidiary is a company that is controlled by another company, and… #
In consolidation reporting, subsidiaries are recognized as part of the group, and their financial statements are combined with those of the parent company. Related terms include Parent Company, Control, and Consolidation. A subsidiary is typically a company that is controlled by the parent company, and is required to prepare consolidated financial statements.
Tangible Asset is a physical asset that has a specific valu… #
In consolidation reporting, tangible assets are combined and presented as a single amount, reflecting the group's overall financial position. Related terms include Intangible Asset, Property, and Plant and Equipment. Tangible assets include items such as property, plant, and equipment, and inventory.