For investors, a company's financial statements offers insight into the health of the company.
Depending on the size of a company and the complexity of its business, the financial statements may be a bit confusing, particularly if the company has several subsidiaries with overseas operations.
Consolidation also applies if the firm owns less than 50 percent but exerts significant influence over the way the subsidiary operates.
A consolidated financial statement covers the activities of the parent company and its subsidiaries in a single report, as if they were all a single company operating under one roof.
Organizing Your Information Setting Up a Worksheet Combining Financial Statements Eliminating Duplicate Values Community Q&A Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.
After their acquisitions, these smaller companies, or subsidiaries, may have remained legally separate from the large corporation, or parent company.
Both concepts are distinct -- one refers to a process, whereas the other is the final result.
A company that owns more than 50 percent equity in another firm must consolidate, or combine, its results with the subsidiary’s data.