The financial statements of a group (a parent and one subsidiary or more) in which the separate financial statements of the entity and each and every subsidiary are consolidated, i.e., presented as those of a single economic entity (a controlling entity and its controlled entities). These involves presenting the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiary(s), on a consolidated basis.
Consolidating financial statements (consolidation), is, in general, the process of combining assets, liabilities, and other financial items/ balances of two or more entities together for whatever purpose. In financial accounting, it reflects the combination of financial statements of an entity’s subsidiaries with its financial statements. For consolidation to take place, the subsidiaries have to report under a parent company.
