What Is a Consolidated Income Statement?

The consolidated profit and loss account is a financial statement that summarizes the business results of the entire enterprise group as a single organization under the unified control of the parent company. The parent companies and subsidiaries that make up such an enterprise group are called associates. The consolidated income statement should be prepared on the basis of the fair and reasonable individual income statement of the associate. When merging individual profit and loss statements and preparing a consolidated income statement, the following merger procedures must be completed: offsetting the corresponding transactions between companies within the enterprise group, eliminating unrealized gains and losses accounted for each other, and so on. The internal transactions of enterprise groups that should be offset against each other, in addition to the income items and expense items corresponding to sales and purchases, include the parent company's income from subsidiaries and other items. ^[1]

Consolidated income statement

The consolidated profit and loss account is a financial statement that summarizes the business results of the entire enterprise group as a single organization under the unified control of the parent company. The parent companies and subsidiaries that make up such an enterprise group are called associates. The consolidated income statement should be prepared on the basis of the fair and reasonable individual income statement of the associate. When merging individual profit and loss statements and preparing a consolidated income statement, the following merger procedures must be completed: offsetting the corresponding transactions between companies within the enterprise group, eliminating unrealized gains and losses accounted for each other, and so on. The internal transactions of enterprise groups that should be offset against each other, in addition to the income items and expense items corresponding to sales and purchases, include the parent company's income from subsidiaries and other items. ^[1]

In addition to the internal exchange items within the parent and subsidiary companies of an enterprise group, there are also internal transaction items, such as the group's internal inventory, the purchase and sale of fixed assets, and the redemption of internal bonds. The unrealized profits and unrecognized profits formed by these exchanges should be offset and recognized on the consolidated profit and loss account, respectively, because if the unrealized profits between the companies are not offset, the consolidated profit and loss account and balance sheet will not only make Use frequent internal transactions to inflate profits and make

The United States has established general practices for the preparation of consolidated income statements:

The "Provisional Regulations on Consolidated Accounting Statements" issued by the Ministry of Finance of the People's Republic of China stipulates the following methods:

1. Consolidated Profit and Loss Statement

First, offset all internal sales revenue and cost of sales incurred between companies during the period. Debit operating income items and credit operating cost items. Secondly, to offset the unrealized profit existing in the inventory of the inter-company purchase and sale of goods, the operating cost is debited and the inventory is credited. The above two entries can also be combined into one. Once again, the unrealized profit in the opening inventory is offset, the undistributed profit at the beginning of the year is debited, and the operating costs are credited.

2. Consolidated Profit and Loss Statement 2. Inter-company offsets for purchases and sales of fixed assets

First of all, it is necessary to offset internal retained income, internal sales costs and unrealized sales profits included in the original fixed asset price, that is, at the end of the current period of the internal transaction, operating income should be debited, operating costs and original fixed asset items should be credited. However, at the end of each accounting period after the internal transaction, the distribution of profits at the end of the year should be debited and the original price of the fixed assets should be credited. Second, the amount of unrealized internal sales profits included in the depreciation of fixed assets should be debited for accumulated depreciation and credited for management expenses. Thirdly, the unrealized internal sales profit included in the original price of internal sales of fixed assets shall be offset against the accumulated depreciation in the previous accounting period. The accumulated depreciation shall be debited and the undistributed profit at the beginning of the year shall be credited. Finally, when the fixed asset is scrapped and cleaned up, the total unrealized sales profit included in the original price of the fixed asset minus the amount of unrealized internal sales profit included in the original price of the fixed asset before scrapped and cleaned up, which has been included in the depreciation expenses of the previous periods (That is, the amount of realized internal transaction profits) is offset, so the undistributed profit at the beginning of the year is debited, and management expenses and non-operating income are credited. (3) The offset of each other's bond business held by each member company within the group should be debited to the investment income. In addition to the above offset entries, the credited financial expenses should also offset the parent company's equity investment income in the subsidiary. A separate statement of the profit and loss of minority shareholders is shown before the "net profit" item. The balance of the consolidated profit or loss minus the profit and loss held by the minority shareholders is the net profit in the consolidated income statement. It should be combined with the consolidated retained income statement. Or the net profit amount in the consolidated profit distribution table is the same.