Consolidating two balance sheets

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NOTE: formulas in such cases can be error-prone, since it’s very easy to accidentally select the wrong cell.

It can also be difficult to spot a mistake after entering a complex formula.

Consolidation by category: When the data in the source areas is not arranged in the same order but uses the same labels.

Use this method to consolidate data from a series of worksheets that have different layouts but have the same data labels.

The total amount of unrealised profits/loss to be eliminated in intercompany transactions does not vary regardless of whether the subsidiary is wholly-owned (non-controlling interest, NCI, does not exist) or partially owned.

However, if the subsidiary is partially owned (i.e., NCI exists), the elimination of such profit/loss may be allocated between the majority and minority interests.

Thus, profit/loss will be visible to the parent’s shareholders only, and not to the minority interest’s.

Not adjusting intercompany transactions results in consolidated financial statements that do not offer a true and fair view of the group’s financial situation.Some examples of intercompany transactions and how to account for them will be discussed below.Parent investment in a subsidiary previously accounted for as an asset in the parent’s balance sheet and as equity in the subsidiaries’ balance sheet is eliminated.In both lateral and upstream transactions, the subsidiary records the transaction and the profit/loss from it.Thus, the profit/loss can be shared between majority and minority interests, as the parent’s shareholders and minority interest share the ownership of the subsidiary.

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