Consolidated annual accounts

accounting

The consolidated annual accounts are those financial statements that are required to be presented for companies that form an economic group or holding company. In this way, as if they were a single entity or economic personality.

On numerous occasions, companies have equity stakes over each other. Also in third parties, thus forming a holding or groups of companies. As each company has its own legal personality, each of these must present its accounting and annual accounts like the rest of the companies; with the exception that economic groups that have several companies must present, in turn, a consolidation of their annual accounts. Accounts that, it should be noted, represent accounting statements, called general, for the entire group. All this, due to the fact that it operates jointly through several companies and not as completely independent entities.

Financial statements of the consolidated annual accounts

As for the rest of the companies, these financial statements are:

  • Consolidated balance
  • Consolidated income statement
  • Statement of changes in consolidated equity
  • Consolidated statement of cash flows
  • Consolidated report

How and why account consolidation is carried out

Consolidation is carried out according to national and international standards. Well, they suppose a homogenization of the information and accounting elements. All this, in order to be carried out in a similar way in any country in the world. To do this, allowing to present the same information, according to the same criteria, leaving aside the specific requirements of each territory.

This fact occurs for several reasons: firstly, due to the demands of administrations and public bodies for monitoring and control of intra-group activities that prevent tax and capital evasion; as a consequence of carrying out activities and transactions between the companies themselves. In order to give a true picture of the situation of the group as a whole.

On the other hand - and more importantly - multinational companies must collect information from their subsidiaries and holdings around the world. The purpose is to integrate it at a global level, as well as to present a balance sheet of management and results of the entire group. Therefore, consolidation is vital in this case. In addition, in listed companies, the consolidation and subsequent presentation of the information is the transcendental element for the shareholders, as well as the interest groups. Well, it is to these that business groups must be accountable.

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