Consolidated financial statements example
A three-company group, consolidated line by line.
Quick answer
Below is a worked consolidated P&L and balance sheet for a three-company group. The parent's £100,000 sale to one subsidiary and £40,000 management fee to another are eliminated from revenue and costs; a £200,000 intercompany loan and the parent's £150,000 investment are eliminated from the balance sheet. Group operating profit is £280,000 and group net assets are £920,000.
The group
Harbour UK Ltd owns 100% of Harbour Retail Ltd and Harbour Ireland Ltd. Both subsidiaries were set up by the parent, so there's no goodwill. Harbour Ireland's figures have already been translated into sterling. During the year:
- Harbour UK sold goods to Harbour Retail for £100,000, all sold on to customers by year end.
- Harbour UK charged Harbour Ireland a £40,000 management fee.
- Harbour UK lent Harbour Retail £200,000.
Consolidated profit and loss
| £000 | Harbour UK (parent) | Harbour Retail | Harbour Ireland | Eliminations | Group |
|---|---|---|---|---|---|
| Revenue | 900 | 600 | 300 | (140) | 1,660 |
| Cost of sales | (540) | (380) | (170) | 100 | (990) |
| Gross profit | 360 | 220 | 130 | (40) | 670 |
| Overheads | (210) | (130) | (90) | 40 | (390) |
| Operating profit | 150 | 90 | 40 | 0 | 280 |
Revenue is reduced by the £100,000 intercompany sale and the £40,000 fee. Cost of sales falls by £100,000 and overheads by £40,000. Group profit is unchanged at £280,000, the sum of the three companies.
Consolidated balance sheet
| £000 | Harbour UK (parent) | Harbour Retail | Harbour Ireland | Eliminations | Group |
|---|---|---|---|---|---|
| Investment in subsidiaries | 150 | (150) | 0 | ||
| Due from Harbour Retail | 200 | (200) | 0 | ||
| Other assets | 650 | 520 | 260 | 1,430 | |
| Total assets | 1,000 | 520 | 260 | (350) | 1,430 |
| Due to Harbour UK | (200) | 200 | 0 | ||
| Other liabilities | (300) | (120) | (90) | (510) | |
| Share capital | (200) | (100) | (50) | 150 | (200) |
| Retained earnings | (500) | (100) | (120) | (720) | |
| Total liabilities and equity | (1,000) | (520) | (260) | 350 | (1,430) |
The parent's investment of £150,000 is eliminated against the subsidiaries' share capital, and the £200,000 loan receivable against the payable. Group net assets are £1,430,000 less £510,000, or £920,000.
Download the workings
Doing this every month
For a real group you repeat this every month with live data. See Xero consolidation or QuickBooks consolidation, or let an app like Joiin do it.
Frequently asked questions
What are consolidated financial statements?
Financial statements that present a parent and its subsidiaries as a single economic entity, with intercompany transactions and balances removed.
Why is the subsidiaries' share capital eliminated?
Because it's matched by the parent's investment in them. From the group's point of view, only the parent's share capital is held by outsiders.