The consolidated income statement

The Consolidated Income Statement

The consolidated income statement presents the financial performance of group companies (i.e. parent and subsidiaries under common control) in one, single statement.

The Basic Principles

The consolidated income statement follows the same basic principles as the consolidated statement of financial position. The volume of adjustments are, however, fewer. The steps for consolidating the income statements are as follows:

(1)Add together the revenues and expenses of the parent and the subsidiary.

If the subsidiary is acquired part way through the year all the revenues and expenses of the subsidiary must be time apportioned during the consolidation process.

(2)Eliminate intra-group sales and purchases.

(3)Eliminate unrealised profit held in closing inventory relating to intercompany trading.

(4)Calculate the profits attributable to the non-controlling interests.

After the net profit for the year the split of profit between amounts attributable to the equity holders of the group and the non-controlling interests (to reflect ownership) is shown.

Non-controlling interest

This is calculated as:

Illustration

The income statements for P and S for the year ended 31 August 20X4 are shown below. P acquired 75% of the ordinary share capital of S several years ago.

The consolidated income statement of P group for the year ended 31 August 20X4

(W1) Non-controlling interest

NCI share of subsidiary profit for the year (NCI% x sub's profit for the year)

25% x $4,000 = $1,000