Ch 19 Consolidated Statement of Profit or Loss S

Consolidated Profit Statements include profit generated by the parent company (P) and its subsidiary (S).

Important components of these statements include:

• Sales

• Interest

• Transfers of non-current assets

The consolidated statement of profit or loss provides a comprehensive view of the profit generated by both the parent and subsidiary.

Key principles include including all income and expenses from both entities while reflecting the distribution of profit between the parent’s shareholders and non-controlling interests after the profit calculation.

The mechanics of consolidation involve:

• Developing a group structure diagram

• Forming a proforma statement that combines the incomes and expenses of both entities

• Completing workings for necessary adjustments (e.g., post-unrealized profit, fair value depreciation)

• Calculating the non-controlling interest’s share of profit

Non-controlling interest is calculated with this formula:

• Adjusted Subsidiary's profit after tax minus fair value depreciation and any impairment

• NCI = Adjusted Subsidiary Profit × NCI Percentage

Intra-group trading impacts must be considered, especially the effects of sales and purchases.

It is essential to eliminate the effects of intra-group trading from the consolidated profit statement.

Consolidated sales revenue is determined as follows:

• Parent’s revenue + Subsidiary’s revenue - Intra-group sales

Adjustments must also be made for the consolidated cost of sales to reflect accurate profit reporting in the consolidated statements.