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Consolidated financial statements – everything you need to know

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What is a consolidated financial statement, what different parts are included and who actually has to prepare one? Here we provide answers to the most common questions regarding consolidated financial statements.

What counts as a group?

A group of companies is an economic entity consisting of an association of enterprises. A group of companies consists of a parent company and one or more subsidiaries.

What is a parent company?

The main company in a group of companies is called a parent company. parent undertakings have a dominant influence over one or more subsidiaries;
Parent companies can arise in different ways. A deeper description of how parent companies can be formed can be found in the first chapter of the Annual Accounts Act. Regardless of how the parent company arises, its formation is based on the fact that it has control over one or more subsidiaries.

What is a subsidiary?

An undertaking in which a parent undertaking has a dominant influence is considered to be a subsidiary.

How does a subgroup arise?

Parent (x) may own one or more subsidiaries; (y). The subsidiary may, in turn, own one or more companies (z). In these cases, (y) and (z) a sub-group where: (y) are parent undertakings and Z are subsidiaries.

What is consolidated financial statements?

The consolidated financial statements are a separate annual report that a parent company prepares in addition to its regular annual report.
The consolidated financial statements shall provide a realistic picture of the Group’s financial situation.
In the consolidated financial statements, the parent and its subsidiaries are recognised as if they together constituted an economic unit. Internal transactions are eliminated. The statutory consolidated financial statements have certain formal requirements. Some groups choose to also do internal consolidation or consolidated financial statements.

What should be the content of the consolidated financial statements?

It is largely statutory what a consolidated financial statement should contain.
  • Certificate of declaration. A document certifying that the income statement and balance sheet are adopted by the Board of Directors and the CEO during the Annual General Meeting.
  • Management report. Information on the Group’s development, position, results and important events that have taken place during the past year.
  • Consolidated balance sheet. a merger of the balance sheets of the parent and subsidiary undertakings in which certain items have been eliminated;
  • Consolidated income statement. A reflection of the Group’s total earnings, where all internal profits were eliminated.
  • Cash flow statement. A summary of the Group’s annual money flows.
  • Sheet music. Consolidated financial statements also include a list of subsidiaries and other associates.
  • Audit report. The Group’s auditor’s report shall be included in the financial statements.

How often does consolidated financial statements need to be prepared?

The consolidated financial statements should cover a financial year, which is normally 12 months long.

Do all groups have to prepare consolidated financial statements?

No. According to the main rule, all groups must prepare consolidated financial statements, but some groups may choose to abstain.
Who has the opportunity to refrain from preparing consolidated financial statements is stated in the Annual Accounts Act. If a parent company prepares consolidated financial statements that include all the companies in the group, the sub-group does not need to prepare separate consolidated financial statements. Parent companies in smaller groups are also excluded from the requirement to prepare consolidated financial statements.
The definition of a smaller group is a group that is not classified as larger. You can read about exactly what this means at the Swedish Companies Registration Office.

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When do I not need to prepare consolidated financial statements?

If you meet the criteria for waiving consolidated financial statements (as described above), you do not need to prepare consolidated financial statements. You also cannot prepare consolidated financial statements if you apply K2 in the parent company. If K2 is applied in the subsidiaries, consolidated financial statements may nevertheless be prepared by the parent company.

Who is responsible for the consolidated financial statements?

It is the Board of Directors that is responsible for ensuring that the content of the consolidated financial statements is correct. The responsibility cannot be agreed away.

Who should sign the consolidated financial statements?

In order for the consolidated financial statements to apply, they must be signed by all ordinary board members of the parent company and any CEO.

Group elimination – what is it?

In consolidated financial statements, the group’s profit and loss and position shall be presented as if the parent and the subsidiaries were an economic entity. This means that internal transactions should be eliminated.
Example: If the subsidiary sells goods to the parent company, it is recorded as sales in the subsidiary and as purchases in the parent company. If the companies were an economic entity, the transaction would never have taken place.
Since the group is to be presented as a single economic entity, transactions of this kind must be eliminated.

Our group includes international subsidiaries. What applies?

The international subsidiaries shall be included in the consolidated financial statements. However, the currency must be converted to the same as that of the parent company.

Where does the consolidated financial statements end up when they are completed?

The consolidated financial statements are prepared by the parent company, which usually publishes it together with its annual report.

Acquisition analysis

The success factor for a correctly prepared consolidated financial statement lies in the acquisition analysis. It describes which assets and liabilities were included in the subsidiary as of the date of acquisition. An acquisition analysis must always be prepared in the event of an acquisition even if the parent company does not prepare consolidated financial statements.

How can Boardeaser help with consolidated financial statements?

Boardeaser’s digital tools help you to smoother reporting and group consolidation directly from the accounting.
We handle eliminations, minority ownership, international subsidiaries and everything else related to consolidated financial statements. Log in or register for free to test Boardeaser for 30 days.

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With Boardeaser you can get consolidated reports in 1 minute!

Boardeaser automatically provides comprehensive reporting for the entire group – directly from your accounting. Our web service handles complete group reporting incl. consolidation, eliminations, minority ownership, international subsidiaries, etc. Log in or register for free to test Boardeaser for 30 days.

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