Control determines consolidation
Consolidation presents a parent and controlled subsidiaries as a single economic entity under the relevant rules. It generally combines their assets, liabilities, revenues and expenses and eliminates intragroup balances and transactions. The determination of control can be more complex than a simple ownership-percentage rule, especially for structured entities.
Remove internal sales
A parent sells components to its subsidiary for $50. The subsidiary sells the finished product to an outside customer for $80. Consolidated revenue is not $130 from those two entries: the $50 internal sale is eliminated. The group reports the external $80 sale, with appropriate treatment of underlying costs and any unrealized internal profit in unsold inventory.
If the parent controls 80% of a subsidiary, consolidation generally includes 100% of the subsidiary's relevant balances and results, then presents the noncontrolling interest and income attribution as required. It is not simply multiplying every revenue line by 80%. Investments without control may use other accounting, such as the equity method when its criteria apply.
Consolidated debt and cash belong to specific legal entities. Restrictions, guarantees and minority rights can limit how easily cash moves within the group. A consolidated cash total does not prove that every subsidiary can pay its own obligations.
The transaction perimeter also matters. Buying assets, buying a business and buying shares can lead to different accounting and tax consequences. Identify the acquisition's substance and applicable standards before assuming that every purchase creates goodwill.