Consolidated versus consolidating financials
Intercompany eliminations (ICE) are made to remove the profit/loss arising from intercompany transactions.No intercompany receivables, payables, investments, capital, revenue, cost of sales, or profits and losses are recognised in consolidated financial statements until they are realised through a transaction with an unrelated party.It depends on the percentage of the company's voting stock Federated owned.The company would not be able to report its share of Saks' earnings, except for the dividends it received from the Saks stock.For instance if company Z owns company A, B and C, then the consolidating financial statements will show the details of company A, company B and Company C, whereas Consolidated financial statements will just show the total of A B and C.ransactions where subsidiary entities bought and sold goods or loaned each other money.For example lets say we have Parent company P and subsidiary companies S and T. S would record revenue of ,000 and T would record expense of ,000.
In most cases, Federated would include a single-entry line on their income statement reporting their share of Saks' earnings.
In both lateral and upstream transactions, the subsidiary records the transaction and the profit/loss from it.
Thus, the profit/loss can be shared between majority and minority interests, as the parent’s shareholders and minority interest share the ownership of the subsidiary.
Some examples of intercompany transactions and how to account for them will be discussed below.
Parent investment in a subsidiary previously accounted for as an asset in the parent’s balance sheet and as equity in the subsidiaries’ balance sheet is eliminated.
However when P consolidates the f/s P would eliminate that sale as an inter-entity transaction, if not, then revenue and expenses would be over stated by $10,000.