I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

Parent company financial statements, which will include 'investments in subsidiary undertakings' 

as an asset in the statement of financial position, and income from subsidiaries (dividends) in the 

statement of profit or loss and other comprehensive income 

 

Consolidated statement of financial position 

 

Consolidated statement of profit or loss and other comprehensive income (the other 

comprehensive income element of consolidated financial statements is beyond the scope of the 

FFA/FA syllabus) 

 

Consolidated statement of cash flows (this is beyond the scope of the FFA/FA syllabus) 

QUESTION 

Consolidated financial statements

 

Companies with subsidiaries are required to publish consolidated financial statements. 

Required 

State why you feel the preparation of consolidated financial statements is necessary and outline their 

limitations, if any. 

ANSWER 

The object of financial statements is to help shareholders exercise control over their company by 

providing information about how its affairs have been conducted. The shareholders of a parent company 

would not be given sufficient information from the financial statements of the parent company on its 

own, because not enough would be known about the nature of the assets, income and profits of all the 

subsidiary companies in which the parent company has invested. The primary purpose of consolidated 

financial statements is to provide a true and fair view of the position and earnings of the parent company 

group as a whole, from the standpoint of the shareholders in the parent company. 

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