1 Groups and consolidation: an overview

PART G: PREPARING SIMPLE CONSOLIDATED FINANCIAL STATEMENTS 
 
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Summary: consolidated statement of profit or loss 
The table below summarises the main points about the consolidated statement of profit or loss. 
Purpose 
To show the results of the group for an accounting period as if it were a single entity 
Sales revenue 
to profit for 
year 
100% parent (P) + 100% subsidiary (S) (excluding adjustments for intra-group 
transactions) 
Reason 
To show the results of the group which were controlled by the parent company 
Intra-group 
sales 
Strip out intra-group activity from both sales revenue and cost of sales 
Unrealised 
profit on intra-
group sales 
(a) Goods sold by P. Increase cost of sales by unrealised profit. 
(b) Goods sold by S. Increase cost of sales by full amount of unrealised profit and 
decrease NCI by their share of unrealised profit. 
Non-
controlling
interests 
S's profit after tax
X 
Less* unrealised profit 
(X) 
X
NCI%
X 
* Only applicable if sales of goods made by subsidiary 
Reason 
To show the extent to which profits generated through P's control are in fact owned by 
other parties 
 EXAM FOCUS POINT 
In the July to December 2015 and January to June 2017 exam reports, the ACCA examining team 
provided the following comments on the consolidated statement of profit or loss, which may help 
students to improve their performance: 

Carefully read through the information provided in the question.

Give the statement its correct title ie 'Consolidated Statement of profit or loss for the year ended 
(year end date)'. 

Use the correct format for a consolidated statement of profit or loss, there is usually one mark 
available for presentation. 

Eliminate inter-company sales and purchases.

Eliminate unrealised profit held in closing inventory relating to intercompany trading.

Calculate the profit attributable to the controlling and the non-controlling interests in the 
company. 

Always show your workings and reference them to the figures in the statement. 
BPP Tutor Toolkit Copy

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CHAPTER 25
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THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS