“The consolidation process is
“The consolidation process is time consuming and repetitive.Companies should not have to present consolidated financialstatements as users can look at individual entities’ financialstatements for their decision making.” Comment.
Answer:
Consolidated financial statements are made collectively byaggregating a parent company and its subsidiary company’sfinancials.
GAAP and IFRS both include provisions that help a company tocreate the framework for consolidated financial statementreporting.
Consolidated financial statements are used by the companies totake the tax benefits, for example if one of the subsidiary companyhaving losses then it can be set off in the consolidated financialstatements, the use of debt either by parent or subsidiary companyalso facilitates the tax benefits from the company’s point ofview.
Yes, it is true that the consolidation process is repetitive andtime consuming but as it has the tax benefits that is why companychoose to consolidated financial statement reporting.
Users can look at individual entities’ financial statements fortheir decision making but as it is explained above consolidatedfinancial statements give the tax benefits to the companytherefore, they choose the consolidation process even knowing thefact that it is time consuming.
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