Preparing consolidated financial statements

In this lesson

1. 0:00 Consolidated statement of financial position overview
2. 1:09 Goodwill calculation and fair value adjustments
3. 2:47 Retained earnings in consolidated statements
4. 4:00 Non-controlling interests calculation
5. 4:30 Consolidated statement of profit or loss
6. 6:23 Non-controlling interests in profit or loss
7. 7:33 Inter-group transactions and eliminations
8. 9:38 Unrealised profits on inventory and PPE

About this lesson

This video walks you through the step-by-step mechanics of combining parent and subsidiary figures, handling non-controlling interests, and making essential consolidation adjustments like eliminating intergroup transactions and unrealised profits. Essential for SBR and F2 papers, this foundation ensures you can confidently tackle group accounting questions in your exams. The consolidated statement of financial position requires you to combine 100% of parent and subsidiary assets and liabilities, calculate goodwill using consideration transferred plus non-controlling interests less fair value of net assets, and split equity between parent retained earnings and non-controlling interests. You'll learn how to work through retained earnings by identifying post-acquisition movements and attributing the parent's share to the group, while handling fair value adjustments and impairment losses systematically. For the consolidated statement of profit or loss and other comprehensive income, you'll add all parent and subsidiary income and expenses for the year, then apportion subsidiary figures if acquired mid-year to include only post-acquisition results. The video covers how to split profit between non-controlling interests and the parent, and crucially, how to eliminate intergroup transactions—including sales, receivables and payables, goods in transit, and unrealised profits on inventory and property, plant and equipment. Understanding which adjustments affect the non-controlling interest share is key to getting these calculations right.

Duration: 10m