When a holding company owns a subsidiary, the consolidated balance sheet combines the financial information of both entities to present a unified view of the group’s financial position. Here’s how you might prepare a consolidated balance sheet for a holding company with one subsidiary:
Consolidated Balance Sheet of Holding Company and Subsidiary
Assets
-------------------------------------------------------
Current Assets:
Cash and Cash Equivalents
Accounts Receivable
Inventory
Other Current Assets
-----------------------------------------------------
Total Current Assets
-------------------------------------------------------
Non-Current Assets:
Property, Plant, and Equipment
Investment in Subsidiary (at cost or equity method)
Intangible Assets
Other Non-Current Assets
-----------------------------------------------------
Total Non-Current Assets
-------------------------------------------------------
Total Assets
=======================================================Liabilities and Equity
——————————————————-
Current Liabilities:
Accounts Payable
Short-Term Loans
Other Current Liabilities
—————————————————–
Total Current Liabilities
——————————————————-
Non-Current Liabilities:
Long-Term Loans
Deferred Tax Liabilities
Other Non-Current Liabilities
—————————————————–
Total Non-Current Liabilities
——————————————————-
Equity:
Equity attributable to Holding Company:
Share Capital
Retained Earnings
Other Equity Items
Equity attributable to Non-Controlling Interest (from subsidiary)
—————————————————–
Total Equity
——————————————————-
Total Liabilities and Equity
=======================================================
Notes:
- Investment in Subsidiary: The investment in the subsidiary is reported on the balance sheet of the holding company. It can be accounted for using either the cost method or the equity method, depending on the level of control exerted by the holding company over the subsidiary.
- Non-Controlling Interest (NCI): If the holding company does not own 100% of the subsidiary, a portion of the equity is attributed to non-controlling interests. This represents the ownership interests held by external shareholders in the subsidiary.
- Consolidation Adjustments: Before preparing the consolidated balance sheet, adjustments are made to eliminate any intercompany transactions or balances between the holding company and the subsidiary. These adjustments ensure that the consolidated financial statements reflect only transactions with external parties.
- Presentation: The consolidated balance sheet presents the combined financial position of the holding company and its subsidiary, providing stakeholders with a comprehensive view of the group’s assets, liabilities, and equity. This enables investors, creditors, and other users to assess the overall financial health and performance of the consolidated entity.