How to Prepare a Consolidated Balance Sheet

The consolidated balance sheet represents a parent company and the subsidiaries it controls. Before creating a single statement for a large corporate conglomerate, duplicate accounts must be eliminated and remaining accounts then combined.

Things You'll Need

• Completed balance sheets for all entities to be included on the combined statement.
• Worksheet for consolidated statements listing all accounts for the parent company and all subsidiaries the parent controls.
• Calculator

Instructions

1. Review the account listings of the parent company and all subsidiaries the parent company has controlling interest in. For example: if the parent company purchased another company, start with the purchased company's balance sheet.

2. 

   Use the Worksheet for consolidated statements to list all accounts for all entities to be included on the consolidated balance sheet. This worksheet eliminates duplicate accounts resulting from inter-corporate transactions such as loans. List all duplicate accounts (which will not show on the balance sheet), and combine all others in the consolidated balance sheet column.

3. Use the amount the parent company paid for assets as the current value for subsidiary assets acquired by the parent. If the consolidation is a result of pooled interests instead of an acquisition, assets are listed according to their book value. Show Goodwill as an intangible asset. Goodwill is any premium amount the parent company paid for the purchased company above the value of the firm.

4. Add together all liabilities from separate entities according to type (i.e. accounts payable and notes payable). The consolidated balance sheet should show all liabilities adopted from purchased or pooled companies as well as the parent company's liabilities.

5. 

   List the capital stock of the parent company under shareholder's equity. The capital stock of subsidiaries is not listed because it is inherently included with the parent company.

Tips & Warnings

• Remember, the consolidated balance sheet reflects the net result of transactions, so if other underlying transactions took place, such as laying off employees or selling real estate, the ending values on the date of the consolidated balance sheet should reflect this. Use footnotes to explain complicated discrepancies such as the calculation for goodwill.

Resources

• American Institute for Certified Public Accountants - Financial Statement Standards