Dear Anand, please retain the edited version as I removed extra spaces between some words or

inserted space where it is not given. As they are very few, I did not highlight or marked them. At
other places, I just made some very minor alterations like inserting or deleting comma or
apostrophe etc and later remembered that I did not highlight. Hence, retain this please.
------ padmini

Standalone Financial Statement

A company reports a standalone financial statement, representing the financial position, as a

single entity and does not include any subsidiaries. It is generally presented by the parent
company/holding company and includes Profit & Loss statement, Balance Sheet and Cash Flow
statements.

Consolidated Financial Statement:

A consolidated financial statement is a financial statement of a group

presented as those of a single enterprise. The parent company or holding
company has to prepare it to provide financial information about the
economic activities of the group. The main object behind the introduction of
this new standard is to show the economic strength of the group rather than
a standalone company. Now the parent, besides its separate financial
statement, has to prepare a consolidated financial statement of all its
subsidiaries (domestic as well as foreign). However, a subsidiary should be excluded
from consolidation if the parent’s control is intended to be temporary and if the subsidiary
operates under severe long-term restrictions, which significantly impair its ability to transfer
funds to the parent. If the financials of the subsidiary have not been consolidated, then the
reason(s) for the same should be disclosed in the consolidated financial statements. The
consolidated financial statement must be presented, to the extent possible,
in the same format as that adopted by the parent for its separate financial
statement. The consolidated statement will normally include the following:

• The consolidated balance sheet,

• The consolidated profit and loss,
• The consolidated cash flow statement,
• Notes and other statements, and explanatory material that form an integral
part of the statement.

To illustrate the difference, consider a simple example, where Company A owns

60% of company B. Company A can reports its financial results either in the parent
company statement or in a consolidated statement.

• If it chooses to report the financial results in a parent company statement,

the operating income statement will center on just Company A's operating
results. The revenues and operating income will reflect only company A's
operations. However, there will be a line item on the income statement,
below the operating income line, which will include 60% of the net income of
company B. On the balance sheet, only the operating assets and liabilities of
 Company A will be recorded. However, there will be a line item on the asset
side of the balance sheet that reflects the accountant's estimate of the value
of the 60% of Company B; the rules on how to estimate this value and how
often it has to be updated can vary from country to country.

• If the financial results are in a consolidated statement, the operations of

Company A and Company B will be combined. As a result, the revenues,
operating income and other operating numbers (depreciation, cost of goods
sold) will reflect the sum of those numbers for companies A and B. In a
similar vein, the assets and liabilities on the balance sheet will reflect the
combined values of companies A &B, notwithstanding the fact that Company
A owns only 60% of company B. The accounting adjustment for the 40% of
Company B's equity that does not belong to Company A takes the form of
minority interest, shown on the liability side of the consolidated balance
sheet. Again, the rules on how to estimate this value and how often it gets
updated vary across countries.