Consolidations adjustments (what are they and why?)

Expert Solution

These are types of balance sheet - Standalone and Consolidated. Consolidated statements are the statement which consist results of two more associate entities. It is generally holding-subsidiary, where results of both the entities are presented in consolidated form, but there may be such transactions which are mutual these are intra-group transactions or inter company transactions. any loss and gains resulting out of such transactions must be eliminated (from the P&L as well as balance sheet) in order to reflect the true state of affairs. and these adjustments are consolidation adjustments

-because of these intra-group transactions the income of the entities are affected resulting the tax may not be properly calculated.

-if asset is sold between these two entities, the actual cost of purchase may not be reflected in books. and many more.

the Adjustment is made with the help of elimination entries. Intercompany elimination refers to the process for removal of transactions between companies included in a group in the preparation of consolidated accounts.

ekkarill92 answered 2 years ago

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