Question

What is the requirement and justification for the use of consolidated Financial Statements?

Answer 1

The consolidated financial statements are required to prepare under the Applicable Financial Reporting framework and generally accepted accounting policies (GAAP)

The consolidated financial statements are prepared by removing the inter company Owings and Mutual gains so as to help to analyse the financial advantage over the combination of two companies.

The financial statements are prepared with intention to protects the interest of all stockholders such as creditors, lenders, Bankers, consumers, suppliers, Government, Employees etc , In order to analyse financial and economic strength of both companies.

The consolidated Financial statements are prepared with intention to analyse the financial performance of the two companies, I.e. how strength after combination of two companies, whether it is beneficial to gain competitive advantage over hostile fast changing economic environment and Frequent political and Legal changes, Whether such combination gains large scale of economies over the production which lead to cost reduction by utilising the existing strengths and exploiting the Opportunities by way of proper utilisation of technology and Know-how of both companies.