by Consolidated Profit and Loss Statement is prepared by a holding company to present the combined financial performance of the holding company and its subsidiaries as a single economic entity. It eliminates intra-group transactions, adjusts for unrealized profits, and allocates profit between equity shareholders of the holding company and non-controlling interest (minority interest).
Structure of Consolidated P&L Statement:
| Particulars | Treatment in Consolidation |
|---|---|
| Revenue from operations | Add holding & subsidiary revenues, eliminate intra-group sales. |
| Other income | Combine incomes, eliminate intra-group items (e.g., interest, dividends from subsidiary). |
| Expenses | Combine expenses, eliminate intra-group purchases, interest, and unrealized profits. |
| Depreciation & Amortization | Adjust for any extra depreciation on assets transferred within the group. |
| Profit before tax | Derived after adjustments. |
| Tax Expense | Combine tax expenses of all entities. |
| Profit after Tax | Allocated between Holding Co.’s shareholders and Minority Interest. |
Key Adjustments in Consolidation:
-
Eliminate intra-group sales, purchases, interest, rent, royalties, etc.
-
Adjust unrealized profit in closing stock or assets.
-
Remove dividend from subsidiary in holding company’s books.
-
Adjust depreciation on assets transferred within the group.
-
Share Post-acquisition profits between Holding Company and Minority Interest.
Consolidated Profit and Loss Statement:
|
Particulars |
Holding Co. (₹) |
Subsidiary (₹) |
Adjustments (₹) |
Consolidated (₹) |
|---|---|---|---|---|
| Revenue from Operations | XX | XX |
(–) Intra-group sales (XX) |
XX |
|
Other Income |
XX | XX |
(–) Intra-group income (e.g., interest, rent) (XX) |
XX |
| Total Income | XX | |||
| Expenses: | ||||
|
Cost of Goods Sold |
XX | XX |
(–) Intra-group purchases (XX) (–) Unrealized profit in stock (XX) |
XX |
| Employee Benefit Expenses | XX | XX | – | XX |
|
Depreciation & Amortization |
XX | XX |
(+) Extra depreciation on assets transferred within group |
XX |
|
Finance Costs |
XX | XX |
(–) Intra-group interest (XX) |
XX |
| Other Expenses | XX | XX | – | XX |
| Total Expenses | XX | |||
| Profit Before Tax | XX | |||
| Tax Expense | XX | XX | – | XX |
| Profit After Tax | XX | |||
| Less: Minority Interest Share | – | (XX) | ||
| Profit Attributable to Holding Company Shareholders | XX |
Notes on Adjustments:
-
Intra-group Sales & Purchases → Eliminated to avoid double counting.
-
Unrealized Profit in stock → Removed from closing inventory & cost of sales.
-
Intra-group Income & Expenses → Eliminated (interest, rent, royalties).
-
Depreciation Adjustment → On transferred assets to reflect correct group depreciation.
-
Minority Interest → Share of subsidiary’s profit after tax allocated to non-controlling shareholders.
