Issued by the Committee on Accounting Procedure American Institute of Certified Public Accountants 270 Madison Avenue, New York 16, N. Y.
Copyright 1959 by American Institute of Certified Public Accountants
August, 1959 No. 51
Consolidated Financial Statements
Purpose of Consolidated Statements
1. The purpose of consolidated statements is to present, primarily for the benefit of the shareholders and creditors of the parent company, the results of operations and the financial position of a parent company and its subsidiaries essentially as if the group were a single company with one or more branches or divisions. There is a presumption that consolidated statements are more meaningful than separate statements and that they are usually necessary for a fair pre-sentation when one of the companies in the group directly or indirectly has a controlling financial interest in the other companies.
2. The usual condition for a controlling financial interest is owner-ship of a majority voting interest, and, therefore, as a general rule ownership by one company, directly or indirectly, of over fifty per cent of the outstanding voting shares of another company is a condition pointing toward consolidation. However, there are exceptions to this general rule. For example, a subsidiary should not be consolidated where control is likely to be temporary, or where it does not rest with the majority owners (as, for instance, where the subsidiary is in legal reorganization or in bankruptcy). There may also be situations where the minority interest in the subsidiary is so large, in relation to the equity of the shareholders of the parent in the consolidated net assets, that the presentation of separate financial statements for the two com-panies would be more meaningful and useful. However, the fact that