Consolidated financial statements are financial statements that factor the holding company's subsidiaries into its aggregated accounting figure. It is a representation of how the holding company is doing as a group. The consolidated accounts should provide a true and fair view of the financial and operating conditions of the group. Doing so typically requires a complex set of eliminating and consolidating entries to work back from individual financial statements to a group financial statement that is an accurate representation of operations.
The guiding principle of consolidated financial statements is that of the 'single entity' principle. The aim of consolidated financial statement is to show the performance of the group as if it were a single entity. This means that all intra-group transactions (sales from one group company to another group company, for example) and intra-group balances (intercompany loans, for example) need to be eliminated as otherwise the consolidated financial statements would double count these balances.
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