Condensed consolidating financial information

Each of these entities reports its own financial statements and operates its own business.

However, because the subsidiaries are considered to form one economic entity, investors, regulators, and customers find consolidated financial statements more beneficial to gauge the overall position of the entity.

Our popular financial reporting guide, Financial statement presentation, describes in detail the financial statement presentation and disclosure requirements for common balance sheet and income statement accounts.

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Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they let you gauge the overall health of an entire group of companies as opposed to one company's standalone position.

Because condensed financial statements do not constitute a fair presentation of financial position, results of operations, and cash flows in conformity with generally accepted accounting principles, an auditor should not report on condensed financial statements in the same manner as he reported on the complete financial statements from which they are derived.

To do so might lead users to assume, erroneously, that the condensed financial statements include all the disclosures necessary for complete financial statements.

When examining a condensed set of financials, you should be extra critical when looking at each line item.

The lack of detail may make the analysis simpler, but that same lack of detail can mask large fundamental problems within the firm.

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