Consolidated statement of financial position
A group’s balance sheet: a parent and the company it controls, shown as one business. Explained line by line.
ACCA exams this helps with: FA Financial Accounting FR Financial Reporting SBR Strategic Business Reporting See the ACCA map
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When one company (the parent) controls another company (the subsidiary), usually by owning more than half of its shares, it must also produce group accounts. These show both companies as if they were one business. You add the two balance sheets together line by line, then make a few changes: remove anything the companies owe each other, replace the parent’s investment with goodwill, and show the part owned by outside shareholders as “non-controlling interest”.
Example. A food company owns 80% of a bakery. The group balance sheet shows 100% of the bakery’s ovens and stock, because the food company controls them. A separate line shows the 20% that belongs to the bakery’s other shareholders.
Key words
- Parent
- A company that controls one or more other companies (its subsidiaries).Example: P owns 80% of S and controls it, so P is the parent.
- Subsidiary
- A company controlled by another company (the parent), usually because the parent owns more than 50% of its voting shares.Example: P owns 80% of S, so S is P’s subsidiary.
- Consolidation
- Combining the accounts of a parent company and the companies it controls (subsidiaries) into one set of accounts, as if they were one business.Example: The group accounts add 100% of each subsidiary’s assets to the parent’s, then remove any trading between them.
- Goodwill
- The amount paid for a business that is more than the fair value of its identifiable net assets. It represents things like reputation, customers and staff.Example: A company pays £500,000 for a business whose net assets are worth £390,000. Goodwill is £110,000.
- Non-controlling interest
- The part of a subsidiary that is owned by shareholders outside the group.Example: A parent owns 80% of a subsidiary. The other 20% is the non-controlling interest.
- Intra-group
- Between companies in the same group, such as a parent selling goods to its subsidiary.Example: The parent sells £40,000 of goods to its subsidiary. That is an intra-group sale.
The statement, explained
| 2025 £000 | |
| Assets | |
| Non-current assets | |
| Goodwill 2 | 1,250 |
| Property, plant and equipment 3 | 7,200 |
| 8,450 | |
| Current assets | |
| Inventories | 1,300 |
| Trade receivables 4 | 1,180 |
| Cash and cash equivalents | 400 |
| 2,880 | |
| Total assets | 11,330 |
| Equity and liabilities | |
| Equity attributable to owners of the parent 7 | |
| Share capital 5 | 3,000 |
| Retained earnings 6 | 4,840 |
| 7,840 | |
| Non-controlling interest 8 | 710 |
| Total equity | 8,550 |
| Non-current liabilities | |
| Bank loans | 1,500 |
| Current liabilities | |
| Trade payables 9 | 1,280 |
| Total equity and liabilities 10 | 11,330 |
What each numbered line means
- Heading. “Consolidated” means the parent (Harbour Foods) and the company it controls (Quay Bakery, 80% owned) are shown as if they were one business. Figures are in £000. Real reports also show last year; this one shows one year to keep it simple.
- Goodwill. The extra paid for Quay above the value of its net assets, for things like its name and customers. Price 2,400 + non-controlling interest 550 − Quay’s net assets on the day 1,700 = 1,250. Harbour’s “Investment in Quay 2,400” is not on this statement. It has been replaced by Quay’s assets, liabilities and this goodwill.
- Property, plant and equipment. Add 100% of both companies: 5,000 + 2,200 = 7,200. This is 100%, not 80%, because Harbour controls all of Quay’s assets. Every asset and liability line works the same way.
- Trade receivables. 800 + 500 − 120 = 1,180. The 120 Quay owes Harbour is removed. A group cannot owe money to itself.
- Share capital. Harbour’s shares only: 3,000. Quay’s 1,000 of share capital is cancelled when goodwill is worked out.
- Retained earnings. Harbour’s 4,200 + 80% of the profit Quay has kept since it was bought. Quay’s profit since then = 1,500 − 700 = 800. 80% × 800 = 640. Total 4,200 + 640 = 4,840. Quay’s profit from before the purchase is not group profit.
- Equity attributable to owners of the parent. 3,000 + 4,840 = 7,840. This is the part of the group that belongs to Harbour’s own shareholders.
- Non-controlling interest. The 20% of Quay owned by other shareholders. Value on the purchase date 550 + 20% of profit since then (20% × 800 = 160) = 710.
- Trade payables. 1,000 + 400 − 120 = 1,280. The same 120 is removed on this side, so both sides go down by the same amount.
- Total equity and liabilities. 8,550 + 1,500 + 1,280 = 11,330, the same as total assets.
How to read it
- Check it balances: total assets £11,330 = total equity and liabilities £11,330.
- Remember the lines are 100%: each asset and liability includes all of the subsidiary, even though Harbour owns 80%. The outside owners’ 20% is shown in one line: non-controlling interest (£710).
- Look at goodwill: 1,250 ÷ 11,330 = 11.0% of total assets. If the subsidiary does badly, goodwill may be written down (impaired), and that reduces profit.
- See who owns the equity: £7,840 belongs to Harbour’s shareholders and £710 to the non-controlling interest. 710 ÷ 8,550 = 8.3%.
- Compare with the parent alone: Harbour’s own balance sheet shows total assets of £9,400. The group shows £11,330, because Quay’s assets are brought in line by line.
For more practice with goodwill and group workings, see the Group accounts topic.
Watch it explained
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Videos from YouTube tutors
These videos are made by independent tutors on YouTube, not by Trial Balance. Some use US terms or older exam names (for example F7 for FR), but the principles are the same.
How to make it yourself
Start with each company’s own balance sheet and the extra information.
| Statements of financial position at 31 December 2025 (£000) | Harbour Foods plc | Quay Bakery Ltd |
|---|---|---|
| Property, plant and equipment | 5,000 | 2,200 |
| Investment in Quay Bakery Ltd (at cost) | 2,400 | – |
| Inventories | 900 | 400 |
| Trade receivables | 800 | 500 |
| Cash and cash equivalents | 300 | 100 |
| Total assets | 9,400 | 3,200 |
| Share capital (£1 shares) | 3,000 | 1,000 |
| Retained earnings | 4,200 | 1,500 |
| Non-current liabilities: bank loans | 1,200 | 300 |
| Trade payables | 1,000 | 400 |
| Total equity and liabilities | 9,400 | 3,200 |
- Harbour Foods bought 80% of Quay Bakery’s shares on 1 January 2023 for £2,400,000 cash.
- On that date Quay’s retained earnings were £700,000. Its assets were worth what the books said (no fair value changes).
- The non-controlling interest (the other 20%) was valued at £550,000 on that date.
- At 31 December 2025, Quay owes Harbour £120,000 for goods. This is in Harbour’s receivables and Quay’s payables.
- Goodwill has not been impaired.
Steps
- Group structure: Harbour owns 80%. The non-controlling interest owns 20%.
- Quay’s net assets: on the purchase date, share capital 1,000 + retained earnings 700 = 1,700. Now: 1,000 + 1,500 = 2,500. Profit since the purchase = 2,500 − 1,700 = 800.
- Goodwill: price paid 2,400 + non-controlling interest 550 − net assets on the purchase date 1,700 = 1,250.
- Non-controlling interest: 550 + 20% × 800 = 710.
- Group retained earnings: Harbour 4,200 + 80% × 800 = 4,840.
- Remove the amount the two companies owe each other: take 120 off receivables and 120 off payables.
- Add the rest line by line and take out the investment and Quay’s share capital. The table below shows every line.
| £000 | Harbour | Quay | Adjustment | Group |
|---|---|---|---|---|
| Goodwill | – | – | +1,250 (step 3) | 1,250 |
| Investment in Quay | 2,400 | – | (2,400) | – |
| Property, plant and equipment | 5,000 | 2,200 | 7,200 | |
| Inventories | 900 | 400 | 1,300 | |
| Trade receivables | 800 | 500 | (120) | 1,180 |
| Cash and cash equivalents | 300 | 100 | 400 | |
| Share capital | 3,000 | 1,000 | (1,000) | 3,000 |
| Retained earnings | 4,200 | 1,500 | (860) | 4,840 |
| Non-controlling interest | – | – | +710 (step 4) | 710 |
| Bank loans | 1,200 | 300 | 1,500 | |
| Trade payables | 1,000 | 400 | (120) | 1,280 |
The (860) on retained earnings is Quay’s profit from before the purchase (700, used in goodwill) plus the non-controlling interest’s 20% share of later profit (160). 1,500 − 860 = 640, which is Harbour’s share.
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