Consolidation - Examples - Holding Company with two Subsidiaries
This page describes using the Consolidation module using an example in which there is a holding company (or "Mother" Company) and two subsidiary companies (or "Daughter" Companies).
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For this example we will use the following company structure:
For simplicity and clarity, we will enter a single Transaction in each Company. This is the Transaction in the Mother Company:
This is the similar Transaction in the first Daughter Company:
We have used the same Accounts in both Transactions, but in the Account records in the Daughter Company we have specified Consolidation Accounts:
This means that the Bank Accounts of the Mother and Daughter Companies will be shown separately in consolidated Balance Sheet reports when we produce them from the Mother Company. The Bank Account of the Daughter Company will be shown as 701, while that of the Mother Company will be shown as 700 as normal. Account 701 does not have to exist in the Daughter Company, but it must exist in the Mother Company. If it does not, the balance of the Daughter's Bank Account will not be included in consolidated reports.
In the Main Owner Percentage register of the Daughter Company, we specified that it was 60% owned by the Mother Company. As we have selected the Reduce Minorities option in the Daughter Company's Bank Account, 60% of the balance of the Daughter Company's Bank Account will be shown in consolidated reports produced from the Mother Company. However, for the purposes of the example, we have not selected the Reduce Minorities option in the Sales Account (Account 100) in the Daughter Company. This means that the full balance of the Daughter Company's Sales Account will be shown in consolidated reports.
This is the Transaction in the second Daughter Company:
Now we will produce a Balance Sheet Report from the Consolidation module in the Mother Company. For the first example, we have not selected the
Include Daughter Companies option in the 'Specify Balance Sheet' window, so the balance on the Bank Account will be calculated from the Transaction in the Mother Company only:
When we produce the report again, this time using the
Include Daughter Companies option in the 'Specify Balance Sheet' window, the balance on the Bank Account will be calculated from the Transactions in all three Companies. For clarity, we have shown each Company's Bank Account separately (by specifying Consolidation Accounts in the Bank Accounts of both Daughter Companies, as described above):
The Net Change is calculated as follows:
| 2,000.00 | | from M |
| + | 1,400.00 | x 60% | from D1 (60% owned by M) |
| + | 300.00 | | from D2 |
| 3,140.00 | | |
The figure for Total Net Assets is different to that for Profit/Loss this YTD because we selected the
Reduce Minorities option for the Bank Account in the first Daughter Company but not for the Sales Account. So, the Total Net Assets figure includes 60% of the first Daughter Company's Bank Account, but the Profit/Loss this YTD includes 100% of its Sales Account.
We will now produce a Profit & Loss Report from the Consolidation module in the Mother Company. If we do not select the Include Daughter Companies option in the 'Specify Profit & Loss Report' window, the balance on the Sales Account will be calculated from the Transaction in the Mother Company only:
If we select the Include Daughter Companies option in the 'Specify Profit & Loss Report' window, the balance on the Sales Account will be calculated from the Transactions in all three Companies. Again, for clarity, we have shown each Company's Sales Account separately:
As mentioned above, we did not select the
Reduce Minorities option for the Sales Account in the first Daughter Company, so the report shows 100% from all Companies.
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Consolidation examples:
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