ECONOMICS

Detailed explanation-1: -The total assets, liabilities and equity on the consolidated balance sheet should be equal to the sum of assets, liabilities and equity, respectively, of all independent balance sheets from all the companies involved.

Detailed explanation-2: -Since, the word ‘entity’ includes a company as well as any other form of entity, therefore, LLPs and partnership firms are required to be consolidated. Similarly, under Accounting Standard (AS) 21, as per the definition of subsidiary, an enterprise controlled by the parent is required to be consolidated.

Detailed explanation-3: -The Functions of Consolidated Financial Statements The purpose of these financial statements is to provide an impartial view of the company’s financial situation and actions (parent company and subsidiaries). So that stakeholders like investors and auditors can rapidly comprehend and evaluate the firm as a whole.