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Difference Between Standalone and Consolidated Financial Statements

Organizations and companies run for a long period and have a huge infrastructure. It is not easy to keep information about their performance and actions. So, the financial statement is there to handle these tasks and provide adequate information. Standalone and consolidated are two such financial statements that are used to extract and analyze such information.

Standalone vs Consolidated Financial Statements

The main difference between the Standalone and Consolidated Financial Statements is that when the revenue produced by subsidiaries is excluded is known as a standalone financial statement while the inclusion of performance of subsidiaries is considered to be a consolidated financial statement. This difference is completely distinguished from the inclusion or exclusion of its subsidiaries.

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The concept of a standalone financial statement represents the performance and position related to the financial state of a particular company as a sole entity. In standalone statements, the performance and financial state of its subsidiaries are not included. A company is a large group that includes multiple people and provides many services.

The concept of consolidated financial statement represents the same parameters that are financial performance and the position of a company in its respective field, but it includes all the subsidiaries. Since subsidiaries are also a major part of a company and their performance affects the company on a big scale. So, it is suggested to include subsidiaries as well.

Comparison Table Between Standalone and Consolidated Financial Statements

Parameters Of ComparisonStandaloneConsolidated Financial Statements
MeaningThe standalone statement is a balance sheet that describes the financial performance and position of a company. The consolidated statement is a balance sheet that describes the financial performance of a company and subsidiaries companies.
StructureA standalone financial statement consists of the profit, loss, investments, sales, performance, financial state of a particular company.A consolidated statement consists of the profit, loss, investments, sales, financial state of a company including its subsidiaries.
UsageA standalone statement is used in the representation of the sole entity that relates to the parent company only. A consolidated statement is used in the representation of the entire entity that relates to a company and its subsidiaries.
AdvantageThe standalone financial statement is very beneficial to get knowledge about the true entity of a company. A consolidated statement is useful to represent data in one sheet and it facilitates the concept of decision making.
DisadvantageWith standalone statements, the real nature or performance of subsidiary companies of the parent company can not be known. The disadvantage of a consolidated statement is that it can sugarcoat the performance of the parent company.

What is Standalone?

The specific data related to a particular company accumulates over time and is represented by standalone financial statements. This data can be about anything such as profit or loss made by the company, expense or budget of the company, trends or workflow of the company, investment, sales, etc. The structure of data is very complex but it should be analyzed from time to time to make necessary improvements.

An example of a movie distribution company can be taken to understand the entire scenario. A company ‘x’ generates its revenue by selling or distributing short movies made by other studios and companies and doesn’t have other departments of the business. That’s how it creates multiple subsidiaries.

In this case, a standalone financial statement would only collect and analyze the data or information related to the company ‘x’. It has nothing to do with the financial performance of the subsidiaries of ‘x’. Although, the performance and position of subsidiaries make an apparent impact on the company ‘x’.

Hence, a standalone financial statement avoids every achievement or failure of subsidiaries but focuses on the sole entity of a particular company. Standalone statements are very beneficial to describe the exact state or liabilities of the company.

What is Consolidated Financial Statement?

In consolidated financial statements, the all-over performance of a particular company including its subsidiaries is elaborated. Unlike standalone statements, consolidated financial statements focus on each and every change in the performance of the company. The format of consolidated financial statements is very vivid and analytical.

To understand it better, a similar example of the company ‘x’. The company ‘x’ is a movie distribution company and has many subsidiaries. So, when the consolidated financial statement is prepared, it would consist of performance, financial state, loss, profit, revenue generated by the company ‘x’ itself, and all its subsidiaries. The consolidated statement represents the complete financial state of the subsidiaries of the company.

All the meticulous profit or significant loss made by subsidiaries would appear on the consolidated financial statements. Consolidated statements are prepared by the parent company that includes all the records of subsidiary companies. In other words, consolidated financial statements are used to portray the financial performance of a company and its subsidiaries.

The company’s management department is liable to prepare consolidated statement balance sheets. Consolidated statements are useful to analyze the entire data in one glance and they can be used to attract potential investors. By preparing consolidated statements, there is no need to make a balance sheet for each subsidiary company.

Main Differences Between Standalone and Consolidated Financial Statements

  1. The standalone statements can avoid the achievement of subsidiaries while consolidated statements include the achievement of both parent company and subsidiaries.
  2. A stand-alone financial statement is a balance sheet for a single company while consolidated financial statements are a balance sheet for both subsidiaries and parent companies.
  3. A stand-alone financial statement can be used to represent before potential investors by the parent company while consolidated statements are prepared for the parent company.
  4. The standalone financial statement elaborates the original financial state of the company while a consolidated statement can cover the lacking areas of the parent company.
  5. The standalone financial statement provides data based on specific terms while consolidated financial statements combine the entire data making it hard to analyze.

Conclusion

The results of activities laid out by companies for a specific period are analyzed by the financial statement. Financial statements are like report cards provided via school to parents filled with information about their child.

Financial statements have their separate value when it comes to drawing conclusions about the performance of a particular company. It provides information about how much profit is generated, how much loss the company had to bear, what steps should be taken to solve problems or to improve performance, etc.

Financial statements can also take the form of a balance sheet. Each financial statement has separate meanings and objectives to serve.

References

  1. https://www.bajajfinserv.in/bhfl-financials-new.pdf
  2. https://www.bankalfalah.com/wp-content/themes/alfalah-theme/pdf/consolidated-financials-31-12-2016.pdf
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