Adjustment of investment income: If the parent company holds the equity of the subsidiary, the investment income of the subsidiary shall be incorporated into the consolidated statement according to the shareholding ratio. This usually includes dividend income and investment income under the equity method. These amounts need to be excluded from the statements of subsidiaries to avoid double counting.
Internal transaction adjustment: Internal transactions between subsidiaries and parent companies may affect the profits of subsidiaries. These transactions may include sales, purchases, service fees, etc. In the consolidated statements, it is necessary to eliminate the influence of these internal transactions to reflect the performance of subsidiaries under market conditions.
Inter-period adjustment: If the accounting cycle of the subsidiary is different from that of the parent company, inter-period adjustment is required. This includes adjusting the profits of subsidiaries to suit the accounting period of consolidated statements.
Adjustment of non-controlling rights and interests: If the parent company does not own all the shares of its subsidiaries, it needs to eliminate the influence of non-controlling rights and interests. This includes the share of non-controlling shareholders in the profits of subsidiaries.
Reorganization and revaluation adjustment: If reorganization or asset revaluation occurs during the consolidated statement period, the profits of subsidiaries need to be adjusted accordingly to reflect the impact of these major events.
Adjustment of net profit and loss: items to be considered include the merger of affiliated companies, profit and loss before merger, etc. To ensure that the net profit and loss in the consolidated statements correctly reflect the financial performance of the whole enterprise group.
Tax adjustment: Considering the influence of tax, it is necessary to adjust the pre-tax profit of subsidiaries to ensure the correct calculation of consolidated income tax in consolidated statements.
Currency exchange adjustment: If the currency of the subsidiary is different from that of the parent company, it is necessary to adjust the exchange rate change to reflect the foreign exchange difference in the consolidated statement.