A consolidation example from start to finish

Consolidation is easiest to understand by doing one from start to finish. This guide takes a parent and its 80% subsidiary through every step, with the worksheet and the four consolidation entries, and ends with the consolidated statement of financial position.

By Awais Jameel, Chartered Accountant. Reviewed by Muhammad Bilal, Chartered Accountant. 3 minute read.

Short answer

This consolidation example shows how a consolidated statement of financial position is built under IFRS 10. A parent paid 500 for 80% of a subsidiary whose net assets were 480 at acquisition. Consolidation adds the two balance sheets line by line, replaces the investment with goodwill of 116 and a non-controlling interest, eliminates an intragroup balance of 20 and unrealised profit of 5, and allocates the subsidiary's post-acquisition profit between the parent and the non-controlling interest. The group's total assets are 2,021.

At a glance

Parent owns
80% of the subsidiary
Goodwill
116
NCI at year end
106
Intragroup balance
20 eliminated
Unrealised profit
5 eliminated
Excel
Consolidation worksheet
A consolidation example from start to finishParent owns: 80% of the subsidiary; Goodwill: 116; NCI at year end: 106; Intragroup balance: 20 eliminated; Unrealised profit: 5 eliminated; Excel: Consolidation worksheet.KEY FACTS AT A GLANCEA consolidation example from start to finishParent owns80% of the subsidiaryGoodwill116NCI at year end106Intragroup balance20 eliminatedUnrealised profit5 eliminatedExcelConsolidation worksheetTax BakersA consolidation example from start to finishParent owns: 80% of the subsidiary; Goodwill: 116; NCI at year end: 106; Intragroup balance: 20 eliminated; Unrealised profit: 5 eliminated; Excel: Consolidation worksheet.KEY FACTS AT A GLANCEA consolidation example from startto finishParent owns80% of the subsidiaryGoodwill116NCI at year end106Intragroup balance20 eliminatedUnrealised profit5 eliminatedExcelConsolidation worksheetTax Bakers
Key facts at a glance, as set out in this guide.

What are the facts of the consolidation example?

  • At the start of the year the parent paid 500 for 80% of the subsidiary, gaining control, whose share capital was 300 and retained earnings 180, so net assets of 480. Fair values equalled book values.
  • The non-controlling interest is measured at its proportionate share of net assets.
  • The subsidiary made a profit of 50 in the year, so its retained earnings are now 230.
  • The parent sold goods to the subsidiary for 100 at a cost of 80; a quarter are still in the subsidiary's inventory.
  • The subsidiary owes the parent 20.

Step 1: goodwill and the non-controlling interest

Goodwill = consideration 500 + NCI 96 (20% of 480) - net assets 480 = 116. At year end, the NCI is 96 plus its 20% share of the post-acquisition profit of 50, so 106.

Step 2: the consolidation entries

EntryDebitCredit
1. Eliminate the investment: Dr Share capital 300, Dr Retained earnings 180, Dr Goodwill 116; Cr Investment 500, Cr NCI 96596596
2. NCI share of post-acquisition profit: Dr Retained earnings 10; Cr NCI 101010
3. Cancel the intragroup balance: Dr Payables 20; Cr Receivables 202020
4. Remove unrealised profit: Dr Retained earnings 5; Cr Inventory 555

Step 3: the consolidation worksheet

From two balance sheets to one (CU)From two balance sheets to one (CU)ParentSubsidiaryAdjustmentsGroupTotal assets1,800630-4092,021Goodwill+116116Retainedearnings500230-195535Non-controllinginterest+106106
The investment of 500 is replaced by the subsidiary's net assets, goodwill and the NCI.
CUParentSubsidiaryAdjustmentsGroup
Property, plant and equipment9004001,300
Goodwill+116116
Investment in subsidiary500-5000
Inventory200120-5315
Receivables15080-20210
Cash503080
Total assets1,8006302,021
Share capital1,000300-3001,000
Retained earnings500230-195535
Non-controlling interest+106106
Payables300100-20380
Total equity and liabilities1,8006302,021

How is group retained earnings made up?

Group retained earnings of 535 = the parent's 500 + its 80% share of the subsidiary's post-acquisition profit of 50 (40) - the unrealised profit of 5. The subsidiary's pre-acquisition retained earnings of 180 never appear in group retained earnings; they were bought, not earned by the group.

What changes if there are fair value adjustments?

If the subsidiary's plant had been worth 50 more than its book value at acquisition, the plant would be increased by 50 on consolidation, with deferred tax of 12.5 at 25%, so net assets at acquisition would rise to 517.5 and goodwill would fall by the same 37.5. Each year the group would also charge extra depreciation on the uplift, reducing post-acquisition profit, shared with the NCI.

What if the NCI were measured at fair value?

If the non-controlling interest's fair value at acquisition were 120, goodwill would be 500 + 120 - 480 = 140, the NCI at year end 130, and total assets 2,045. Group retained earnings would be unchanged at 535. See full vs partial goodwill.

What about the consolidated income statement?

The two income statements are added line by line, intercompany revenue and cost of sales of 100 are eliminated, cost of sales is increased by the unrealised profit of 5, and profit for the year is split between the owners of the parent and the non-controlling interest, 10 for the NCI here.

In later years, the same entries are repeated, because consolidation starts again from the parent's and subsidiary's own records each period: the investment is eliminated again, the NCI's share of cumulative post-acquisition profits is updated, and current intragroup items are cancelled.

Can you build it in Excel?

Yes. The Consolidation worksheet (Excel) takes both balance sheets, the acquisition details and the intragroup items, generates the four entries and produces the consolidated statement with balance checks. See intragroup eliminations and IFRS 10 explained.

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Questions people ask

How do you prepare a consolidated statement of financial position?

Add the parent's and subsidiaries' balance sheets line by line, replace the investment with goodwill and the NCI, and eliminate intragroup balances and unrealised profits.

Are a subsidiary's pre-acquisition profits included in group retained earnings?

No. Only the parent's share of post-acquisition profits is included.

How is the non-controlling interest at year end calculated?

Its value at acquisition plus its share of the subsidiary's post-acquisition changes in equity.

What is a consolidation worksheet?

A schedule that adds the parent and subsidiary figures and applies the consolidation entries to reach the group totals.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. IFRS Foundation: IFRS 10 Consolidated Financial Statements

Rules and fees change. If you are reading this long after October 4, 2026, confirm the figures with the source before you rely on them.

IFRS 10Intragroup transactions and eliminationsIFRS 10IFRS 10 consolidation explainedIFRS 3Purchase price allocation

More in IFRS 10

TopicAll 4 guides in IFRS 10

This guide is general information. It is not tax or legal advice for your situation.