Most large corporations in the United States and other industrialized countries own other corporations. Their primary financial statements are consolidated statements, reflecting the total assets, liabilities, owners’ equity, net income, and cash flows of all the corporations in the group. Thus, for example, the consolidated balance sheet of the parent corporation (the corporation that owns the others) does not list its investments in its subsidiaries (the companies it owns) as assets; instead, it includes their assets and liabilities with its own.
Some subsidiary corporations are not wholly owned by the parent; that is, some shares of their common stock are owned by others. The equity of these minority shareholders in the subsidiary companies is shown separately on the balance sheet. For example, if Any Company, Inc., had minority shareholders in one or more subsidiaries, the owners’ equity section of its Dec. 31, 19—, balance sheet might appear as follows:
The consolidated income statement also must show the minority owners’ equity in the earnings of a subsidiary as a deduction in the determination of net income. For example: