Understanding Combined vs Consolidated Financial Statements

A company’s financial statements can give a snapshot of its financial position, cash flow, and performance. When a business owns or controls more than one legal entity—whether subsidiaries, related LLCs, or multiple operating divisions—owners and stakeholders must decide how to report that group’s financial information.

Join our Raleigh small business CPAs as we explore the difference between combined vs consolidated financial statements. We'll break down the key points about each type of statement in effort to help you learn the when to use which type of statement.

What Are Combined Financial Statements?

Combined financial statements present the financial information of two or more entities together in one document while keeping each entity’s separate financials visible within the single report. They’re often used when entities are under common control. For example, when multiple businesses are owned by the same individual. However, there is no formal parent-subsidiary relationship required to be reported under accounting standards.

Key Points About Combined Financial Statements

Combined Financial Statements Example

A small business owner who runs a plumbing company and a plumbing supply shop may prepare combined financial statements to show both businesses together while still allowing lenders or investors to see each operation’s performance.

What Are Consolidated Financial Statements?

Consolidated financial statements combine the financial results of a parent company and its subsidiaries into a single set of financial statements, presenting the entire group as though it were one economic entity. Consolidated financial statement reports show the parent company and multiple subsidiaries together so users can assess the overall financial position, cash flow, and financial performance of the entire group.

Key Points About Consolidated Financial Statements

• They are required under generally accepted accounting principles (GAAP) when a parent corporation controls a subsidiary—commonly when the parent owns more than 50% of the voting stock, or otherwise has a controlling financial interest through contracts or board control.
• All intercompany transactions and balances are eliminated so the consolidated statements reflect only third-party activity and avoid double counting (for example, intercompany sales, loans, and receivables are removed).
• Consolidated statements present the overall economic wealth and financial health of the entire group, which is useful for potential investors, lenders, and regulators who need a single financial view of the consolidated entity.
• Preparation is more complex than combined statements because consolidation requires elimination entries, possible non-controlling interest calculations, and additional disclosures in the notes to the financial statements.
• Typical for large corporations and parent entities with multiple subsidiaries where the parent corporation controls the subsidiaries and wants to report the group as a single economic unit.

Consolidated Financial Statement Example

PepsiCo’s consolidated financial statements report PepsiCo and its subsidiaries’ combined financial position, income, and cash flow as one entity—with inter company sales and loans eliminated and any minority interests disclosed. Then investors can evaluate the consolidated financials rather than viewing each subsidiary separately.

Essential Financial Statement Reports for Businesses

Whether you’re deciding between combined vs consolidated financial statements or preparing a single set of reports for multiple businesses, every comprehensive view of a business' finances relies on three core financial statements. These reports help a business owner, lender, or potential investor understand the company's financial position, financial performance, and cash flow.

Balance Sheet

Balance sheets show a company’s financial position at a point in time—including its assets, liabilities, and equity.

In consolidated financial statement reports the parent company and its multiple subsidiaries are presented as one entity and therefore inter-company balances are eliminated. Combined financial statement reports can show each entity’s separate balances side-by-side. This is useful when related entities are under common control but a parent corporation does not consolidate them.

Income Statement

Income statements summarize revenues, expenses, and net income for a period and reveals financial performance.

Consolidated statements provide the overall economic wealth of the entire group, while combined statements let users compare how each separate business contributes to total results—helpful for a business owner evaluating which subsidiary drives profitability.

Cash Flow Statement

Cash flow statements track cash inflows and outflows from operating, investing, and financing activities and is essential for assessing liquidity.

In a consolidation, inter-company cash flows are eliminated so the consolidated cash flow reflects only third-party movements for the entire group. Combined statements preserve each entity’s cash flow, which lenders or tax preparers may request during financial statement preparation or for tax returns.

Choosing to Use Combined vs Consolidated Financial Statements

Choosing between combined vs consolidated financial statements depends on ownership, control, and who will use the reports. Below are common scenarios for which approach typically fits a particular business model.

Parent Corporation Controls Another Entity (Consolidate)

If a parent corporation controls a subsidiary (commonly by owning more than 50% of voting stock or otherwise having a controlling financial interest), consolidated financial statements are generally required. Consolidation presents the parent and its multiple subsidiaries as one economic unit, eliminates intracompany transactions, and gives investors and lenders a single view of the group’s financial health.

Users Need to Review Each Entity’s Standalone Performance (Combine)

When investors, lenders, or management want to see how each business performs on its own, combined financial statements are more useful. Combined statements present separate financial statements together in one report so stakeholders can compare individual entity results without the eliminations required for consolidation.

Entities Are Under Common Control, Yet Not Structured as Parent (Combined)

If two or more entities are under common control but there’s no formal parent–subsidiary relationship, combined statements may be appropriate to reflect the group while preserving separate entity financials. This approach helps show the financial data of related entities for lender review, tax reporting purposes, or internal management without treating them as a single consolidated entity.

Goal Is to Show the Overall Financial Health of the Entire Enterprise (Consolidated)

When the priority is to present the enterprise’s overall economic wealth and that its position is financially sound as one entity, consolidated statements provide that single, aggregated view. Consolidated reporting removes internal transactions and focuses on third-party activity, making it ideal for external stakeholders evaluating total group performance.

You Need to Eliminate Intercompany Transactions to Avoid Double Counting (Consolidated)

If eliminating inter-company transactions and balances is necessary to avoid double counting (for example, inter-company sales, loans, or receivables), consolidation is the required process. Consolidated statements perform those eliminations and may also require presenting non-controlling interests and additional disclosures under applicable accounting standards.

How Our Raleigh CPAs Can Support Your Financial Reporting Needs

C.E. Thorn, CPA, PLLC helps Raleigh small business owners decide which reporting route makes sense—and then prepares the financial statements you need. We start by reviewing ownership, voting stock, and control indicators to determine whether a consolidated approach is required under GAAP or whether combined statements better serve lenders, investors, or internal management.

What we do for you:

• Assess ownership and control: Analyze parent-subsidiary relationships, common control, and controlling financial interest to recommend consolidated vs combined financial statements.
• Financial statement preparation: Prepare balance sheets, income statements, and cash flow statements on a combined or consolidated basis, including necessary consolidation journal entries and elimination of intercompany transactions when required.
• Compliance and disclosures: Ensure consolidated financial statement reports meet GAAP disclosure requirements (non-controlling interests, intracompany eliminations, and footnote disclosures).
• Support lenders and investors: Produce combined financial statement reports or consolidated financials tailored to lender covenants, investor due diligence, or tax return preparation.
• Ongoing reporting and advisory: Provide periodic consolidated statements, management reporting, cash-flow forecasting, and guidance to improve the group’s financial health and decision making.

Contact Our Financial Statement Accountants in Raleigh Today

At C.E. Thorn, PLLC, we create financial statements for small businesses owners who are part of our monthly accounting services. To learn more about our small business financial statement preparation services, call us today at  919-420-0092 or fill out the contact form below.