Company Filings normally have two type of financial

Statements – Consolidated and Standalone. Whats the

difference between two..?

Standalone Financial Statements represents the financials of the

company and its 100% subsidiaries (fully owned subsidiaries). Results
for other subsidiaries (which are not fully owned) are not included in
standalone financial statements. Consolidated Financial Statements
represent the financials which adds up non-fully owned subsidiary's
financials in standalone financial statements of the entity. E.g.
Company A has 60% stake in Company B, 75% in Company C and
100% in Company D. Standalone Financial Statements will represent
the combined numbers of Company A and Company D. While
Consolidated Financial Statements will be combined results of all 4
companies : A+B+C+D.

Companies are required to consolidate the financials of every

subsidiary in its books fully…….. It means that if the revenues of
Company A, B, C,and D are INR 5000, 300, 400, and 200 respectively,
Standalone Profit and Loss Account will show revenues of INR 5200
(A+D), While Consolidated profit and loss account will show revenues
of INR 5900 (A+B+C+D). While consolidation revenues will NOT be
proportioned to respective stake-holding in the company. Revenues are
not proportioned, as if we see carefully, we can say that B, and C are
group companies of Company A, in which 40%, and 25% stake is held
by outsiders. So for Company A, the revenues will be total revenues
earned by the group. However, the proportionate part of net income is
shown as a separate line item in P&L Account as Minority Interest.
 Financial
    Market
What is Minority Interest in Profit & Loss Account..? Concept
 Valuation
of
Companie
s
Minority Interest in Profit & Loss Account refers to that portion of a subsidiary company’s net
income that is not owned by the parent company but has been included in results of parent
company. When Company A has more than 50% stake in Company B, Company A is termed as
Parent Company / Holding Company, and Company B as Subsidiary Company. Lets understand
it with the help of an example where Company A has 80% stake in Company B. As discussed in
previous question, Consolidation norms require Company A to consolidate full results of
Company B in its results. lets further assume that Company A has Revenues and Net Income of
INR 10,000 and 2,000 respectively. Similar results for Company B has figures of INR 4,500 and
INR 1,000 respectively.
Now while consolidation Company A will include each line item of Company B in its line items
and will present the financial statements accordingly. So Consolidated revenues will be INR
14,500 and Consolidated Net Income would be INR 3,000. However, INR 200 (1,000 x 20%) of
net profit is not belonging to Company A. So A will take that portion of profit form its books
and will show it as minority interest in its own books.

  Standalone Results   Consolidated

   Particulars A B   A+B
   Revenues 10,000 4,500   14,500
   Cost of Goods Sold 4,000 2,000   6,000
   Gross Profit 6,000 2,500   8,500
   SG&A 3,000 1,000   4,000
   Operating Profit 3,000 1,500   4,500
   Income Tax 1,000 500   1,500
   Net Profit 2,000 1,000   3,000
   Minority Interest       200*
   Net Profit for Equity Holders       2,800

   * 20% (stake not held by Company A) multiplied by Subsidiary’s Net Profit (1,000)

What is Minority Interest in Balance Sheet?

Minority interest in Balance Sheet refers to the portion of a subsidiary company’s stock that is
not owned by the parent company. It is calculated as the proportionate share of paid up capital of
subsidiary adding proportionate share of reserves and surplus of that subsidiary. Continuing with
the example in above question, where Company A has 80% stake in Company B, the abstract
balance sheets (stand alone) are given as below:

   Liabilities A B    Assets A B
   Equity Holders Fund        Fixed Assets 34,800 23,000
     - Share Capital 20,000 9,000    Investments* 9,200 -
     - Reserves &
12,000 6,000    Current Assets 26,000 17,000
Surplus
   Total Debt 22,000 12,000        
   Current Liabilities 16,000 13,000      
   Total Liabilities 70,000 40,000    Total Assets 70,000 40,000

   * Investments include INR 2,000 in mutual funds and remaining portion represents
investments in subsidiary.

One must note that while consolidation, all assets of subsidiary company are added to assets of
holding company except for holding company’s investments in subsidiary company, investment
in subsidiary company will automatically adjust with the amount of share capital of subsidiary
company in holding company. Similarly all the liabilities of subsidiary company are added with
 the liabilities of holding company. But Share capital of subsidiary company in holding company
will not shown in the consolidated balance sheet in the books of holding company. Because, this
share capital automatically adjust with the amount of the investment of holding company in to
subsidiary company. Minority Interest in this will be calculated as total of 20% of share capital
and 20% of reserves and surplus i.e. INR 3,000. Consolidated Balance Sheet in this example
will look as:

   Liabilities A    Assets A
   Equity Holders Fund      Fixed Assets 57,800
     - Share Capital 20,000    Investments (3) 2,000
     - Reserves & Surplus 16,800    Current Assets 43,000
(1)

     - Minority Interest (2)  3,000     

   Total Debt 34,000     
   Current Liabilities 29,000    
   Total Liabilities 102,800    Total Assets 102,800
  (1) 12,000 (A’s Reserves and Surplus) plus 80% of 6,000 (B’s Reserves and Surplus)
  (2) 20% of 9,000 (B’s Share capital) plus 20% of 6,000 (B’s Reserves and Surplus)
  (3) 9,200 (Total Investments) Less 7,200 (Investments in subsidiary – 80% of 9,000 (B’s Share Capital)