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Consolidating financial statements equity

According to the model, control is considered to exist if an entity has power to direct activities of a VIE that most significantly impact the VIEs economic performance (power criterion) and receives benefits or suffers losses from the VIE (losses/benefits criterion).

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Consolidated financial statements combine the balance sheets, income statements and cash flow statements of two or more companies or business units.Typically, consolidation should take place when the company exercises control over the investee. All entities are classified into VIEs (variable interest entities) and non-VIEs.For VIEs, a qualitative model is applied that focuses on the assessment of possession of controlling financial interest.For non-VIEs, the voting interest model is used that considers the actual share of voting rights.The relative size of ownership (generally, more than 50 percent of shares) is the key factor in assessing existence of control.Consolidated financial statements can give readers a misguided sense of profitability and financial stability in the absence of non-consolidated information.When income statements are brought together and reported on a consolidated basis, the revenues, expenses and net profit are presented as combined figures.They are often presented for companies that have one or more subsidiaries to show an overview of the entire operation.During the consolidation process under generally accepted accounting principles, activity between the companies disappears.wiki How's mission is to help people learn, and we really hope this article helped you.Now you are helping others, just by visiting wiki How.

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