Difference Between Balance Sheet vs Consolidated Balance Sheet
The following article provides an outline for Balance Sheet vs Consolidated Balance Sheet. A balance sheet is the position of assets and liabilities as on the date of the specific organization and whereas the consolidated Balance sheet is the combined balance sheet of the group as a whole which shows the combined position of assets and liabilities as a group and it is much wider than the Balance sheet.
The balance sheet is prepared by all the business organizations, whereas the consolidated balance sheet is prepared only by companies with subsidiaries or associate or joint venture entities. The consolidated balance sheet is a much wider concept than the balance sheet. A normal accountant can prepare a balance sheet, but for the preparation of a consolidated balance sheet, expert knowledge is required as it involves a lot of adjustments. All organizations cannot prepare the consolidated balance sheet, but the balance sheet is prepared by all organizations, including those who required to prepare the balance sheet. In accounting terms balance sheet also known as the standalone statement of assets and liabilities. If the company contains subsidiaries or associate companies consolidated balance sheet can give a broader view.
Head to Head Comparison between Balance Sheet vs Consolidated Balance Sheet (Infographics)
Below are the top 8 differences between balance sheet vs consolidated balance sheet
Key Differences between Balance Sheet vs Consolidated Balance Sheet
Following are the key differences between balance sheet and consolidated balance sheet:
- Compulsion: Preparation of balance sheet is compulsory for every organization, whether business or non-profit organization, whereas consolidated balance sheet, is to be prepared by only those organizations who has subsidiary companies or associate companies.
- Audit: Audit of the balance sheet is compulsory only if the turnover exceeds the limit, whereas audit of the consolidated balance sheet is compulsory for all organizations that prepare it.
- Classification: In the balance sheet, only the assets and liabilities which belongs specifically to the entity is included, whereas, in the consolidated Balance sheet, there is no classification of assets and liabilities for each subsidiary or associates.
- Preparation: The balance sheet is to be prepared by every organization, whether it is the subsidiary company or associate company or standalone business; for each organization balance sheet is to be prepared by that organization only. Whereas a consolidated balance sheet is to be prepared only by the holding company.
- Involvement of expert and adjusting the intra company holdings: While preparing the Balance sheet, a normal financially literate person can accurately prepare the balance sheet. Whereas in case of preparation of consolidated balance sheet expert knowledge and involvement is required as while preparing to consolidate balance sheet intra company transactions are to eliminated and various adjustments are required at the initial level for the calculation of goodwill or capital reserve, minority interest and thereby on every balance sheet date or on subsequent holding or disposal.
- Preparation time: A balance sheet can be prepared in a limited time. It is easy to process, whereas the preparation of a consolidated balance sheet is time-consuming and complex.
- Preference: Consolidated balance sheet takes the preference over the balance sheet if the company required to prepare the consolidated balance sheet as the investor will consider the consolidated balance sheet as the basis point for an investment decision.
Balance Sheet vs Consolidated Balance Sheet Comparison table
Let’s discuss the top 8 comparisons between the Balance Sheet vs Consolidated Balance Sheet:
|
Heading |
Balance Sheet |
Consolidated Balance Sheet |
| Definition | A balance sheet is the statement of financial position, which consist of details of assets, liabilities and the capital, whether owners’ capital or equity capital. | A consolidated balance sheet is the summary statement of assets, liabilities of parent and its subsidiaries; it also consists of shareholders’ fund of holding and minority interest for subsidiaries. |
| Scope | The balance sheet is a narrow concept as it consists of details of a single enterprise. | A consolidated balance sheet is a wider concept as it consists of details of all group companies. |
| Consolidated adjustments | There is no need for consolidated adjustments as the statement is a standalone statement. | Consolidated adjustments like the elimination of intra company transactions etc., are to be eliminated. |
| Pre – requisite | Every organization needs to prepare a balance sheet | A company that owns more than 50% share in other company or business entity needs to prepare a consolidated balance sheet. |
| Analysis | A balance sheet is easy to analyse as the format and terms used are simple to understand. | A consolidated balance sheet requires detailed analysis and knowledge of some technical terms to read and understand the balance sheet. |
| Comparatives | In the balance sheet, comparative data is to be prepared with the previous year. | In preparation for the consolidated balance sheet, there is no need for comparative data with the previous year to be included. |
| Example | ABC ltd holds 25% in XYZ Ltd, then ABC Ltd need not to prepare the consolidated balance sheet as the percentage held is less than 50 %. Here only investment in XYZ Ltd is to be reflected in the balance sheet of ABC Ltd., and both the companies only need to prepare their own balance sheets. | ABC Ltd. Holds 52% in XYZ Ltd and 60% in MNP Ltd. Then ABC Ltd, XYZ Ltd and MNP Ltd has to prepare the separate balance sheet of their own, as well as abc ltd, need to prepare the consolidated balance sheet to consist of combined position ABC, MNP and XYZ Ltd along with the separate statement consist of details of subsidiaries. |
| Relevance | The balance sheet is more reliable for legal and tax compliance and less relevant for the investor if a consolidated balance sheet is prepared. | A consolidated balance sheet is less reliable for the purpose of tax and other legal compliance and more reliable by investors while taking investment related decisions. |
Conclusion
Thus Balance sheet refers to the position of the assets and liabilities of the company on the specific date, while on the other hand Consolidated Balance sheet is the statement of the financial position of the group company together, which is to be prepared by a holding company that holds more than 50 % in another company called as subsidiary company or companies. While preparing the consolidated balance sheet, there is more complexity, legal compliance and calculations are required as compared to the normal balance sheet. The consolidated balance sheet is considered the relevance point for the investor to make the investment decisions.
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