Consolidation Procedure :

a) In preparing CFS, the financial statement of the parent and its subsidiaries should
be
combined / added on line by line basis by adding the like items of assets, liabilities,
income
and expenses.
b) The cost of investment of parent in each subsidiary should be cancelled /
eliminated with
parent’s portion of equity on each subsidiary on the date on which the investment
was
acquired in each subsidiary.
c) If cost of investment in a subsidiary exceeds the parent’s portion of above equity
on the date
of consolidation, the excess is debited in Goodwill and should be shown as an asset
in the
CFS.
d) If cost of investment in a subsidiary is less than the parent’s portion of above
equity on the
date of consolidation, the difference is credited to Capital Reserve account and
should be
shown in the CFS under the head Reserve and Surplus.
e) Minority Interest should be calculated and shown in the CFS
f) Intra group balances and intra group transactions and resulted unrealized profits
should be
eliminated in full.