Adjusting entries consolidating statements
There are three ways to account for the ownership interest: cost, equity and acquisition methods.
The type of method depends on how much of the second company the first company owns.
Intercompany eliminations (ICE) are made to remove the profit/loss arising from intercompany transactions.
No intercompany receivables, payables, investments, capital, revenue, cost of sales, or profits and losses are recognised in consolidated financial statements until they are realised through a transaction with an unrelated party.
A consolidated financial statement takes the financial statement of a parent company and its subsidiaries and combines them into one comprehensive financial statement.