Consolidated vs. Separate Financial Statements

What each set of statements covers
What the SEC says (US, SEC registrants)

Consolidated financial statements present a parent company and the companies it controls as if they were one company. Separate financial statements present one company on its own. The difference shows up in the balances between the companies: in a parent's own statements, its investment in a subsidiary and any amounts the companies owe each other appear as assets and liabilities, and in the consolidated statements they're removed, because a group can't own or owe itself.

Billed publishes this page. The US rules are quoted from the Securities and Exchange Commission's Regulation S-X, 17 CFR 210.3A-02 (eCFR, current as of October 28, 2026), and from the text of the Financial Accounting Standards Board's Accounting Standards Update (ASU) 2015-02, issued February 2015, opened on October 30, 2026. This page explains the two kinds of statements; it doesn't advise which ones your business should prepare or file. Ask your accountant. For running the books of more than one company, see multi-entity accounting for small businesses.

What each set of statements covers

Separate statements: one legal entity's own assets, liabilities, income and expenses. A parent's separate balance sheet shows its shares in a subsidiary as an investment, and shows amounts owed to or by the subsidiary as receivables and payables.
Consolidated statements: the parent and its subsidiaries combined line by line, as one reporting entity. The parent's investment in each subsidiary, and the balances and transactions between group companies, are removed. The multi-entity accounting page quotes the international IFRS for SMEs Standard (Section 9) on removing them.

Both sets use the same statements: a balance sheet, an income statement and the others described in small business financial statements.

What the SEC says (US, SEC registrants)

Rule 3A-02 of Regulation S-X is written for the registrant, the company filing with the SEC. It says:

"There is a presumption that consolidated financial statements are more meaningful than separate financial statements and that they are usually necessary for a fair presentation when one entity directly or indirectly has a controlling financial interest in another entity."
"Other particular facts and circumstances may require combined financial statements, an equity method of accounting, or valuation allowances in order to achieve a fair presentation."
On majority ownership: "Generally, registrants shall consolidate entities that are majority owned and shall not consolidate entities that are not majority owned."

What FASB's 2015 update says about control (US GAAP)

In US GAAP, consolidation turns on a controlling financial interest. ASU 2015-02 (February 2015) sets out paragraph 810-10-25-1, which applies to "legal entities other than limited partnerships" (limited partnerships have their own paragraph, 810-10-25-1A), as: "The usual condition for a controlling financial interest is ownership of a majority voting interest, but in some circumstances control does not rest with the majority owner." That is the 2015 update's text, not necessarily today's wording: the current text is in the FASB Accounting Standards Codification, which requires a login. Ask your accountant whether a company controls another and which rules apply.

Sample: from two separate balance sheets to one consolidated balance sheet

The companies and figures here are a sample, invented for this example. In it, the parent formed the subsidiary by buying all of its shares for $25,000, and keeps the investment at that amount in its own books. How a parent measures the investment in its separate statements depends on the accounting framework it uses.

Parent Co., separate balance sheet, December 31, 2026

Cash: $32,000
Receivable from Sub Co.: $6,000
Other receivables: $12,000
Investment in Sub Co.: $25,000
Equipment: $45,000
Total assets: $120,000
Payables: $20,000
Common stock: $60,000
Retained earnings: $40,000
Total liabilities and equity: $120,000

Sub Co., separate balance sheet, December 31, 2026

Cash: $9,000
Receivables: $14,000
Equipment: $21,000
Total assets: $44,000
Payable to Parent Co.: $6,000
Other payables: $5,000
Common stock: $25,000
Retained earnings: $8,000
Total liabilities and equity: $44,000

Two eliminations:

The $6,000 Parent Co. invoiced Sub Co. and hasn't been paid: remove the $6,000 receivable and the $6,000 payable.
Parent Co.'s $25,000 investment: remove it against Sub Co.'s $25,000 common stock.

Consolidated balance sheet, Parent Co. and subsidiary, December 31, 2026

Cash: $32,000 + $9,000 = $41,000
Receivables: $12,000 + $14,000 = $26,000
Equipment: $45,000 + $21,000 = $66,000
Total assets: $133,000
Payables: $20,000 + $5,000 = $25,000
Common stock: $60,000 (Parent Co.'s only)
Retained earnings: $40,000 + $8,000 = $48,000
Total liabilities and equity: $25,000 + $60,000 + $48,000 = $133,000

Check: the two separate totals add to $120,000 + $44,000 = $164,000. Taking out the $6,000 receivable and the $25,000 investment leaves $164,000 − $6,000 − $25,000 = $133,000, the consolidated total, on both sides.

Where Billed fits

Billed's financial reporting page says: "If you manage multiple businesses in Billed, each business has its own set of financial reports." It adds: "You can view and export reports for each business independently, keeping your financial data organized."

Frequently Asked Questions

What is the difference between consolidated and separate financial statements?

Separate statements cover one company. Consolidated statements combine a parent and the companies it controls as one entity, and remove the parent's investment in each subsidiary and the balances and transactions between group companies.

When does the SEC expect consolidated statements?

For SEC registrants, Regulation S-X Rule 3A-02 says: "There is a presumption that consolidated financial statements are more meaningful than separate financial statements and that they are usually necessary for a fair presentation when one entity directly or indirectly has a controlling financial interest in another entity."

What is removed when statements are consolidated?

The parent's investment in each subsidiary, set against the subsidiary's common stock, and amounts the group companies owe each other or charge each other, such as an unpaid invoice from one company to another.

Which statements should my business prepare?

This page doesn't advise on that. It depends on how the companies are owned and controlled, who will read the statements and any filing rules that apply. Ask your accountant.

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