6.2.2. Analysis of consolidated statements
For external users, consolidated financial statements act as additional information that eliminates the limitations of private balances. For the parent company, the consolidated statements serve as a kind of "extension" and & quot; Supplement & quot; to your reporting.
In the process of analysis, it should be borne in mind that in order to avoid re-counting and artificial overstating of capital and financial results, articles reflecting mutual intra-firm operations should be eliminated.
Articles subject to elimination are those items that are excluded from the consolidated statements because they lead to a repeated account and distortion of the financial performance of the group.
The following calculations are subject to elimination in the preparation of consolidated financial statements:
o Debt for contributions not yet made to the authorized capital;
o advances received or issued;
o loans of companies in the group;
o mutual accounts receivable and accounts payable to group companies;
o other assets and securities;
o Expenses and deferred income;
o Unexpected operations.
If the amounts of accounts receivable of one company fully correspond to the amounts of accounts payable of another company included in the group, they are mutually eliminated.
When assessing the financial condition, various methods and techniques are used:
o vertical analysis, in which the structure of the final financial indicators is determined with the exposure of the effect of each reporting item on the result as a whole;
o analysis of relative indicators, in which the calculation of relations between individual positions of the report is carried out, the relationships of the indicators are determined;
o a method of comparison that presupposes the establishment of similarities and differences in indicators, provided that the comparable quantities, homogeneity and the same methodology for their determination are interrelated.
The consistency and methodology for analyzing the consolidated balance sheet is analogous to the analysis of the normal balance sheet. It is necessary to explain what kind of consolidation of reporting was used, on what conditions there was a merger of enterprises into a group, to characterize the relationship and interaction of members of the group. It is necessary to conduct a financial analysis not only of the consolidated financial statements, but also of the initial forms of financial statements of the parent organization and subsidiaries. In the process of analysis, the share of the parent organization and subsidiaries in the property of the financial and industrial group is determined, and the share of subsidiaries in the group's assets is estimated. Calculate the proportion of own and borrowed funds of the parent organization and subsidiaries in the sources of formation of the property of the financial and industrial group, estimate the share of participation of subsidiaries in the sources of formation of the group's property.
When compiling a profit and loss account, the financial results of the activities of the merging companies, their presentation will depend on the way of combining-buying or merging.
In the income statement is the minority's share of the profits (losses) of subsidiaries. This indicator is used to adjust the financial result (profit or loss) of the group to determine the net profit attributable to the parent.
In the process of analysis, it is necessary to calculate and estimate the share of subsidiaries in the financial results of the financial and industrial group.
The value of a company formed as a result of the merger of two enterprises, often exceeds the total value of these two enterprises. As a result of the merger of enterprises there is economies of scale - reducing average costs while increasing the scale of production. Information on the merger of enterprises can (and should) lead to an increase in the value of shares, since the goal of any merger is to maximize the incomes of shareholders of merging enterprises.
Such an indicator as earnings per share is taken into account in the merger of enterprises for which growth is important in the short term, and an assessment of the long-term trend is not necessary. When assessing the long-term outlook, discounting should be used.
The explanatory note to the consolidated balance sheet and the profit and loss account provides a list of all subsidiaries with disclosure of a number of data (names of companies, state registration or business activities, the size of the authorized capital, the share of the principal (predominant) in these companies or in their authorized capital).
Many small and large companies are constantly striving to expand and diversify their activities by merging with one or more companies. There are many reasons for such unification, in particular:
o giving the administration of the acquiring company the opportunity to actively exploit the historically established production mechanism and effective sales schemes of the acquired company;
o Providing the company initiating this association with a new mix of suppliers and customers, additional production resources, including qualified production personnel and a group of qualified managers, as well as the use in the interests of the new association of established relationships with consumers and government authorities and extra-budgetary funds for places;
o belonging to the company being sold directly or indirectly to the industry to which the diversification process of the initiator of the association is aimed;
o modification of the organizational structure of the market, the competition remains unchanged;
o External extension is much more attractive and efficient enough compared to a progressive internal extension;
o The psychology of scale, which consists in the fact that a large company attracts partners for joint activities, which is why the business activity is reviving and, in the long run, the efficiency of the combined company is increased;
o reduction of financial risk: if one of the group companies is inefficient and unprofitable, all losses will be covered by the owners and creditors of this subsidiary, i.е. responsibility for obligations is borne by the enterprise, and not by the group;
o economic reasons caused by a significant difference in legislative systems, taxation and requirements for the activities of companies in different countries of the region, as well as the advisability to more effectively carry out activities through companies that are legally dependent;
o Overcoming customs and tax barriers, trade restrictions, bans, etc.
It should be noted that the unification of companies in a developed market economy is an ongoing process. By planning their investment management policies, companies seeking to join consolidated groups receive the opportunity to prepare, evaluate and implement the most effective investment projects and programs.
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