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What Is The Difference Between Consolidated And Standalone Financial Results?
Earnings season for the financial year 2022 has kick-started with some of the big entities like TCS slated to announce its Q1Fy22 results today. Now these financial statements or results are often segregated as consolidated and standalone and there is a remarkable difference between the two. So, here in we will try and figure out what these two numbers or results put across and how consolidated and standalone results differ.
What are consolidated financial statements?
These financial statements as the name suggest provides for the complete picture of the company's financial standing including that of its holding or subsidiary company. So, say if we talk about say Reliance Industries, the consolidated statement shall provide the profit realized, sales figure as well as the total debt of the conglomerate entity as a whole including those of Jio Platforms, its retail venture etc.Thus the overall and true financial picture of the company can be known via going through its consolidated financial statements.
Consolidated financial statement thus tells about the overall financial performance of the company along with its subsidiary, joint venture companies as well as holding or associate companies.
What are standalone financial results or statements?
Standalone financial results on the other hand reflect or show the performance as a single business concern. Now taking the above example if RIL releases the standalone results it will just entail the financial performance of its core company RIL.
Various differences between Consolidated/ Standalone Financial Results
| Point of difference | Consolidate financial results | Standalone financial results |
|---|---|---|
| Provides information on | Encompass results of all subsidiary, joint ventures | It is exclusively of the particular company and does not incorporates results of other subsidiaries etc. |
| On the basis of importance | Consolidated statements are always important | But in a case when subsidiaries are in a growing stage, while the consolidated statement can be depicting the weak overall picture, the standalone results however may show the financial standing as good. |
| Interpretation | Provides for the complete financial strength and hence can be relied upon | This can be misguiding at times as it can only provide for the debt taken by the holding company, likewise the dividend or interest paid out to the firm. Further a one sided interpretation may also not help us know to what extent the firm has borrowed funds. |
| Which to opt for | Consolidated financial statement should be the first choice to decide on the financial performance | Nonetheless it shall always be good to know the individual subsidiary results as well for better understanding and analysis |
