Accounting consolidating financial statements
In other words, the holding companies will be recorded as stand-alone companies. ABC Ltd holds 55% of DEF (subsidiary) and 30% of GHI Ltd (associate).
An extract of the combined income statement will be as follows.
NEP acquires all of the stock of Midwest Gas Corporation (MGC). NEP is the parent company and MGC is the subsidiary company.
The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB), requires companies to prepare consolidated financial statements when they hold a controlling interest; more than 50 percent ownership in other businesses.
Continuing from the above example, With this approach, the results of the holding company are amalgamated into the financial statements of the parent company.
Each of these corporations will continue to operate its respective business and each will issue its own financial statements.
However, the investors and potential investors in NEP will find it helpful to see the financial results and the financial position of the earned from outside customers.