Consolidated financial statements Financial statements that reflect the combined operations of a parent company and its subsidiaries.

Control An investing company’s ability to decide the operating and financial policies of another firm because it owns more than 50 percent of that firm’s voting stock.

Cost-adjusted-to-market method A method of accounting for available-for-sale securities at cost adjusted for changes in the market value of the securities.






Eliminations Entries made on consolidation work sheets to eliminate transactions between parent and subsidiary companies.

Equity method A method of accounting for influential but noncontrolling long-term investments in which the investment is initially recorded at cost and then adjusted for the investor’s share of the company’s net income or loss and subsequent dividends.

Exchange gain or loss A gain or loss due to exchange rate fluctuation that is reported on the income statement.

Exchange rate The value of one currency stated in terms of another.






Functional currency The currency of the place where a subsidiary carries on most of its business.






Goodwill The amount paid for a subsidiary that exceeds the fair value of the subsidiary’s assets less its liabilities; also called goodwill from consolidation.






Held-to-maturity securities Investments in debt or equity securities that a company plans to hold until their maturity date.






Minority interest The amount recorded on a consolidated balance sheet that represents the holdings of owners of less than 50 percent of a subsidiary’s voting stock.

Multinational (transnational) corporations Companies that operate in more than one country.






Parent company A company that has a controlling interest in another firm.

Purchase method A method of accounting for controlling investments in which similar accounts from the parent’s and subsidiaries’ statements are combined.






Reporting currency The currency used in consolidated financial statements.

Restatement The stating of one currency in terms of another.






Significant influence "An investing company’s ability to affect the operating and financial policies of the firm in which it has invested, even though it holds 50 percent or less of the voting stock."

Subsidiary A firm in which another company owns a controlling interest.