FAR, Financial Accounting and Reporting

Sources for Consolidation

Last reviewed 2026-10-07

The standards and authorities behind PocketCPA's FAR lessons on Consolidation. The topic rests on ASC 810.

About this topic

A parent company and the companies it controls report as though they were a single company. That is what consolidation does.

Consolidated financial statements are the result: they combine a parent and the entities it controls into the statements of one economic entity.

Key points

A parent consolidates a subsidiary when it holds a controlling financial interest, usually more than 50% of voting shares.
Variable interest entities (VIEs) are consolidated by the primary beneficiary: the party with power and the obligation to absorb losses or receive benefits.
A noncontrolling interest is reported as a separate component of equity, not as a liability.
Intercompany transactions and balances are eliminated in consolidation.

What the lessons cover

When to consolidate: the controlling financial interest (ASC 810-10-15-8; 810-10-25-1)
The variable interest entity model (ASC 810-10-15-14; 810-10-25-38)
Noncontrolling interest: measurement and presentation (ASC 810-10-45-15, -16, -20)
Intercompany eliminations (ASC 810-10-45-1)
Upstream versus downstream, and the effect on NCI
Building the consolidated statements
Changes in ownership and loss of control (ASC 810-10-45-23; 810-10-40-5)

Authoritative references

ASC 810-10-15-8 and 25-1, when to consolidate: a controlling financial interest.
ASC 810-10-15-8A, the limited partnership kick-out rights test, which requires more than 50 percent held through voting interests.
ASC 810-10-15-14, the test for a variable interest entity, with the voting interest model governing if the entity is not one.
ASC 810-10-15-17AA through 15-17C and 15-17AD, the superseded paragraphs on common-control entities, and the private company election to opt out of the VIE model for entities under common control.
ASC 810-10-25-2 through 25-14, the presumption of control by a majority holder and the rights that overcome it.
ASC 810-10-25-38A, the primary beneficiary: the party holding both the power and the obligation to absorb losses or right to receive benefits.
ASC 810-10-25-42, 25-44, 25-44A and 25-44B, the primary beneficiary's indirect variable interests, and the related-party group rules for the party most closely associated with the VIE.
ASC 810-10-25-45 through 25-47, how much equity at risk is enough without additional subordinated financial support.
ASC 810-10-30-2, identification of the accounting acquirer where the acquisition is effected primarily by exchanging equity interests, as amended by ASU 2025-03.
ASC 810-10-40-5, deconsolidation: the retained interest at fair value, used in computing the gain or loss.
ASC 810-10-45, presentation of the noncontrolling interest within equity, separate from the parent's equity.
ASC 810-10-45-1 and 45-8, intercompany eliminations, including income taxes already paid on intra-entity profit.
ASC 810-10-45-15, 45-16, 45-20 and 45-21, measurement and presentation of the noncontrolling interest, attribution of net income and comprehensive income (45-20), and losses attributed to the NCI even below zero (45-21).
ASC 810-10-45-23, changes in ownership while control is retained.
ASC 810-10-50-1A, the amounts attributable to the parent and the NCI on the face of the statements (a), the equity reconciliation (c), and the schedule of changes in the parent's ownership interest (d).
ASC 810-10-50-2AG through 50-2AI, disclosure of involvement with a common-control entity and the maximum exposure to loss.
ASC 810-10-55-37D, whether a decision maker's or service provider's fee is itself a variable interest.

How PocketCPA uses these sources

Every lesson is written in original words and cites the paragraph each rule comes from. No standard's text is reproduced. How lessons and questions are written and checked is set out in our methodology.