Konsolidierungsgrade

Konsolidierungsgrade, often translated as consolidation levels or degrees of consolidation, refers to the extent to which individual financial statements of a parent company and its subsidiaries are combined into a single set of financial statements. This process is essential for presenting a true and fair view of the economic reality of a group of companies that are under common control.

There are generally three main degrees of consolidation. The first is full consolidation, where the assets, liabilities, revenues, and expenses of the subsidiary are combined entirely with those of the parent company. This is typically used when the parent has control over the subsidiary, usually defined as owning more than 50% of the voting shares.

The second degree is the equity method. Under this method, the investment in the subsidiary is recorded on the parent's balance sheet at cost, and then adjusted for the parent's share of the subsidiary's net income or loss and dividends. This method is used when the parent has significant influence but not control, often when ownership is between 20% and 50%.

The third degree is the proportionate consolidation. In this approach, the parent company includes its proportionate share of the assets, liabilities, revenues, and expenses of the jointly controlled entity in its own financial statements. This method is applied when two or more parties share control of an entity. The choice of consolidation degree depends on the level of control or influence the parent company exercises over the investee.