The organizational structure of a company may include several subsidiaries or affiliates. For such entities, revenue can be measured separately for each company, or consolidated revenue can be calculated including the cumulative financial results.
Consolidated revenue is non-accounting revenue. It includes the results of operations of parent and subsidiary companies that have established legal and financial relationships. This division of business in most cases is due to economic feasibility and the desire to reduce tax costs, as well as to reduce risks in doing business and diversification of activities.
Consolidated revenue is displayed in the consolidated financial statements.
Consolidated reporting concept
Consolidated financial statements include a group of interconnected companies that represent a single business entity. It contains the property and financial condition of the group of companies.
A feature of such reporting is the consolidation of legally independent companies, their income, assets and liabilities into a separate financial reporting system. Now it is provided by almost all holdings and groups of companies.
The concept of consolidated net revenue and its difference from revenue
Consolidated revenue is the total amount of cash received by subsidiaries and parent companies for a certain period of its operation. Basically, this is revenue from the sale of goods or the provision of services, depending on the core business of the company. But consolidated revenue can also include investment and finance income. It differs from profit in that it contains the costs that the company incurred in the production process.
There are two ways to recognize revenue - cash basis or accrual basis. In the first case, it is accounted for directly by the date of payment or the receipt of money on the company's current account. Accrual revenue accounting is commonly used in large companies. In this case, advances and prepayments for goods and services are not considered revenue.
It is worth distinguishing between net revenue and gross revenue. In the latter case, we are talking about the entire amount of money that was received for the goods or services rendered. In reality, gross sales do not reflect the real state of affairs in the company, since the company is obliged to deduct compulsory taxes, excise taxes and duties to the state, which are included in the selling price.
Therefore, more important is the indicator of net revenue, which excludes VAT, discounts, excise taxes and revaluation amounts. The net proceeds are directly in the company's turnover.
