Consolidated statement of profit or loss and other comprehensive income

A consolidated income statement is easier than it looks. For every line, you add the parent and the subsidiary. Then you take out what happened inside the group, because a group cannot sell to itself and make a profit. What is left is the story of the group with the outside world.

The only twist is that some of the profit belongs to the outside owners of the subsidiary, and that has to be shown separately.

This topic covers the cross-cast of the consolidated statement of profit or loss and other comprehensive income, the elimination of intra-group sales, unrealised profit, management fees, interest and dividends, fair value depreciation, goodwill impairment, subsidiaries bought part-way through the year and the share of the non-controlling interest. The previous topics covered control and the consolidated statement of financial position. The next topic covers associates and joint ventures.

May 2026 Question 1(a) was a consolidated profit or loss question worth 20 marks.

Key terms in plain English

Syllabus check

This topic is examinable under syllabus area C. It covers:

• the preparation of a consolidated statement of profit or loss and other comprehensive income;
• the elimination of intra-group transactions and unrealised profit, and fair value adjustments.

The basic rules

Income, expenses, gains and losses are a cross-cast of the individual statements. The statement must show the profit for the period, and the total comprehensive income, attributable to the owners of the parent and to the non-controlling interests. The NCI figure is its percentage of the subsidiary’s profit (or total comprehensive income) included in the group statement, after consolidation adjustments. The owners’ figure is the balance.

Intra-group items

• Sales and purchases: cancel revenue of the seller against cost of sales of the buyer. Dr revenue, Cr cost of sales.
• Unrealised profit: goods bought from a group company and still in inventory must be valued at the lower of cost and net realisable value from the group’s view. Dr cost of sales (this reduces gross profit), Cr inventory. In an upstream sale, the adjustment is made in the subsidiary’s profit, so the NCI shares it. In a downstream sale, the whole adjustment is the parent’s.
• Management fees and interest: the income of one member and the expense of the other cancel. There is no external income or expense.
• Dividends: a dividend received from a subsidiary is ignored in the group statement, because the profit it comes from is already consolidated.

Other adjustments

• Fair value adjustments: if an asset is fair valued upwards on consolidation, the extra depreciation is charged in the group statement (in the subsidiary’s costs), which reduces the subsidiary’s profit and so the NCI’s share.
• Goodwill impairment: it is not in either company’s own statements. It is a group expense, usually in administrative expenses. Under the partial method, only the parent’s share of the impairment is recognised. With full goodwill, it is shared in the profit ratio (see the previous topic).

CAMA 2020 and group statements

The Companies and Allied Matters Act 2020 (CAMA 2020) requires statements that follow International Financial Reporting Standards (IFRS) and give a true and fair view.

Pre- and post-acquisition profits

A subsidiary is consolidated from the date control starts to the date it ends. If the parent controls it for the whole year, all of its results are included. If it is acquired part-way through the year, only the post-acquisition results are consolidated, usually by time-apportioning the year’s results (for example 3/12 for a purchase on 1 October). The NCI takes its share of the post-acquisition profit only.

The rules in more depth

Why unrealised profit is removed

A profit is earned only when goods are sold outside the group. Until then the group has just moved goods from one pocket to another.

Why the NCI shares upstream but not downstream adjustments

In an upstream sale the subsidiary booked the profit, and the NCI owns part of the subsidiary. In a downstream sale the parent booked it, and the NCI has no share in the parent.

Why the dividend is ignored

The profit that paid the dividend is already in the group income statement. Counting the dividend would count the profit twice.

Effect on analysis

Margins in the group statement are the margins with the outside world. Revenue is lower than the sum of the parts, and so is gross profit when intra-group inventory is still held.

Worked examples

1. Revenue = 1,000 + 800 − 100 = 1,700.
2. Cost of sales.
   400 + 250 − 100 (intra-group) + 5 (unrealised profit, ₦35,000 − ₦30,000) = 555.
   Gross profit = 1,145.
3. Distribution = 120 + 75 + 10 (extra depreciation, 100 ÷ 10) = 205.
4. Administration = 80 + 20 + 15 (goodwill impairment) = 115.
5. The dividend from S of 80 is eliminated.
   Finance costs = 25 + 15 = 40.
6. Profit before tax.
   1,145 − 205 − 115 − 40 = 785.
   Tax = 45 + 40 = 85.
   Profit = 700.
7. S’s profit = 400.
   Adjusted for the fair value depreciation (−10) and unrealised profit (−5, upstream) = 385.
   NCI = 20% × 385 = 77.
   Owners of the parent = 700 − 77 = 623.

1. Include 3/12 of S: revenue 65,000, cost of sales 15,000, distribution 7,500, administration 23,750, tax 3,750.
2. Consolidated: revenue 465,000; cost of sales 215,000; gross profit 250,000; other income 20,000; distribution 57,500; administration 113,750; profit before tax 98,750; tax 33,750; profit 65,000.
3. S’s profit for 3 months = 60,000 \x{00d7} 3/12 = 15,000.
   NCI = 20% × 15,000 = 3,000.
   Owners = 65,000 − 3,000 = 62,000.

1. Profit in the sale.
   ₦150,000 × 25/125 = ₦30,000.
   Unrealised (half) = ₦15,000.
2. Entry in both cases: Dr cost of sales ₦15,000; Cr inventory ₦15,000.
3. Downstream (parent sells to subsidiary): the subsidiary’s profit is unchanged, so the NCI is 20% of the unadjusted profit. The parent bears all ₦15,000.
4. Upstream. (subsidiary sells to parent): the subsidiary’s profit falls by ₦15,000.
   The NCI bears 20% × ₦15,000 = ₦3,000 and the parent ₦12,000.

1. Management fee: Dr income (P) ₦400,000; Cr expense (S) ₦400,000. Group result unchanged.
2. Interest: Dr interest income ₦90,000; Cr finance cost ₦90,000.
3. The dividend of ₦80,000 is removed from the group statement and does not affect profit.

1. Only the six months after 1 July 2024 are consolidated for Royal and ConnectNow (the ICAN solution takes six months, or 50%, of the annual figures).
2. The previously held 30% is remeasured to fair value. The gain (₦6.5bn less carrying amount of ₦5.7bn = ₦0.8bn) is shown in profit or loss.
3. Intra-group sales (bandwidth ₦2.4bn) are removed. Unrealised profit (₦120m) and the deferred tax on it (₦36m) are adjusted. Interest on the loan, the management charge and the goodwill impairment (₦1.2bn, shared with the NCI under full goodwill) are included.
4. The marking guide gives marks for each adjustment and for the presentation, profit and the NCI.

How to score full marks

• Check the dates first. Decide how much of the subsidiary’s year to include.
• Set out a working table with P, S, adjustments and the consolidated column.
• Number every adjustment and show the debit and credit.
• Identify upstream or downstream before calculating the NCI.
• Calculate the NCI from the adjusted profit and take the owners’ share as the balance.
• Check that the owners’ share and the NCI add to the total.

Common mistakes in the exam

• Including the whole year of a subsidiary bought during the year.
• Forgetting to cancel the intra-group sale in both revenue and cost of sales.
• Leaving the parent’s dividend income in the group statement.
• Taking the NCI from the unadjusted subsidiary profit.
• Sharing a downstream unrealised profit with the NCI.
• Putting the goodwill impairment into the subsidiary’s own statements.
• Calculating the NCI on the profit before tax.

Quick revision

• Cross-cast from the date of control. Time-apportion a mid-year acquisition.
• Cancel intra-group sales. Remove unrealised profit through cost of sales. Cancel fees and interest. Ignore dividends.
• Extra depreciation and goodwill impairment are group costs.
• NCI = percentage × adjusted subsidiary profit. Upstream shared, downstream not.
• Owners = total − NCI.
• CAMA 2020: ss. 377(1), 378, 379 to 381, 374(1), 385, 404(7).

Practice questions

These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.

Recall check: multiple choice

The real ICAN paper has no multiple-choice section. These questions are for quick recall. The written questions that follow are closer to the exam.

Written questions

Model answers

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