If a company owns subsidiaries, its own financial statements reflect only part of the picture: they show investments in subsidiaries but not their assets, revenues, and liabilities. Consolidation combines the figures of the parent company and all controlled entities, excluding intercompany transactions.
Excluding intragroup transactions is fundamental. Without it, the sale of goods between subsidiaries would create revenue and profit that do not exist for the group as a whole.
For investors, consolidated financial statements are typically more informative than individual statements, as they show the true scale of the business and total debt burden. Differences between the two types of statements from one issuer are not errors but result from different consolidation scopes.
When analyzing, it is important to understand which statements are used and which standards were applied. Comparing figures calculated using different standards and different consolidation scopes leads to incorrect conclusions, especially when calculating multiples and debt ratios.