Financial Reporting · The concepts and principles of groups and consolidated financial statements

Consolidated Statement of Profit or Loss and OCI Explained

Updated 11 October 2026 · Fact-checked

A consolidated statement of profit or loss adds the parent's income and expenses to 100% of the subsidiary's, from the acquisition date only. You then remove intra-group sales, purchases and unrealised profit, and split profit and total comprehensive income between the parent's owners and the non-controlling interest.

Understand Consolidated Statement of Profit or Loss and OCI

A group is a parent and its subsidiaries. The consolidated statements show them as if they were one business. So the group's profit or loss shows only the group's dealings with outsiders.

The parent controls the subsidiary, so you add 100% of the subsidiary's revenue, costs and other items, line by line. This is true even if the parent owns only 60%. The part of the profit that does not belong to the parent is then shown as the non-controlling interest (NCI) at the bottom of the statement.

Two adjustments matter. First, include the subsidiary only from the date control is gained. If it was bought part-way through the year, time-apportion its results and include only the post-acquisition months. Second, cancel intra-group items. If the parent sells goods to the subsidiary, that sale is not a sale to an outsider. Remove it from revenue and from cost of sales. If some of those goods are still in inventory at the year end, also remove the profit not yet earned by the group (unrealised profit).

The statement ends with an allocation. Profit for the year and total comprehensive income are each split between owners of the parent and NCI. The NCI share is based on the subsidiary's own profit, adjusted for items that belong to it, such as extra depreciation on fair value uplifts or unrealised profit where the subsidiary was the seller. Dividends paid by the subsidiary to the parent are intra-group and are cancelled, so they never appear in group profit.

Other comprehensive income (OCI) is treated the same way. Add 100% of the subsidiary's post-acquisition OCI, such as revaluation gains, then allocate the total to owners and NCI.

Key rules to remember

Line-by-line consolidation: Group item = Parent + (Subsidiary × months owned ÷ 12) ± adjustments; Applies to revenue, cost of sales, expenses and OCI. Use 100% of the subsidiary regardless of the percentage held.
Intra-group sales: Deduct intra-group sales from revenue and the same amount from cost of sales; This removes the sale and the matching purchase. It does not change profit unless inventory remains unsold.
Unrealised profit in closing inventory: Unrealised profit = Intra-group inventory still held × profit ÷ selling price (margin) or × mark-up ÷ (100 + mark-up); Increase group cost of sales by this amount. Use margin on sales or mark-up on cost correctly.
Fair value depreciation: Extra depreciation = Fair value uplift ÷ remaining useful life × time owned; Charge it to the group's expenses, usually cost of sales or administrative expenses.
Profit attributable to NCI: NCI share = NCI % × (Subsidiary's post-acquisition profit after consolidation adjustments); Adjust for fair value depreciation and for unrealised profit if the subsidiary sold the goods. Do the same for total comprehensive income.
Profit attributable to owners of the parent: Owners' share = Group profit for the year − NCI share; Do the same for total comprehensive income.
Intra-group dividends: Subsidiary dividend received by the parent is excluded from group profit; Remove it from the parent's investment income. The NCI's share of the dividend is not a group expense.

How to solve Consolidated Statement of Profit or Loss and OCI questions

Use the same order every time. It keeps the adjustments and the NCI calculation organised.

1Read the date of acquisition and the percentage held. Work out the number of months the subsidiary was owned in the year.
2Set up columns: Parent, Subsidiary (time-apportioned), Adjustments, Group. Include only post-acquisition income and expenses of the subsidiary.
3List the adjustments: intra-group sales and purchases, unrealised profit in closing inventory, extra depreciation on fair value uplifts, intra-group interest and dividends, and any goodwill impairment.
4Add across line by line for revenue down to profit for the year. Use 100% of the subsidiary.
5Deal with any goodwill impairment. It is charged to group expenses. If NCI is measured at fair value, a share of it goes to the NCI.
6Calculate the NCI share of the subsidiary's adjusted profit and of its total comprehensive income.
7Calculate the owners' share as the balance. Check that owners plus NCI equal the group total.

Quickest way: Adjust the totals, not each line twice

When to use it: Use it for Section C questions under time pressure when only a few adjustments are given.

Write the months owned next to the subsidiary column and time-apportion before adding anything.
Add parent and subsidiary revenue, then deduct the intra-group sales in one go. Deduct the same figure from cost of sales.
Put the unrealised profit adjustment in cost of sales only. Do not touch revenue.
Calculate NCI on a small side working: subsidiary profit, less adjustments, times NCI %.
Subtract NCI from total profit to get owners' share, then do a quick check that the two add up.

Common mistakes in Consolidated Statement of Profit or Loss and OCI

Including the subsidiary's results for the whole year when it was acquired mid-year.
The trial balance gives full-year figures and students add them without reading the date.
Fix: Highlight the acquisition date first. Multiply every subsidiary income and expense by months owned ÷ 12 unless told otherwise.
Only deducting intra-group sales from revenue.
Students forget that the purchase side is in cost of sales.
Fix: Always deduct the same amount from revenue and cost of sales. Then deal with unrealised profit separately.
Using the parent's percentage to scale the subsidiary's figures.
Students confuse the proportionate method with full consolidation.
Fix: Add 100% of the subsidiary. Only the NCI allocation uses the percentage.
Calculating NCI on the subsidiary's unadjusted profit.
The adjustments feel like group matters only.
Fix: Deduct extra depreciation on fair value uplifts from the subsidiary's profit before taking NCI %. Deduct unrealised profit as well if the subsidiary sold the goods.
Leaving the subsidiary's dividend in the group's profit.
The parent's investment income appears in its own statement and looks like normal income.
Fix: Remove dividend income from the subsidiary from the group's profit. It is intra-group.
Putting unrealised profit against the wrong party when the parent sells to the subsidiary.
Students always charge the NCI.
Fix: If the parent is the seller, charge all the unrealised profit to the parent's owners. If the subsidiary is the seller, share it with the NCI.

Worked examples

Example 1

P owns 80% of S for the whole year to 31 December. Revenue: P ₹12,00,000; S ₹6,00,000. Cost of sales: P ₹7,00,000; S ₹3,50,000. Expenses: P ₹2,00,000; S ₹1,00,000. During the year P sold goods to S for ₹1,00,000. At year end S still held half of these goods. P sells at a mark-up of 25% on cost. Prepare the consolidated profit for the year and the split between owners and NCI.

Show the solution

Revenue: 12,00,000 + 6,00,000 − 1,00,000 intra-group = ₹17,00,000.
Unrealised profit: goods still held = ₹50,000 at selling price. Mark-up 25% on cost, so profit = 50,000 × 25 ÷ 125 = ₹10,000.
Cost of sales: 7,00,000 + 3,50,000 − 1,00,000 + 10,000 = ₹9,60,000.
Gross profit: 17,00,000 − 9,60,000 = ₹7,40,000.
Expenses: 2,00,000 + 1,00,000 = ₹3,00,000. Group profit for the year = 7,40,000 − 3,00,000 = ₹4,40,000.
P was the seller, so the unrealised profit is charged to the parent. S's profit = 6,00,000 − 3,50,000 − 1,00,000 = ₹1,50,000. NCI = 20% × 1,50,000 = ₹30,000.
Owners of P = 4,40,000 − 30,000 = ₹4,10,000.

Answer: Group profit ₹4,40,000, of which ₹4,10,000 is attributable to owners of P and ₹30,000 to the NCI.

Example 2

P acquired 75% of S on 1 July 20X5, the start of the last six months of its year ended 31 December 20X5. For the full year: revenue P ₹20,00,000, S ₹8,00,000; cost of sales P ₹12,00,000, S ₹4,80,000; expenses P ₹3,00,000, S ₹1,20,000. Revenue and costs of S accrue evenly. A fair value uplift on S's plant of ₹60,000 at acquisition has a remaining life of 5 years and is charged to cost of sales. There was no intra-group trading. Prepare the consolidated profit for the year and the NCI share.

Show the solution

Months owned = 6, so apportion S by 6 ÷ 12.
S revenue = 8,00,000 × 6/12 = ₹4,00,000. Group revenue = 20,00,000 + 4,00,000 = ₹24,00,000.
S cost of sales = 4,80,000 × 6/12 = ₹2,40,000. Extra depreciation = 60,000 ÷ 5 × 6/12 = ₹6,000.
Group cost of sales = 12,00,000 + 2,40,000 + 6,000 = ₹14,46,000.
S expenses = 1,20,000 × 6/12 = ₹60,000. Group expenses = 3,00,000 + 60,000 = ₹3,60,000.
Group profit = 24,00,000 − 14,46,000 − 3,60,000 = ₹5,94,000.
S's adjusted post-acquisition profit = 4,00,000 − 2,40,000 − 60,000 − 6,000 = ₹94,000.
NCI = 25% × 94,000 = ₹23,500. Owners = 5,94,000 − 23,500 = ₹5,70,500.

Answer: Group profit ₹5,94,000, of which ₹5,70,500 is attributable to owners of P and ₹23,500 to the NCI.

Exam tips

Circle the acquisition date and the year end before you write any figures. Mid-year acquisitions are the most common trap.
In Section C, show the working for each adjustment clearly. Marks are given for method even if one figure is wrong.
Check whether the parent or the subsidiary sold the goods. It decides who bears the unrealised profit.
In objective questions, work out only the figure asked for. For NCI questions, you usually need only the subsidiary's adjusted profit and the percentage.
End with a check: owners' share plus NCI must equal the group total for both profit and total comprehensive income.

Practice questions from The concepts and principles of groups and consolidated financial statements

Consolidated Statement of Profit or Loss and OCI in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Consolidated Statement of Profit or Loss and OCI: frequently asked questions

Why do we include 100% of the subsidiary if the parent owns less?

The parent controls the subsidiary's resources and results, so the group reports all of them. The NCI line then shows the share that belongs to other shareholders.

How do I deal with a subsidiary acquired during the year?

Include its income and expenses only from the acquisition date. Time-apportion the full-year figures unless the question gives separate post-acquisition figures.

How do I calculate profit attributable to the NCI?

Take the subsidiary's post-acquisition profit, adjust it for fair value depreciation and for unrealised profit if the subsidiary was the seller, then multiply by the NCI percentage. If NCI is measured at fair value, a share of any goodwill impairment is also charged to NCI.

Does OCI get consolidated the same way?

Yes. Add the parent's OCI to 100% of the subsidiary's post-acquisition OCI. Then allocate total comprehensive income between owners and NCI.