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Finance a la shmoop what is a consolidated income statement? alright

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people put it together consolidated combined and yeah put [Rabbit appears in a cage]

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together imagine that..well think of a consolidated income statement as a

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mash-up of the income statements of two merging companies sort of like you know [Company merges into another]

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when Rihanna met Eminem and there was that monster thing under the bed Reese's

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Pieces thing you know peanut butter and chocolate and they mashed up and they

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were awesome yeah together all right well yeah well only in this case we have

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a consolidated income statement accounting is never that exciting we

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have two drink company's lemonade stands are us being mashed up or consolidated [Boy stood at a lemonade stand]

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with harmonic and peaceful make like a mint and leave yeah that's their

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competitor so let's look at them line by line side by side and go through the

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process of consolidation note the first line here as we compare the hindsight [Lemonade stand company balance sheets appear]

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year of 2020 where lemonade stands our US had 20,000 units of lemonade sold and

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make like a mint and leave had 10,000 units of tea sold so 30,000 if we were

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reporting a consolidated income statement under the new company called

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Le-mint-ade stands are us sorry we could stretch for that then yeah we'd report

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30,000 total drink units sold and yes the number would be a bit more vague

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because it wouldn't necessarily state what was lemonade and what was tea and

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doing solid accounting separately we would probably break out those numbers

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as separate line items if we were actually really good and no you cannot [Lemonade poured into a barrel]

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pour them together and just make them one big fat Arnold Palmer sorry so now

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go down to the revenues line alright the gross revenues from lemonade of 20,000

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would simply be added to the gross revenues of 8,000 bucks for a mint

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to show consolidated income statement revenues of $28,000 with net revenues of

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19,000 plus 7,000 there or 26,000 using advanced calculus to find these numbers

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now go down to the expenses area alright this mashup is well less elegant [Expenses section highlighted on balance sheet]

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in it we don't have apples to apples consolidation like we do in the revenues

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category where dollars map cleanly to dollars on the

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expences lines well tea comprises different elements than lemonade so and

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we've got some stretching to do we still have dollars but they're attributed to

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different kinds of costs in the merged Mint company we have new line items like

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pots and soil and greenhouse rent none of which are items in our lemonade

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stand business because in the mint tea business we grow our own stuff that's [Person give thumbs up at tea plants]

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kind of cool right so more than likely good accounting would simply itemize

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each of these elements producing a detailed and granular income statement

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that would eventually well basically add one side with the other noting the

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pre-tax profits of eight thousand bucks from lemonade combining with sixteen

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hundred dollars of profits for a mint for total pre-tax profits of 9600

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dollars is it likely that the combined company finds what are called synergies

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that is with more volume of product being ordered and/or more volume of [Definition of synergies appears on 100 dollar bill]

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advertisements being placed might the merged company benefit from volume

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discounts? sure what about cross promotion from lemonade drinkers to tea

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drinkers sure what about the cost of accountants who used to separately

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prepare each statement for taxes now combining efforts likely at relatively

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cheaper prices per dollar earned? yes they negotiate with accountants like us

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and get a better price all right well the gist is that when you consolidate an

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income statement you're usually merging with or acquiring

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a competitor or supplier in an analogous business space and most of the time good [Boy and girl cheering at a lemonade stand with stacks of cash]

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things happen so yeah now that you know how to consolidate an income statement

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you can well you know get busy..

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