How to Prepare Consolidated Cash Flow Statement of Holding Company

When there is one holding company and it has one or two subsidiary company, there is need of making one consolidated cash flow statement to show accurate position of inflow and cash outflow in operation, investment and finance of company and on this basis, investor of holding or subsidiary company can take better investment decision.

Meaning of Consolidated Cash Flow Statement

Consolidated cash flow statement is the statement which shows of cash flow in operating,investing and finance activity of parent company and its interest in its subsidiary company

Steps to Prepare of Consolidated Cash Flow Statement

1. Remember the Base of Consolidated Cash Flow Statement

You know that when you make the simple cash flow statement, its base is the balance sheet and income statement. 

Like this, if you are making the consolidated cash flow statement, you must to make consolidated income statement and consolidated balance sheet.

2. Remember Remove Minority or Non Controlling Interest Cash Flow 

For example, we have bought other company's 90% share it means 90%, we have control and 10% control of minority interest. So, we have to remove the cash flow of 10% in different activities through adjustment in consolidated cash flow statement. Good  news, our all raw data of consolidated income statement and consolidated balance sheet already differentiate it

3. No need to Adjust Inter-transactions between Holding company and Subsidiary company

We have adjusted in consolidated income statement and balance sheet already. 

4. Find Consolidated Cash Flow from All Activities

1. Consolidated Cash Flow from operating activities

Net profit as per Consolidated Income Statement 

+ Depreciation and Amortization because it is not cash, so, we add it for finding cash net profit 

+Bad debts and provision for bad debts 

+ tax expenses

+ Finance cost

+ Advance incomes in cash

+  Credit purchase 

- interest income because it is financial income not cash from operating activities

- dividend income

- income from properties 

- foreign exchange income 

- credit sales

- outstanding incomes

- Closing Stock

===============================

Net cash from operation 

==============================

2. Consolidated Cash Flow From Investing activities

Inflow of Cash from Investment

Sale of other company shares 

Sale of other company's mf

Sales of Land 

Sales of any fixed asset

Less Cash outflow in Investment

1. Purchase of shares of other company

1.1 Business Acquisition payment 

2. Purchase of mf of other company

3. Purchase of land

4. Purchase of any fixed assets

5. Bank deposits

6. inter-corporate deposit

7. payment including advance for acquiring right of use of asset

8. payment of purchase of intangible assets

==========================

Net cash flow from investing activity

===========================

3. Consolidated Cash Flow  from Financing activities 

Cash inflow

1. Issue of new shares

2. Issue of debentures and bonds

3. Short term borrowing

Less Cash outflow

1. Cash paid for redemption of debenture 

2. Dividend paid to equity holder of company ( holding+subsidiary)

3. Dividend paid to equity holder of minority interest
3. Interest Paid

4. Buy back of own shares. 

5. Buy back share cost

6. Payment of short term borrowing

==============================

Net Cash flow from Financing Activity

==============================

 Related Contents 

1. How to Make Consolidated Income Statement
2. How to Make Consolidated Income Statement - Part 2
3.  How to prepare Consolidated Balance Sheet of Holding Company
4.  Consolidated Financial Statements of Group of Companies
5.  Accounting standard 21 - Simplified - Consolidated financial statement – AS 21
6.  How to Consolidate Financial Statements

Related Videos Tutorials

1.  How to Prepare Consolidated Balance Sheet of a Holding Company
2.  How to Calculate Minority Interest in Consolidated Balance Sheet

Download Related eBooks

1. Income Statement MADE Easy

2. Balance Sheet MADE Easy