The lowest percent related to the proper adoption year for SFAS 130 (1%), the omitted disclosure of a prior year discontinued operations (5%), note and statement articulation for the discontinued operations (3%), and the articulation problem between the income and retained earnings statements (10%).
Overall financial statement completeness and integrity (3) The balance sheet (6) The income statement and retained earnings statement (13) The accounts receivable/revenue cycle (4) Inventory (2)
Under the parent company theory, the consolidated entity perspective assumed in the consolidated income statement, the consolidated balance sheet, and the consolidated retained earnings statement differs from the consolidated entity perspective assumed in the consolidated cash flow statement.
As such, both elements of retained earnings should be reported in the consolidated retained earnings statement to make it comparable to the consolidated retained earnings statement of companies without subsidiaries or with only wholly owned subsidiaries.
[2] Due to this mixture, the consolidated income statement, the consolidated balance sheet, and the consolidated retained earnings statement assume a parent company stockholder perspective, whereas the consolidated cash flow statement assumes a consolidated entity perspective.
As such, the incomes, dividends, and beginning and ending retained earnings balances of both stockholder groups should be reported in the consolidated retained earnings statement.
Because the focus of the paper is on reporting minority interest in the consolidated retained earnings statement, there are no subsequent intercompany transactions other than dividends.
Because the focus of this paper is the consolidated retained earnings statement, further consideration of consolidation policy and full vs.
[6] The existing literature extensively addresses consolidated balance sheet and consolidated income statement reporting differences, but virtually ignores consolidated retained earnings statement reporting differences under these two theories.
Thereafter, I more extensively examine and illustrate retained earnings statement display issues, using the same numerical example, and relate them to the consolidated cash flow statement.
For ease of exposition, I consider the consolidated balance sheet and consolidated income statement before considering the consolidated retained earnings statement, and each is considered initially under parent company theory and then under entity theory.