Consolidated financial statements combine the financial information of various government entities into a single report. This allows a central government to produce statements that include data from departments, authorities, hospitals, and other organizations. Control is a key concept, where one entity can govern the policies of another to benefit from its activities. When consolidating, all internal transactions must be eliminated, and the total equity reported represents the net amount attributed to the controlling entity only. For example, in the UK, Whole of Government Accounts consolidates over 9,000 public sector organizations to provide a comprehensive picture of the country's financial position.

1. Consolidated financial
statements in the public sector
Dr Alberto Asquer

2. Financial repor,ng in the public sector
Managing revenue
Managing expenditures
Managing cash flow
Managing capital revenue
Managing capital expenditures
Medium-term
budgeting
Short-term
budgeting
Strategic
planning
Programming Financial
repor,ng
Auditing
Compliance auditing
Performance auditing

3. Consolidated accounts
What is the consolidation of financial statements
Consolidated financial statements may be defined as ‘...the
financial statements of an economic entity presented as
those of a single entity...’ (IPSASB, 2006: 180).

4. In consolidated financial statements, the central
government would produce financial statements which
include the financial statements of each government
department, local authority, hospital, prison and police
authority in the country.
Consolidated accounts

5. The concept of control is crucial:
Control may be defined as ‘...the power to govern the
financial and opera=ng policies of another en=ty so as to
benefit from its ac=vi=es...’ (Müller- Marqués Berger and
Ernst & Young, 2012: 76).
Consolidated accounts

6. General consolidation principles:
• All transactions between the entities to consolidate
(balances, revenues, expenses) must be eliminated (e.g.,
reciprocal credits and debts, revenues and costs)
• Equity of the consolidated financial reports should
report the net equity imputed to the controlling entity
(i.e., no ‘double counting’ of nominal equities)
Consolidated accounts

7. Consolidation principles
Current
assets
Long-term assets
Liabilities
Equity
Current
assets
Long-term
assets
Liabilities
Equity
Parent entity
Subsidiary
Shares
£100
£100
for 100% shares

8. Current assets
Current
assets
Long-term
assets
Consolidation principles
Long-term assets
Liabilities
Liabili5es
Group entity
Shares
Equity
Equity
£100
£100

9. Current assets
Current
assets
Long-term
assets
Consolidation principles
Long-term assets
Liabilities
Liabilities
Group en6ty
Equity

10. Consolida)on principles
Current
assets
Long-term assets
Liabilities
Equity
Current
assets
Long-term
assets
Liabilities
Equity
Parent entity
Subsidiary
Shares
£100
Credit
Debt
£200
£200
£100
for 100% shares

11. Current assets
Current
assets
Long-term
assets
Consolidation principles
Long-term assets
Liabilities
Liabili5es
Group entity
Equity
Credit
Debt
£200
£200

12. Current assets
Current
assets
Long-term
assets
Consolidation principles
Long-term assets
Liabilities
Liabilities
Group en6ty
Equity

13. Whole-of-Government accounts
In the UK
Whole of Government Accounts (WGA) consolidates the
audited accounts of more than 9,000 organisations across
the public sector in order to produce a comprehensive,
accounts-based picture of the financial position of the UK
public sector.
WGA is based on International Financial Reporting
Standards (IFRS), the system of accounts used
internationally by the private sector.

14. The end