The process of preparing consolidated financial statements requires that:

The process of preparing consolidated financial statements requires the following steps:

1. Identify the Parent and Subsidiaries: The first step is to identify the parent company and all of its subsidiaries. The parent company is the entity that controls one or more entities, which are the subsidiaries.

2. Gather Financial Statements: The next step is to gather the separate financial statements of the parent company and each of its subsidiaries.

3. Eliminate Intercompany Transactions: Intercompany transactions are transactions that occur between the parent and its subsidiaries or between subsidiaries. These transactions need to be eliminated to avoid double counting of revenues, expenses, and profits.

4. Combine Financial Statements: After eliminating intercompany transactions, the financial statements of the parent company and its subsidiaries are combined. This involves adding together like items of assets, liabilities, equity, income, and expenses.

5. Adjust for Non-controlling Interest: Non-controlling interest, also known as minority interest, is the portion of equity ownership in a subsidiary not attributable to the parent company. This needs to be adjusted in the consolidated financial statements.

6. Prepare Consolidated Financial Statements: Finally, the consolidated financial statements are prepared. These include a consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity, and consolidated statement of cash flows.

7. Disclose Information: The last step is to disclose information about the basis of consolidation and any changes in the group of companies being consolidated. This information is usually provided in the notes to the consolidated financial statements.