With the growth in the controlling shareholdings in subsidiary companies the presentation of a consolidated balance sheet in published reports has become the rule rather than the exception. The increase in the use of consolidated statements warrants a review not only from the standpoint of presentation but also from the standpoint of preparation in respect to certain aspects which are peculiar to consolidated statements. In the preparation of a consolidated balance sheet, the elimination of inter-company profits is limited to the interests of the parent company. This means the minority interests of the subsidiaries are considered as outsiders and the profit applicable thereto is properly considered as realized from the standpoint of the parent company. The net effect of this is that the amount of inter-company profit eliminated is represented by the amount of profit which has been taken up by the parent company as at the date of the balance sheet. This treatment is in conformity with the principle that the consolidation is merely a presentation of the parent company's position rather than a combination of the parent company and subsidiaries. Much of the confusion which exists can be traced to certain of the situations which have been outlined above. Of all the items mentioned the most significant lies in the area of recognizing that a process of substitution is taking place in presenting the consolidated statements rather than a process of combination, and that until such time as this basic principle is recognized misconception in the area of consolidation will continue to arise.

A great deal of controversy has taken place recently covering the field of depreciation and the acceptable method to be applied in the allocation of the expenditure of fixed assets to revenue. Every accountant knows that the straight-line method is not used in order to give the true depreciation but is used only for the reason that it is a convenient way of estimating the depreciation charge. The accounting principles governing the charging of expenditure on fixed assets to revenue are the same as those governing the charging of current expenditure to revenue and there can be no question of setting aside amounts out of profits to meet the expense. The fundamental proposition in regard to depreciation arises from the necessity of presenting income statements for periods of shorter duration than the life of the assets. It has been stated that the same principle underlying the charging of depreciation against revenue exists as applies to any other expense and therefore the general concept underlying the presentation of a true statement of operations, namely, the attempt to make an accurate matching of cost and revenue forms the fundamental basis under which a justification exists for the charging of depreciation against the revenue of a given period.