Overstating Sales – Creating Revenue through the Consolidation Process

Publication Date


Document Type



If a company grows through acquisitions by buying companies with an equity interest of more than 50 percent but less than 100 percent, is there evidence of revenue creation through the consolidation process? According to the consolidation procedures of the United States Generally Accepted Accounting Principles (U.S. GAAP), companies report 100 percent of sales from the parent company, as well as 100 percent of sales from its subsidiaries, even if the parent does not have total ownership of these affiliates.

This article covers a study of 694 public companies with non-controlling income of at least $2 million. An estimate of overstated sales was obtained by dividing the non-controlling income by the consolidated company's percentage of net income before non-controlling income. It can be inferred that these companies are taking advantage of the consolidation process and are overstating consolidated sales.

Original Citation

Crowley, M. & Tobin, M. (2014, March/April). Overstating Sales – Creating Revenue through the Consolidation Process. Today’s CPA, 41(5), 32-34.

This document is currently not available here.