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The consolidated balance sheet reports all the subsidiary company's assets and liabilities on the parent company's balance sheet.
Instead, the company will report its initial investment in the investee's stock at cost.
This is recorded as a long-term asset called "Investments in Associates." There's then an "equity pick up," where profit declared by the investee company increases the investment by an amount proportionate to the company's shareholding.
Dividends you receive are deducted from this account.
When consolidating the group's financial statements, you only report income and expenses from outside of the group of companies.
Intra-group trading activity, such as a sale by the parent to the subsidiary, is eliminated as these transactions effectively cancel each other out.
That's because the net effect on the group is zero: the income earned by one entity is offset by the expense incurred by the other.