Answer:
Situational Differences
The steps involved in creating combined or consolidated financial statements are basically the same. One major difference between combined financial statements and consolidated financial statements has to do with the ownership of the companies involved.
A parent company with controlling interest in subsidiary companies must consolidate the financial results of the parent and the subsidiaries into one set of statements. The rationale behind this requirement is that because these companies are all operating together as a single enterprise they should report their results as though they were a single entity.
There are some business enterprises, however, where there are multiple companies operating as a single enterprise even though there is no parent-subsidiary relationship between them.
For example, a group of investors wants to set up multiple entities to handle their operations in different states: Management Co.; CA Operations LLC; NV Operations LLC; and AZ Operations LLC. In this case Management Co. does not have any ownership interest in the operations companies; it is not a parent. It does, however, act as a parent and many of the overhead expenses are paid by Management Co. The customer revenue, on the other hand, is collected and earned by the operations companies. In this case, although there is no GAAP requirement to do so, the group of investors would likely want to combine the financial statements of these entities to get an accurate picture of how the overall enterprise is performing.
The preparation and presentation of combined and consolidated financial statements are basically the same. The major difference is in the ownership of the companies involved. In a parent-subsidiary enterprise the statements are "consolidated"; if no subsidiary relationship exists the statements are "combined".
Technical Differences
There are more similarities than differences between combined and consolidated statements.
-Intercompany transactions are eliminated
-Minority interests are presented the same way
-Equity accounts are typically adjusted in consolidated statements (to not duplicate ownership balances); in combined statements equity accounts are typically added together (unless the companies have ownership in each other)