Consolidation and same reporting date

The basic requirement in IFRS 10 is that each group entity’s financial statements are drawn up to the same reporting date for consolidation purposes. Where reporting dates differ, additional financial information is prepared for consolidation purposes, unless impractical [IFRS 10 B92].

IFRS 10 does allow some flexibility if it is impractical to obtain the additional information. In that situation the subsidiary’s financial statements are used for consolidation purposes, with adjustments for significant transactions or events occurring outside the period covered by the consolidated financial statements. In this situation: Consolidation and same reporting date

  • the difference between the subsidiary’s and parent’s reporting date may not exceed three months
  • the length of the subsidiary’s reporting period and difference in dates must be the same from one period to the next. Consolidation and same reporting date

Not the same reporting date in consolidation

Parent company P is preparing consolidated financial statements to 31 March 20X1. For this purpose, it uses statutory, IFRS-based financial statements for Subsidiary S.

S has a year end of 31 December 20X0.

In February 20X1 Subsidiary S sold a property held at cost, realising a large profit that is material to the consolidated financial statements.

Analysis:

P should obtain additional information for S, such as a reporting pack or appropriately prepared management accounts, covering:

  • the 3 month period from 1 January 20X1 to 31 March 20X1
  • the comparative 3 month period from 1 January 20X0 to 31 March 20X0.

S’s financial statements should be adjusted for consolidation purposes by adding its results for the current 3 month period and deducting those for the comparative period, to end with income and expenses relating to a ‘normalised’ 12 month period.

If this is impractical then S’s financial statements may be used without including this comprehensive additional information.

However, in that situation adjustments should still be made for the property sale in February 20X1 (and for any other significant transactions or events of Subsidiary S occurring in Parent P’s annual period but outside S’s annual period).

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