Uniform accounting policies for consolidation

For IFRS, the parent company and its subsidiaries must have and apply uniform (i.e. the same) accounting policies. If not, appropriate adjustments are made when preparing the consolidated financial statements to ensure conformity. The extent and complexity of this exercise depend on the nature of the group’s activities and the basis of preparation of individual group entities’ financial statements.

Many times overlooked is that not only subsidiaries need to apply the same accounting policies as the parent that Continue reading

Consolidation in summary

Consolidated financial statements present the financial position and results of a group (a parent and its subsidiaries) as those of a single economic entity. The key steps to achieve this are:

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What are Consolidated Financial Statements about?

IFRS 10 Consolidated Financial StatementsConsolidated Financial Statements are the financial statements of a group of entities in which the assets, liabilities, equity, income, expenses and cash flows of the parent entity and its subsidiary entities are presented as those of a single economic entity.

IFRS 10 applies both to traditional entities and to special purpose (or structured) entities and replaced the corresponding requirements of both IAS 27  Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities.

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Consolidation procedures

Presentation of a group of entities as a single economical entity

9.13 The consolidated financial statements present financial information about the group as a single economic entity. In preparing consolidated financial statements, an entity shall:

  1. combine the financial statements of the parent and its subsidiaries line by line by adding together like items of assets, liabilities, equity, income and expenses.
  2. eliminate the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity
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Consolidated or unconsolidated financial statements

Consolidated financial statements provide information about the assets, liabilities, equity, income and expenses of both the parent and its subsidiaries as a single reporting entity.

That information is useful for existing and potential investors, lenders and other creditors of the parent in their assessment of the prospects for future net cash inflows to the parent. This is because net cash inflows to the parent include distributions to the parent from its subsidiaries, and those distributions depend on net … Continue reading