Disclosures subsidiaries and NCI

IFRS 12 requires disclosures for each of an entity’s subsidiaries that have material non-controlling interests. Such disclosures assist users when estimating future profit or loss and cash flows (for example, by identifying the assets and liabilities that are held by subsidiaries, risk exposures of particular group entities, and those subsidiaries that have significant cash flows). The disclosures are as follows (new disclosures compared to the previous standard are in bold):

  • The subsidiary’s name
  • Its principal place of business (and country of incorporation, if different)
  • The proportion of ownership interests held by non-controlling interests
  • The proportion of voting rights held by noncontrolling interests, if different from the proportion of ownership interests held
  • The profit or loss allocated to non-controlling interests of
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Earnings per share

The objective of IAS 33 Earnings per share is prescribing principles for the determination and presentation of earnings per share, so as to improve performance comparisons between different entities in the same reporting period and between different reporting periods for the same entity.

Earnings per share is mostly used in the consolidated financial statements of a group with a parent:

  1. whose ordinary shares or potential ordinary shares are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); or
  2. that files, or is in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing ordinary shares in a public market.
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Group cash pooling and company accounts

Cash pooling arrangements arise where one group entity (which may be the ultimate group parent, or a fellow subsidiary) acts as the treasury function for the rest of the group. Under these arrangements, one entity within a group holds and maintains all cash balances with an external financial institution(s) and advances funds to group entities.

Often, a group treasury function is used in order to make the most efficient use of cash resources within a group, and to enable hedge accounting transactions to be entered into at group-level at the lowest overall cost. Typically, the group entities that act as a treasury function are not financial institutions. In some cases, subsidiaries do not have bank accounts at all, and instead … Read more

Allocation between Controlling and Non-controlling interest

When a parent entity first obtains control over another entity, it recognises any non-controlling interest in the new subsidiary’s net assets as illustrated in the example below. In subsequent periods the parent allocates to the non-controlling interest its proportion of:

  • profit or loss
  • each component of other comprehensive income [IFRS 10 B94].


The proportion allocated to non-controlling interest is based on ‘existing ownership interests’ [IFRS 10 B89]. Ownership interests in this context are the parent’s economic interests in the subsidiary rather than the voting rights. In most cases involving a traditional corporate structure these proportions will be the same and will reflect the ownership of ordinary shares. However, differences can arise as illustrated here:


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The ‘relevant activities’ of an investee

Don’t get fooled, relevant activities for financial reporting and consolidation purposes does not mean that the activities of an investee are the same as the activities of other entities (parent entity and subsidiary entities) consolidated into that one group. No…….. it is about whether the activities significantly affect the investee’s returns. In other words can the parent entity earn from the relevant activities.

Let that be clear!!

IFRS 10 introduces the concept of ‘relevant activities’. This is a critical part of the model. This concept clarifies which aspects of an investee’s activities must be under the direction of an investor for that investor to have control for consolidation purposes.The ‘relevant activities’ of an investee

Examples of activities that, depending on the circumstances, can be relevant … Read more

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.

In mainstream financial reporting IFRS 10 has not affected the scope of consolidation involving control through ownership of a majority of the voting power in an investee. However, more complex and borderline control assessments have been purposely affected.

Purposely because improving the financial performance … Read more