Overview IFRS 10 Consolidated Financial Statements

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Overview IFRS 10 Consolidated Financial StatementsShort – To establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities Overview IFRS 10 Consolidated Financial Statements

Longer – IFRS 10 replaces the part of IAS 27 Consolidated and Separate Financial Statements that addresses accounting for subsidiaries on consolidation. What remains in IAS 27 after the implementation of IFRS 10 is the accounting treatment for subsidiaries, jointly controlled entities and associates in their separate financial statements. Contingent consideration Contingent consideration Contingent consideration Contingent consideration Contingent consideration

The aim of IFRS 10 is to establish a single control model that is applied to all entities including special purpose entities. The changes require those dealing with the implementation of IFRS Read more

Consolidated financial statements

IFRS 10 Definition of consolidated financial statements

The financial statements of a group in which the assets, liabilities, equity, income, expenses and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

ParentAn entity that controls one or more entities.

The other types of financial statements are unconsolidated financial statements (or company accounts) and combined financial statements.

Single economic entity concept

The concept of a single economic entity is illustrated in the example below:

Example – Single economic entity concept

A subsidiary buys an asset from a third party for CU 100. It subsequently sells the asset on to its parent for CU 130. The subsidiary records a profit

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Investments in Joint Ventures Overview

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Investments in Joint Ventures Overview that is what this is……

An entity with joint control of an investee shall account for its investment in a joint venture using the equity method except when that investment qualifies for exemption in IAS 28. Investments in Joint Ventures Overview

The exemptions include:Investments in Joint Ventures Overview

  • if the entity is a parent that is exempt from preparing consolidated financial statements by the scope exception in paragraphs 4(a) of IFRS 10 Consolidated Financial Statements; or Investments in Joint Ventures Overview
  • all of the following apply: Investments in Joint Ventures Overview
    1. the entity is a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other owners, including those
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Uniform accounting policies for consolidation

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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. Uniform accounting policies for consolidation

Uniform accounting policies for consolidation Many times overlooked is that not only subsidiaries need to apply the same accounting policies as the parent that consolidates those subsidiaries. Also (other) unconsolidated investments accounted for at the equity method should determine the amount of equity applying those same accounting policies.

In carrying out … Read more

Consolidation in summary

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Consolidation in summary 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:

  • currency conversion: assets, liabilities, equity, income, expenses and cash flow need to be translated into the reporting currency. Positions at closing rates and streams at average rates or transaction date rates,
  • combine like items of assets, liabilities, equity, income, expenses and cash flows from the financial statements of each group entity,
  • eliminate intra-group transactions and balances,
  • eliminate the parent’s investment in each subsidiary and recognise goodwill and other business combination-related adjustments,
  • eliminate intra-group dividends,
  • consolidate allocation differences of goodwill/badwill,
  • allocate comprehensive
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What are Consolidated Financial Statements about?

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What are Consolidated Financial Statements about What are Consolidated Financial Statements about – Consolidated 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 … Read more