BLOCK 2
, 04
Consolidations
Section 9
, Combined Financial Statements
Separate Financial Statements
(s9.28 - 9.30): Scope (s9.1): • defines circumstances in
·
mmmmmmmmmmm
(s9.24 - 9.27): which an entity presents
consolidated FS and the
ACCN 3004/3010 Mind Map
procedures for preparation
Standard does not require presentation of separate Standard does not require combined financial statements to be prepared Consolidated financial statements = the
IC sale of
FS for parent entity or individual subsidiaries financial statements of a parent and Consolidations
its (Section
• includes guidance9)
on
• If investor prepares combined FS and describes them as conforming to IFRS for SMEs, those separate and combined FS
subsidiaries presented as those of a single
statements shall comply with ALL of the requirements
PRESENTATION assets • Intercompany transactions and balances shall be eliminated
economic entity • if a parent entity by itself
does NOT have public
Separate FS are a second set of FS presented in addition to: • Profits or losses resulting from intercompany transactions recognised in assets (eg. inventory & accountability, it may
PPE) shall be eliminated Separate financial statements = a second set of
• consolidated FS prepared by a parent present its separate FS in
financial statements presented by an entity, in which
• FS prepared by a parent exempted from preparing
consolidated FS or
• FS of the entities included in the combined FS shall be prepared as of the same reporting date
unless impracticable to do so
Deferred tax
entity could elect to account for its investments in
accordance with this, even if
it presents its consolidated
• Uniform accounting policies shall be followed for like transactions and other events in similar subsidiaries, jointly-controlled entities and
• FS prepared by an entity that is not a parent but is an FS in accordance with full
circumstances associates either at cost less impairment, at fair
investor in an associate or has a venturer’s interest in a IFRS or another set of
value with changes recognised in P/L or using the
joint venture generally accepted
DISCLOSURES equity method
accounting principles (GAAP)
ACCOUNTING POLICY ELECTION policy of accounting for its investments in subsidiaries,
associates & jointly controlled entities
Combined FS shall disclose: Combined financial statements = a single set of financial
Entity shall adopt a policy in its separate financial statements either: • fact that FS are combined financial statements statements of two/more entities under common control
• at cost less impairment • reason why combined FS are prepared
present financial information about entities that are controlled by the same
• at FV with changes in FV recognised in P/L • basis for determining which entities are included in the combined FS
investor/investors, as if those entities were a single entity
Intangible assets
• using the equity method BUT can elect different policies for different classes
The entity shall apply the same policy for ALL investments in a single class
• basis of preparation
• related party disclosures required by Section 33
Requirement to Present Consolidated
DISCLOSURES
Separate FS shall disclose:
Financial Statements (s9.2 - 9.3):
• that statements are separate FS
A parent entity shall present consolidated FS in which it consolidates ALL its
• description of methods used to account for the investments in subsidiaries, jointly controlled
investments in subsidiaries
entities and associates
AND shall identify the consolidated FS/other primary FS to which they relate A parent need NOT present consolidated FS if BOTH of the following conditions are met:
PART 1 • the parent is itself a subsidiary, and
• its ultimate parent (or any intermediate parent) produces consolidated general
Consolidations
purpose financial statements that comply with full IFRS/IFRS for SMEs
Disclosures Consolidations A parent does NOT need to consolidate if:
(s9.23): • a subsidiary is both acquired and held with the intention of selling/disposing of it
The following disclosures shall be made in consolidated FS:
(Section(s29)
9) within one year from its acquisition date
• has NO subsidiaries other than those that are NOT required to be consolidated
• fact that the statements are consolidated
I
• basis for concluding that control exists when the parent does not own, Parent = an entity that has one/more subsidiaries
directly/indirectly, more than half of voting power
SPV SPE Subsidiary = an entity, including an unincorporated entity, that is controlled by
• any difference in the reporting date of the FS of the parent and its
subsidiaries used in preparation
special purpose vehicle special purpose entity another entity (parent) NCI
• nature and extent of any significant restrictions on the ability of
subsidiaries to transfer funds to the parent in the form of cash Control power to govern the financial and operating
Contingent liabilities
dividends or to repay loans Special Purpose Entities an entity created to accomplish policies of an entity so as to obtain benefits
• parent entity shall disclose the CA of investments in subsidiaries that a narrow and well-defined (s9.4 - 9.9): from its activities
are not consolidated at the reporting date, in total, either in the SOFP (s9.10 - 9.12): objective
or in the notes Is presumed to exist when the parent owns, directly/indirectly, more than
AOE
Entity will prepare consolidated financial statements that include the entity and any half of the voting power of an entity
SPEs when the substance of the relationship indicates that the SPE is controlled by that entity
Uniformity Common reasons for creating SPEs include:
Control also exists when the parent has:
• power over more than half of the voting rights
(s9.16 - 9.17): • Securitisation: commonly used to securitise loans/other receivables
• Risk-sharing: may be used by corporate entities to isolate a high-risk project/asset from
• power to govern the financial and operating policies of the entity
• power to appoint/remove majority of the members of the BOD
the parent company • power to cast the majority of votes at meetings of the BOD
REPORTING DATE • Asset transfer: used to facilitate the ownership & transfer of assets and related
components where, because of complex legal or regulatory reasons, transfer of ownership Control can also be achieved by having options/convertible instruments that
• FS of parent and its subsidiaries used for consolidated FS are
of the SPE is easier are currently exercisable or by having an agent with the ability to direct
prepared as of the same reporting date
• Regulatory reasons: set up to circumvent regulatory restrictions the activities for the benefit of the controlling entity
• Unless impracticable
• If impracticable to prepare FS of subsidiary at same reporting date as
The following circumstances may indicate that an entity controls an SPE: A subsidiary is NOT excluded from consolidation if:
parent, parent consolidates subsidiary’s financial info using their most
• activities of SPE are conducted on behalf of entity according to its specific business needs • the investor is a venture capital organisation or similar entity
recent FS, adjusted for effects of significant transactions/events
• entity has ultimate decision-making powers over SPE’s activities even if day-to-day • its business activities are dissimilar to those of the other entities
that occur between date of FS and date of consolidated FS
decisions have been delegated within the consolidation
• entity has rights to obtain the majority of the benefits of SPE and therefore may be • it operates in a jurisdiction that imposes restrictions on transferring
ACCOUNTING POLICIES exposed to risks incidental to activities of SPE cash/other assets out of the jurisdiction
• Consolidated FS prepared using uniform accounting policies for like • the entity retains the majority of the residual/ownership risks related to SPE or its
transactions and other events and conditions in similar circumstances assets
• If a member of the group uses a different policy from the group policy,
adjustments must be made when preparing the consolidated FS
, ·
mmmmmmmmmmm
ACCN 3004/3010 Mind Map
IC sale of Consolidation Procedures Consolidations (Section 9)
assets
Parent’s financial Subsidiary’s financial Consolidating journal Group’s consolidated
statements + statements + entries = Deferred tax
financial statements
Intangible assets
ON ACQUISITION INTRA-GROUP BALANCES
1) Eliminate the subsidiary's equity 1) Remove any intra-group transactions so the group's consolidated FS
2) Account for subsidiary's assets and liabilities at their FV only reflects the external part of any transaction
• Non-depreciable assets • Loans and interest paid/received
• Depreciable assets • Accounts receivable/payable
• Contingent liabilities • Rent expense/income
3) Recognise goodwill or bargain purchase gain Consolidations • Dividends
4) Allocate the portion of the equity that belongs to the NCI • Intra-group trading
(Section 9) • Sale of inventory
- Sale of non-depreciable assets
- Sale of depreciable assets
2) Allocate the portion of the intra-group trading that belongs to the NCI
NCI
Contingent liabilities
Any profit or loss accounts with Any profit or loss accounts within the
consolidating journal entries = consolidating journal entries =
retained earnings AOE total comprehensive income
1/01/20X1 31/12/20X1 31/12/20X2 31/12/20X3 31/12/20X4
ACQUISITION BEGINNING OF THE END OF THE
DATE CURRENT YEAR CURRENT YEAR
• Add parent and subsidiary's financial
statements together
• Repeat the prior year's consolidating
journal entries
• Prepare the consolidating journal
entries for current year
, 04
Consolidations
Section 9
, Combined Financial Statements
Separate Financial Statements
(s9.28 - 9.30): Scope (s9.1): • defines circumstances in
·
mmmmmmmmmmm
(s9.24 - 9.27): which an entity presents
consolidated FS and the
ACCN 3004/3010 Mind Map
procedures for preparation
Standard does not require presentation of separate Standard does not require combined financial statements to be prepared Consolidated financial statements = the
IC sale of
FS for parent entity or individual subsidiaries financial statements of a parent and Consolidations
its (Section
• includes guidance9)
on
• If investor prepares combined FS and describes them as conforming to IFRS for SMEs, those separate and combined FS
subsidiaries presented as those of a single
statements shall comply with ALL of the requirements
PRESENTATION assets • Intercompany transactions and balances shall be eliminated
economic entity • if a parent entity by itself
does NOT have public
Separate FS are a second set of FS presented in addition to: • Profits or losses resulting from intercompany transactions recognised in assets (eg. inventory & accountability, it may
PPE) shall be eliminated Separate financial statements = a second set of
• consolidated FS prepared by a parent present its separate FS in
financial statements presented by an entity, in which
• FS prepared by a parent exempted from preparing
consolidated FS or
• FS of the entities included in the combined FS shall be prepared as of the same reporting date
unless impracticable to do so
Deferred tax
entity could elect to account for its investments in
accordance with this, even if
it presents its consolidated
• Uniform accounting policies shall be followed for like transactions and other events in similar subsidiaries, jointly-controlled entities and
• FS prepared by an entity that is not a parent but is an FS in accordance with full
circumstances associates either at cost less impairment, at fair
investor in an associate or has a venturer’s interest in a IFRS or another set of
value with changes recognised in P/L or using the
joint venture generally accepted
DISCLOSURES equity method
accounting principles (GAAP)
ACCOUNTING POLICY ELECTION policy of accounting for its investments in subsidiaries,
associates & jointly controlled entities
Combined FS shall disclose: Combined financial statements = a single set of financial
Entity shall adopt a policy in its separate financial statements either: • fact that FS are combined financial statements statements of two/more entities under common control
• at cost less impairment • reason why combined FS are prepared
present financial information about entities that are controlled by the same
• at FV with changes in FV recognised in P/L • basis for determining which entities are included in the combined FS
investor/investors, as if those entities were a single entity
Intangible assets
• using the equity method BUT can elect different policies for different classes
The entity shall apply the same policy for ALL investments in a single class
• basis of preparation
• related party disclosures required by Section 33
Requirement to Present Consolidated
DISCLOSURES
Separate FS shall disclose:
Financial Statements (s9.2 - 9.3):
• that statements are separate FS
A parent entity shall present consolidated FS in which it consolidates ALL its
• description of methods used to account for the investments in subsidiaries, jointly controlled
investments in subsidiaries
entities and associates
AND shall identify the consolidated FS/other primary FS to which they relate A parent need NOT present consolidated FS if BOTH of the following conditions are met:
PART 1 • the parent is itself a subsidiary, and
• its ultimate parent (or any intermediate parent) produces consolidated general
Consolidations
purpose financial statements that comply with full IFRS/IFRS for SMEs
Disclosures Consolidations A parent does NOT need to consolidate if:
(s9.23): • a subsidiary is both acquired and held with the intention of selling/disposing of it
The following disclosures shall be made in consolidated FS:
(Section(s29)
9) within one year from its acquisition date
• has NO subsidiaries other than those that are NOT required to be consolidated
• fact that the statements are consolidated
I
• basis for concluding that control exists when the parent does not own, Parent = an entity that has one/more subsidiaries
directly/indirectly, more than half of voting power
SPV SPE Subsidiary = an entity, including an unincorporated entity, that is controlled by
• any difference in the reporting date of the FS of the parent and its
subsidiaries used in preparation
special purpose vehicle special purpose entity another entity (parent) NCI
• nature and extent of any significant restrictions on the ability of
subsidiaries to transfer funds to the parent in the form of cash Control power to govern the financial and operating
Contingent liabilities
dividends or to repay loans Special Purpose Entities an entity created to accomplish policies of an entity so as to obtain benefits
• parent entity shall disclose the CA of investments in subsidiaries that a narrow and well-defined (s9.4 - 9.9): from its activities
are not consolidated at the reporting date, in total, either in the SOFP (s9.10 - 9.12): objective
or in the notes Is presumed to exist when the parent owns, directly/indirectly, more than
AOE
Entity will prepare consolidated financial statements that include the entity and any half of the voting power of an entity
SPEs when the substance of the relationship indicates that the SPE is controlled by that entity
Uniformity Common reasons for creating SPEs include:
Control also exists when the parent has:
• power over more than half of the voting rights
(s9.16 - 9.17): • Securitisation: commonly used to securitise loans/other receivables
• Risk-sharing: may be used by corporate entities to isolate a high-risk project/asset from
• power to govern the financial and operating policies of the entity
• power to appoint/remove majority of the members of the BOD
the parent company • power to cast the majority of votes at meetings of the BOD
REPORTING DATE • Asset transfer: used to facilitate the ownership & transfer of assets and related
components where, because of complex legal or regulatory reasons, transfer of ownership Control can also be achieved by having options/convertible instruments that
• FS of parent and its subsidiaries used for consolidated FS are
of the SPE is easier are currently exercisable or by having an agent with the ability to direct
prepared as of the same reporting date
• Regulatory reasons: set up to circumvent regulatory restrictions the activities for the benefit of the controlling entity
• Unless impracticable
• If impracticable to prepare FS of subsidiary at same reporting date as
The following circumstances may indicate that an entity controls an SPE: A subsidiary is NOT excluded from consolidation if:
parent, parent consolidates subsidiary’s financial info using their most
• activities of SPE are conducted on behalf of entity according to its specific business needs • the investor is a venture capital organisation or similar entity
recent FS, adjusted for effects of significant transactions/events
• entity has ultimate decision-making powers over SPE’s activities even if day-to-day • its business activities are dissimilar to those of the other entities
that occur between date of FS and date of consolidated FS
decisions have been delegated within the consolidation
• entity has rights to obtain the majority of the benefits of SPE and therefore may be • it operates in a jurisdiction that imposes restrictions on transferring
ACCOUNTING POLICIES exposed to risks incidental to activities of SPE cash/other assets out of the jurisdiction
• Consolidated FS prepared using uniform accounting policies for like • the entity retains the majority of the residual/ownership risks related to SPE or its
transactions and other events and conditions in similar circumstances assets
• If a member of the group uses a different policy from the group policy,
adjustments must be made when preparing the consolidated FS
, ·
mmmmmmmmmmm
ACCN 3004/3010 Mind Map
IC sale of Consolidation Procedures Consolidations (Section 9)
assets
Parent’s financial Subsidiary’s financial Consolidating journal Group’s consolidated
statements + statements + entries = Deferred tax
financial statements
Intangible assets
ON ACQUISITION INTRA-GROUP BALANCES
1) Eliminate the subsidiary's equity 1) Remove any intra-group transactions so the group's consolidated FS
2) Account for subsidiary's assets and liabilities at their FV only reflects the external part of any transaction
• Non-depreciable assets • Loans and interest paid/received
• Depreciable assets • Accounts receivable/payable
• Contingent liabilities • Rent expense/income
3) Recognise goodwill or bargain purchase gain Consolidations • Dividends
4) Allocate the portion of the equity that belongs to the NCI • Intra-group trading
(Section 9) • Sale of inventory
- Sale of non-depreciable assets
- Sale of depreciable assets
2) Allocate the portion of the intra-group trading that belongs to the NCI
NCI
Contingent liabilities
Any profit or loss accounts with Any profit or loss accounts within the
consolidating journal entries = consolidating journal entries =
retained earnings AOE total comprehensive income
1/01/20X1 31/12/20X1 31/12/20X2 31/12/20X3 31/12/20X4
ACQUISITION BEGINNING OF THE END OF THE
DATE CURRENT YEAR CURRENT YEAR
• Add parent and subsidiary's financial
statements together
• Repeat the prior year's consolidating
journal entries
• Prepare the consolidating journal
entries for current year
