IAS 27 has the twin objectives of setting standards to be applied: Show
Consolidated financial statements: the financial statements of a group presented as those of a single economic entity. Subsidiary: an entity, including an unincorporated entity such as a partnership, that is controlled by another entity (known as the parent). Parent: an entity that has one or more subsidiaries. Control: the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control is presumed when the parent acquires more than half of the voting rights of the entity. Even when more than one half of the voting rights is not acquired, control may be evidenced by power: [IAS 27.13]
SIC-12 provides other indicators of control (based on risks and rewards) for Special Purpose Entities (SPEs). SPEs should be consolidated where the substance of the relationship indicates that the SPE is controlled by the reporting entity. This may arise even where the activities of the SPE are predetermined or where the majority of voting or equity are not held by the reporting entity. [SIC-12] A parent is required to present consolidated financial statements in which it consolidates its investments in subsidiaries [IAS 27.9] – with the following exception: A parent is not required to (but may) present consolidated financial statements if and only if all of the following four conditions are met: [IAS 27.10]
The consolidated accounts should include all of the parent's subsidiaries, both domestic and foreign: [IAS 27.12]
Special purpose entities (SPEs) should be consolidated where the substance of the relationship indicates that the SPE is controlled by the reporting entity. This may arise even where the activities of the SPE are predetermined or where the majority of voting or equity are not held by the reporting entity. [SIC-12] Once an investment ceases to fall within the definition of a subsidiary, it should be accounted for as an associate under IAS 28, as a joint venture under IAS 31, or as an investment under IAS 39, as appropriate. [IAS 27.31] Intragroup balances, transactions, income, and expenses should be eliminated in full. Intragroup losses may indicate that an impairment loss on the related asset should be recognised. [IAS 27.24-25] The financial statements of the parent and its subsidiaries used in preparing the consolidated financial statements should all be prepared as of the same reporting date, unless it is impracticable to do so. [IAS 27.26] If it is impracticable a particular subsidiary to prepare its financial statements as of the same date as its parent, adjustments must be made for the effects of significant transactions or events that occur between the dates of the subsidiary's and the parent's financial statements. And in no case may the difference be more than three months. [IAS 27.27] Consolidated financial statements must be prepared using uniform accounting policies for like transactions and other events in similar circumstances. [IAS 27.28] Minority interests should be presented in the consolidated balance sheet within equity, but separate from the parent's shareholders' equity. Minority interests in the profit or loss of the group should also be separately disclosed. [IAS 27.33] Where losses applicable to the minority exceed the minority interest in the equity of the relevant subsidiary, the excess, and any further losses attributable to the minority, are charged to the group unless the minority has a binding obligation to, and is able to, make good the losses. Where excess losses have been taken up by the group, if the subsidiary in question subsequently reports profits, all such profits are attributed to the group until the minority's share of losses previously absorbed by the group has been recovered. [IAS 27.35] The accounting depends on whether control is retained or lost:
Acquiring additional shares in the subsidiary after control was obtained is accounted for as an equity transaction with owners (like acquisition of 'treasury shares'). Goodwill is not remeasured. In the parent's/investor's individual financial statements, investments in subsidiaries, associates, and jointly controlled entities should be accounted for either: [IAS 27.37]
The parent/investor shall apply the same accounting for each category of investments. Investments that are classified as held for sale in accordance with IFRS 5 shall be accounted for in accordance with that IFRS. [IAS 27.37] Investments carried at cost should be measured at the lower of their carrying amount and fair value less costs to sell. The measurement of investments accounted for in accordance with IAS 39 is not changed in such circumstances. [IAS 27.38] An entity shall recognise a dividend from a subsidiary, jointly controlled entity or associate in profit or loss in its separate financial statements when its right to receive the dividend is established. [IAS 27.38A] Disclosures required in consolidated financial statements: [IAS 27.40]
Disclosures required in separate financial statements that are prepared for a parent that is permitted not to prepare consolidated financial statements: [IAS 27.41]
Disclosures required in the separate financial statements of a parent, investor in a jointly controlled entity, or investor in an associate: [IAS 27.42]
Which of the following best describes financial statements?Which of the following best describes financial statements? They are the business documents that companies use to report the results of their financial activities to various user groups.
Which term best describes information in financial statements that is neutral?Which ONE of the following terms best describes information in financial statements that is neutral? The Framework (para 36) refers to information in financial statements as being neutral if it is free from bias ("Management should present information which is neutral, ie free from bias" as a matter of reliability).
Which of the following statements best describes the accounting concept of going concern?Answer and Explanation: The correct answer is B. The going concern concept assumes that the business will continue for the foreseeable future.
What do you call to this financial statement which shows the financial condition or position of a business as of a given period?The statement of financial position is another term for the balance sheet. The statement lists the assets, liabilities, and equity of an organization as of the report date. As such, it provides a snapshot of the financial condition of a business as of a specific date.
|