IAS-27

Consolidated and Separate Financial Statements

IAS-27

Outline
Introduction
Definitions Accounting for Subsidiaries in separate financial statements Truth and fairness

Inclusions
Parent and Control

IAS-27

Outline
Sundry provision of IAS-27
Results of intra-group trading Accounting year ends Accounting policies Date of acquisition or disposal

Disclosure
IAS-27 disclosure

IAS-27

Definitions
Subsidiary: an entity that is controlled by another entity. Parent: an entity that has one or more subsidiary. Group: a parent and all its subsidiaries. Minority interest: the part of interest ,in a subsidiary, that is not owned by the parent. Control: the power to govern financial and operating policies of an entity to obtain benefits from its activities. Business combination: the bringing together of separate entities into one reporting entity.
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Introduction
Truth and fairness
Present the control and ownership of the net assets of subsidiary companies Include all entities controlled by the parent company

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Inclusions
Parent and control
control exist when company owns, directly or indirectly, more than one half of the voting power of another entity.

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Inclusions
Control also exist when:
Over more than one half of the voting rights by virtue of an agreement with other investors.
The power to govern the financial and operating policies of an entity under an agreement. To appoint or remove the majority of the members of the board of directors. To cast the majority of votes at meetings of the board of directors . Illustration On control
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Presentation of Consolidated FS
A parent, shall present consolidated FS in which it consolidates its investments in subsidiaries. No need for consolidated FS if and only if: (all conditions) (a) the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent not presenting consolidated financial statements; (b) the parent's debt or equity instruments are not traded in a public market;

(c) the parent did not file, nor is it in the process of filing, its FS with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market; and
(d) the ultimate or any intermediate parent of the 8 parent produces consolidated FS available for public use that comply with IFRS.

Loss of control

Control of a subsidiary may be lost as the result of a parents decision to sell its controlling interest in the subsidiary to another party. Control can be lost as a result of a subsidiary issuing its shares to others. Control can be lost with or without a change in absolute or relative ownership levels. Government, court, regulator. A Parent might lose control of a subsidiary in two or more arrangements (transactions). One or more of the following may indicate that the parent should account for the multiple arrangements as a single transaction: (a) They are entered into at the same time or in contemplation of each other. (b) They form a single transaction designed to achieve an overall commercial effect. (c) The occurrence of one arrangement is dependent on the occurrence of at least one other arrangement. (d) One arrangement considered on its own is not economically justified, but it is economically justified when 9 considered together with other arrangements. E.g one disposal of shares is priced below market and is

Loss of Control
IF CONTROL IS LOST: derecognise the carrying amount of assets (including goodwill), liabilities and non-controlling interests on the date control is lost recognize the fair value of consideration received; recognize any distribution of shares to owners; recognize the fair value of any residual interest; recognize any resulting difference as a gain or loss in profit or loss attributable to the parent.

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Sundry provision of IAS-27

Results of intra-group trading
Intra group balances and intra-group transactions and resulting unrealized profits should be eliminated in full.

Accounting year ends

1. Co-terminus year ends
The financial statements of the parent and subsidiaries are drawn up to the same date.
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Sundry provision of IAS-27

2. Different reporting dates
Either the subsidiary must prepare special statements as at the same date as the group. Or, if at different dates if :
1. The difference is no longer than 3 months 2. Adjustments are made for the effects of significant transactions or other events that occur between those dates and the date of the parents financial statements.
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Sundry provision of IAS-27

Accounting policies
Consolidated financial statements should be prepared using uniform accounting policies for similar transactions and events.

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Sundry provision of IAS-27

Date of acquisition or disposal
The results of operations of a subsidiary are included in the consolidated financial statement as from the date of acquisition. The date of acquisition is the date on which control of the acquired subsidiary is effectively transferred to the buyer.
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Accounting for investments in subsidiaries, jointly controlled entities and associates in separate financial statements

When separate FS are prepared: investments in subsidiaries, jointly controlled entities associates That are not classified as held for sale per IFRS 5 shall be accounted for either: (a) at cost, or (b) in accordance with IAS 39. The parent/investor shall apply the same accounting for each category of investments. Such investments may not be accounted for by the equity method in the parent's/investor's separate statements.
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Disclosure
IAS-27 disclosure
Consolidated Financial statement
1. The nature of the relationship (voting power). 2. Reporting dates 3. Any significant restrictions on the subsidiary

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Disclosures (Consolidated FS)

The nature of the relationship between the parent and a subsidiary when the parent does not own, directly or indirectly through subsidiaries, more than half of the voting power; The reasons why the ownership, directly or indirectly through subsidiaries, of more than half of the voting or potential voting power of an investee does not constitute control; The end of the reporting period of the financial statements of a subsidiary when such financial statements are used to prepare consolidated financial statements and are as of a date or for a period that is different from that of the parent's financial statements, and the reason for using a different date or period; The nature and extent of any significant restrictions (eg resulting from borrowing arrangements or regulatory requirements) on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans or advances; A schedule that shows the effects of any changes in a parent's ownership interest in a subsidiary that do not result in a loss of control on the equity attributable to owners of the parent; and

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Disclosures (Consolidated FS)

if control of a subsidiary is lost, the parent shall disclose the gain or loss, if any, and: (i) the portion of that gain or loss attributable to recognising any investment retained in the former subsidiary at its fair value at the date when control is lost; and (ii) the line item(s) in the statement of comprehensive income in which the gain or loss is recognised (if not presented separately in the statement of comprehensive income).

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Disclosures (Separate FS)

If a parent elects not to prepare consolidated FS, those separate FA shall disclose: (a) the fact that the financial statements are separate financial statements; that the exemption from consolidation has been used; the name and country of incorporation or residence of the entity whose consolidated financial statements that comply with IFRS have been produced for public use; and the address where those consolidated financial statements are obtainable; (b) a list of significant investments in subsidiaries, jointly controlled entities and associates, including the name, country of incorporation or residence, proportion of ownership interest and, if different, 19 proportion of voting power held; and

Consolidation Procedures
Present Group as a single economic entity Combine Fs of P and S line by line (assets, liabilities, equity, income and expenses). Eliminate Intragroup balances, transactions, income, and expenses in full. Intragroup losses may indicate that an impairment loss on the related asset should be recognised The FS of the parent and its subsidiaries used in preparing the consolidated FS should all be prepared as of the same reporting date If notadjust. And in no case may the difference be more than three months. Consolidated FS must be prepared using uniform accounting policies for like transactions and other 20 events in similar circumstances.

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Thank you for listening Any questions?

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