ias 27 consolidated and separate financial statements

05/01/2023 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

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IAS 27 CONSOLIDATED AND SEPARATE

FINANCIAL STATEMENTS


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SCOPEPreparation and presentation of

consolidated financial statements for a group of entities under the control of a parent company

Accounting for investments in subsidiariesAccounting for jointly controlled entities and

associates in separate financial statementsIFRS 3 business combinations deals with

methods of accounting for consolidated accounts


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DefinitionsConsolidated

financial statements

(FS)

•Group of FS presented as a single economic entity

Control

•Govern financial and operating policies•Obtain benefits from activities


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Definitions•Investment recognised at cost•Recognise distributions from accumulated profit as income•Recognise distribution out of accumulated losses as reduction in cost of investment

Cost method

•Parent company and all its subsidiariesGroup

•Portion of equity of subsidiary not owned by the parent

Minority interest


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Definitions•Entity with one or more subsidiariesParent

•Incorporated and unincorporated entities controlled by a parentSubsidiary

•Presented by parent/investor•Direct equity interest reported rather than interest in results and net assets

Separate financial

statements


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Presentation of consolidated financial statementsA parent must produce consolidated financial

statements unless:The parent is a subsidiary

Wholly owned subsidiary, or Partially owned subsidiary and Other owners do not object, and

Debt or equity instruments are not traded in a public market, and

Parent not in the process of issuing instruments in a public market, and

Ultimate or intermediate parent produces consolidated FS Available for public use Comply with IFRS


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Presentation of consolidated FSParent

Wholly owned parent/subsidiary

Subsidiary75%

Joint Venture

50%

Partly owned subsidiary

80%

Subsidiary 100%

Consolidated FS

Separate FS unless publicly traded shares or debt

Separate FS


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Scope of consolidated FSConsolidated FS include all subsidiaries of the parent

>50% of voting power owned by the parent In exceptional cases ownership ≠ control Do not exclude a subsidiary from consolidation because activities are

dissimilar to parent’s Use IAS 14 Segment reporting to explain dissimilar activities Do not include a subsidiary when parent loses control to government or

another contract<50% of voting power through shares where shareholder

agreement gives Power over > 50% of voting rights Power to govern financial and operating policies Power to appoint/remove majority board members Power to cast majority vote at meetings of the board of directors Do not include unexercised convertible shares until they allow control

over financial and operating policies


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Consolidation proceduresCombine FS line by line


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Consolidation proceduresCombine FS of parent and subsidiaries line by lineAdd together similar assets, liabilities, equity, income and

expensesEliminate

Carrying amount of each investment by parent in subsidiaryParent’s portion of equity in each subsidiaryDisclose resulting goodwill according to IFRS3

Identify separatelyMinority interests in net assets of consolidated subsidiaries

Amount of minority interest at date of original combination (IFRS3) Minority share of changes in equity since that date Reflect only present ownership (not potential conversion to equity)


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Consolidation proceduresEliminate intra-group balances, transactions,

income and expensesEliminate profits and losses of intra-group

transactions recognised in assets Recognise deferred tax on temporary

differences that arise from elimination of profits and losses above

Recognise impairment of investment in consolidated accounts if subsidiaries suffered losses


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Consolidation proceduresPrepare separate FS for each consolidated

entity at the reporting date of the parent unless impracticable to do so

When subsidiary reporting date is different, adjust for significant transactions between reporting date of the sub and the parentDifference not > 3 monthsLength of reporting periods must be the sameDifference in reporting dates shall be the same

from period to period


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Consolidation proceduresUse uniform accounting policies for parent and subsidiaries (make

appropriate adjustments to align accounting policies) Include subsidiary income and expenses from the date of acquisition to

the date on which the parent ceases to control the subsidiaryShow gain or loss on disposal of subsidiaries in the consolidated income

statementPresent minority interests separately:

Consolidated balance sheet within equity, separately from parent shareholder’s equity

Minority interest in profit or loss in consolidated income statement Allocate minority loss > minority interest in equity to majority interest

unless minority will increase its investment Allocate future profit to majority until minority loss allocated to majority

interest has been recovered Adjust majority share of profits or losses for minority dividends due on

cumulative preference shares whether or not they have been declared


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Accounting for investments in subsidiaries, jointly controlled entities and associates in separate FSEither at cost or in accordance with IAS 39If held for sale, in accordance with IFRS5Use same method in separate and

consolidated FS of the parent


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DisclosureConsolidated FS

Nature of control if not via >50% voting powerReason why >50% voting power via ownership

does not constitute controlReporting date of subsidiary if different from

parentNature and extent of significant restrictions on

control


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DisclosureSeparate FS for parent who elects not to prepare consolidated

accountsStatement that the FS are separate FS (not consolidated)

The exemption has been usedName of country of incorporation of ultimate parent who produces

consolidated FSResidence of entity if differentAddress where publically available FS can be obtainedList of investments in subsidiaries, jointly controlled entities and

associates Name Country of incorporation or residence Ownership interest Voting power if different from ownership interest

Description of the method used to account for investments


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DisclosureSeparate FS of parent, venturer in jointly controlled

entity or investor in associateState that the statements are separate FSReason why prepared if not required by lawList of significant investment in

Subsidiaries Jointly controlled entities Associates

Name Country of incorporation or residence Proportion of ownership interest Voting power if different to ownership interest

Description of accounting methods used


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SummaryA parent company must produce consolidated financial

statements including all subsidiary companies under its control

Control is determined by power to control operating and financial policies rather than legal ownership

In a large group, only the ultimate controlling parent needs to produce consolidated FS if strict conditions are met

Follow consolidation procedures, eliminating all intra-group transactions and investments

Follow accounting methods set out in IFRS 3Present disclosures of all interests in group entities

ias 27 consolidated and separate financial statements

Economy & Finance