How to Consolidate Financial Statements under IFRS
Objectives of IFRS 10 :
IFRS 10 basically describes the way the consolidation statement should be presented and prepared when one entity has a significant control over the other. The objectives of the statement are as follows:
How to decide the control of the entity ?
When the company is having the business in the many parts of the world, then it becomes difficult for the investors to judge the correct position of the company, so there has to be one single currency statement which would decide the position of the company as a whole. There has to be some basis on which the entity is said to be have been acquired the control. In IFRS-10, the controlling entity is referred as investor and the entity controlled by investor is called investee. The following points would decide the investor is having the control or not:
Changes in the Ownership Interest:
When the parent loses the control of the subsidiary with the subsidiary company, then the following would be the consequences:
Procedure for Consolidation:
Step 1 – First of the simple steps is to merge all the assets and the liabilities, income and expenses of the parent and the subsidiaries. Step 2 – From that deduct the investment portion or the equity portion of the subsidiary in the books of investor and relevant carrying amount in the subsidiaries books of account. Step 3 – Now we need to eliminate the inter group transactions between the parents and the subsidiaries Step 4 – And finally calculate Minority interest. Recommended Articles
Auditor’s Report on Consolidated Financial StatementsFormat of Auditor’s Report on Consolidated Financial StatementsConsolidation of Financial Statements – Complete DetailsGearing Up For Reporting On Internal Financial ControlsIndAS 1: Presentation of Financial Statement
