A consolidated account is aimed at presenting the assets, financial situation and results of a

group of companies as if it were a single entity. The purpose of this methodology is to define,
within the framework of the OHADA Accounting System, the rules and techniques that must
be used for the establishment of consolidated accounts regardless of the legal form of the
consolidating and consolidated entities.

This is in accordance with:

 international accounting standards approved by the I.A.S.C. (International
Accounting Standards Committee);
 European standards (7th Directive of the Council of the European Communities).

Introduction: approach to consolidation

The growth of the activities of a company can be achieved in different organizational forms,
such as:
 The development of specialized services or the creation of branches to decentralize
decisions and determine management responsibilities;
 Processing of operations carried out jointly through joint ventures, economic interest
groups, temporary groupings of companies;
 The absorption of existing companies, in support of or in addition to the activities
carried out (merger, partial contributions of assets, etc.);

GROUP CONCEPT
The acquisition of only part of the capital of other companies so as to give the buying
company, known as the dominant company, a preponderant or significant influence in the
control and, consequently, in the decisions that the said companies are called to be taken for
their management. This process results in bringing together all these companies, both
dominant and dominated, in a larger economic whole called "consolidated group".
Compared to the dominant company, the constitution of this group has two main
characteristics:
Absence of legal unity, since the scope of the activities carried out is divided between
distinct companies which have their own existence and an independent result. In
addition, the shareholders' equity and the results of the whole belong partly to the
dominant company, partly to "minorities";

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 Effective economic unit because of the dependence of other companies on it and
because it ensures the unity of management and remains the decision-making center of
the consolidated whole.
It turns out that the personal accounting data of each company incorporated in the
consolidated whole, added to each other, do not faithfully reflect the real economic situation
of the entity thus constituted and as noticed by the third parties. It is therefore necessary to
have recourse to the establishment of common accounts, called consolidated accounts which,
grouped together in summary financial statements, will make it possible to present the assets,
the financial situation and the results of the companies included in the consolidated group,
such as: 'it was a single company, regardless of the legal form of these companies.

Designed with this unitary perspective in mind, the consolidated group must comply with the
accounting rules and conventions used for the personal accounts of companies when drawing
up its accounts, subject to the essential adjustments resulting from the specific characteristics
of the consolidated accounts.

SECTION ONE: GENERAL PRINCIPLES

A - OBLIGATION TO PREPARE THE CONSOLIDATED ACCOUNTS

1.
According to article 74 of the OUA, any company which has its head office or its main
activity in any one of the OHADA States, and which controls exclusively or jointly one or
more other companies, or which exercises a significant influence over them, is oblige to draw
up and publishes the financial statements each year, i.e. consolidated accounts of all these
companies, as well as a report on the management of this group.
Article 75
The establishment and publication of the consolidated financial statements are the
responsibility of the administrative, management or supervisory bodies of the dominant
company of the consolidated group, known as the consolidating company.
Article 76
The obligation to consolidate remains even if the consolidating company is itself under the
exclusive or joint control of one or more companies having their head office and their main
activity outside the OHADA area [1]. The identity of this or these company (s) is indicated in

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the annexed report of the personal financial statements of the consolidating company of the
OHADA area and in that of the whole of this consolidated area.
Article 77
The dominant companies in the OHADA area, which are themselves under the control of
another company in this area subject to an obligation of consolidation, are exempt from the
establishment and publication of consolidated accounts.
However, this exemption cannot be invoked:
- if the two companies have their head office in two different regions of the OHADA area;
- if the company makes a public offering;
- if consolidated financial statements are required by a set of shareholders representing at least
one tenth of the capital of the dominant company.
2. Special cases:

Groups for which the dominant company has its head office and its main activities
outside the OHADA area
The obligation to draw up consolidated accounts remains in the case of a sub-group
dominated by a company located in this area and itself controlled exclusively or jointly by one
or more companies having their head office and their main activity outside the OHADA
States . A consolidation must then be established at the level of the sub-groups, and the
consolidating company must indicate in the appendix to its individual accounts as well as in
the appendix to its consolidated accounts the identity of the companies which control it.

If several companies do not have a shareholding link between them, but are part of the same
group of companies whose parent company is located outside the OHADA area, the
establishment of a sub-consolidation bringing together all the companies of the group located
in the States Parties is required ("horizontal consolidation" or "combined accounts"). In such a
case, the designation of the consolidating company is left to the initiative of the group
managers.

B - EXEMPTIONS: MEDIUM SIZE GROUPS

1.
According to article 95, groups of companies whose turnover and average number of workers
exceed, for two successive financial years, the minimum limits fixed by the competent
authorities.

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These limits are established on the basis of the last financial statements drawn up by the
companies included in the consolidation.

2. Determination of thresholds

For the sake of alleviating the obligations which result for consolidating companies from
drawing up consolidated accounts, groups of companies whose size is reduced are exempt
from producing these accounts.
The exemption criteria are established on the basis of turnover and the average number of
workers observed for the consolidated group over two successive financial years. They must
not exceed either of the following limits: 500,000,000 FCFA of consolidated turnover and 100
workers. For the assessment of this provision, the limit figures are calculated on the basis of
the last annual accounts drawn up by the companies included in the consolidated group.

C: OTHER CASES OF EXEMPTIONS

Dominant company of a sub-group, itself a subsidiary of a dominant company located in the

same "region of the OHADA space".
Dominant companies which are themselves under the control of a company in the OHADA
area subject to the obligation to carry out consolidation are exempt from the obligation to
establish and publish consolidated accounts.

However, this exemption does not apply in the following cases:

 The two companies have their head office in two different regions of the
OHADA area;
 The company makes a public offering (issue of securities listed on the official
stock exchange listing, issues of negotiable debt securities, etc.);
 Shareholders representing at least one tenth of the capital request the
establishment of consolidated accounts;
The legal person of which the company is a subsidiary does not draw up or publish
consolidated accounts in accordance with the provisions provided for by the OHADA
Accounting System (a priori excluded hypothesis, taking into account the obligations laid
down in Article 74, 1st paragraph, and the definition of the enterprise in the Uniform Act).

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SECTION TWO: SCOPE AND METHOD OF CONSOLIDATION
A - TYPES OF CONTROL
There are basically three major types of control;
1. Exclusive control
2. Joint control
3. Significant (influence) control
1. Exclusive Control
According to article 78 of the OHADA Uniform Arts, exclusive control by a company
results from:
 The direct or indirect holding of the majority of voting rights in another company;
 The appointment, during two successive financial years, of the majority of the
members of the administrative, management or supervisory bodies of another
company; the consolidating company is presumed to have made this designation
when it has had during this period, directly or indirectly, a fraction greater than forty
percent (40%) of the voting rights, and no other partner held, directly or indirectly, a
fraction greater than his own;
 or the right to exercise a dominant influence over a company by virtue of a contract or
statutory clauses, when the applicable law allows it and the consolidating company is
a partner of the dominated company.

2. Joint control is the sharing of control of a company operated jointly by a limited number
of partners, so that decisions result from their agreement.

3. Significant influence over the management and financial policy of another company
is presumed when a company has, directly or indirectly, a fraction at least equal to one
fifth of the voting rights of this other company.

II. Percentage of control and types of control

The percentage of control reflects the direct or indirect relationship of dependence between
the consolidating company and another company. It is expressed as a percentage of the voting
rights, and is used to determine:

- Companies which must be included in the scope of consolidation,

- The consolidation method to be applied.

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The percentage of control should not be confused with the percentage of interest which
represents the share of capital held, directly or indirectly, by a company of a group over
another company of the same group.
In the context of consolidation operations for a group of companies, there are three types of
control:

- exclusive control;

- joint control;

- notable influence.

Companies which do not fall into one of these three categories cannot be included in the
scope of consolidation (except in specific cases concerning combined accounts or horizontal
sub-consolidations).

Exclusive control results from the direct or indirect holding by the consolidating company of
the majority of voting rights at Ordinary General Meetings or equivalent decision-making
bodies of a company included in the group to be consolidated.

In some cases, this majority is not necessary. Indeed, exclusive control is presumed when the
consolidating company is the only one to have a fraction greater than forty percent of the
voting rights and, as such, has had the power to designate, for two successive years, the
majority. members of the administrative, management, supervisory or equivalent decision-
making bodies of a company to be consolidated.

Exclusive control may also result from the power of the consolidating company to direct the
financial and management policies of a company under a contract or specific clauses provided
that the applicable law allows it and that the consolidating company is a shareholder. or
partner of the dominated company.

Joint control of a company implies for the consolidating company that no important decision
is taken without the agreement of all the associates or partners, between whom there is
therefore a sharing of the dominant influence exerted on the companies concerned.

The significant influence of the consolidating company over a company is presumed if the
first has directly or indirectly a fraction at least equal to one fifth of the voting rights of the
second.

However, the consolidating company has the possibility of demonstrating:

- either that significant influence is exercised with a participation in the voting rights of less
than twenty percent,

- or that a percentage greater than twenty percent is insufficient to exercise significant

influence.

The elements making it possible to characterize the exercise of a significant influence on a

company can be sought in the following facts:

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- participation in important decision-making or provision of technical information essential to
the company's activity,

- representation in management bodies,

- possibility of influencing financial policy,

- taking into account the economic integration of the companies concerned: exchange of
executives and managers, etc.

B- SCOPE OF CONSOLIDATION

According to article 96 of the OUA, companies for which severe and lasting restrictions
substantially call into question either the control or influence exercised over them by the
consolidating company, or their possibilities of transferring funds, are left outside the scope of
consolidation.

The same can be said for companies including:

- the shares or units are only held with a view to their subsequent sale;

- the importance is negligible compared to the consolidated whole entity.

Any exclusion from the consolidation of companies falling within the categories referred to in
this article must be justified in the annexed Statement of the consolidated group.

The absence of information or insufficient information relating to a company falling within

the scope of consolidation does not call into question the obligation for the dominant
company to draw up and publish consolidated accounts. In this exceptional case, it is required
to report the incomplete nature of the consolidated accounts.

2. Determination of the scope of consolidation

All the companies whose annual accounts are taken into account for the preparation of the
group's accounts are referred to as companies that fall within the scope of consolidation.

The scope of consolidation circumscribes the scope of application to the consolidated set of
the consolidation technique. It is defined according to the nature and importance of the links
existing between the consolidating company and the companies over which they can either
exercise exclusive or joint control, or have significant influence.

On a practical level, the scope of consolidation is generally determined by respecting at least

the following two steps:

a) Determination of the percentages of interests and percentages of control held by the

consolidating company in the companies to be consolidated

- the interest percentages correspond to the share of the financial rights of the consolidating
company in each of the other companies,

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- the percentages of control correspond to the share of voting rights held by the consolidating
company in each of the other companies.
b) Setting of the scope of consolidation

To set the scope of consolidation, you must:

· Determine the type of control exercised by the consolidating company over the other
consolidable companies by calculating the percentages of control and other necessary
information;

· List all the companies that can be consolidated in the set to be consolidated;

· Exclude, where applicable, consolidable companies which must or may not be consolidated.

3. Exclusion from the scope of consolidation

Companies whose severe and lasting restrictions substantially call into question:

- the control or influence exercised over them by the consolidating company;

- the possibilities of transferring funds to the consolidating company.

However, losses linked to these entities and which could possibly fall to the group must be
taken into account in the consolidated accounts.

Exceptionally, consolidated accounts may be drawn up by a group excluding certain entities

from the group on the basis of one of the following two criteria:

- entities which, taken together or separately, are of negligible interest with regard to the
objective of providing a faithful image given by the consolidated accounts. In this case, the
grounds for exclusion must be clearly defined and specified in the consolidated annexed
Statement;

- entities over which the consolidating entity exercises only temporary control, duly justified
by a written act, a contract, or any other evidence;

- securities acquired with a view to investment, and which are only held with a view to their
resale at short notice;

- securities held on behalf of third parties outside the group (carry transactions).

No entity belonging to a group can be excluded from the scope of consolidation of this group
on the basis of criteria other than those mentioned above.

In particular, do not constitute grounds for exclusion:

- the fact that an entity carries out an activity different from that of the other companies of the
group (the consolidated statements may however show the information specific to each
branch of activity separately);

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-the fact that an entity has a legal status, nationality or location different from that of other
companies in the group or the parent company.

Special cases: lack of information or insufficient information on a group company.

In the exceptional case where, for an entity forming part of the group, the information
necessary for its inclusion in the consolidation could not be obtained, the obligation to prepare
consolidated accounts remains at the level of the consolidating company. The consolidated
statements drawn up under these conditions must be marked "Provisional incomplete
situation", and the main quantified information concerning the excluded entity as well as the
reasons for its exclusion must be specified in the annexed consolidated statement.

The statutory auditor, called upon to give an opinion on the consolidated accounts, must take
into account the incomplete nature of the consolidated accounts thus established, and assess
the impact on the overall presentation of the group.

4. Changes in the scope of consolidation

The variations during successive financial years in the percentages of control introduce
modifications in the scope of consolidation:

a) An increase in the percentage of control may result for the company whose shares are
acquired:

- keeping outside the scope of consolidation, in particular because the acquired percentage
remains insufficient to give the consolidating company the power to exercise control or
significant influence over the issuing company;

- entry into the consolidation scope using one of the three applicable methods: equity method,
proportional consolidation, full consolidation;

- a change in consolidation method following a change in the degree of control or influence

exercised by the consolidating company;

- maintaining within the scope of consolidation, without changing the consolidation method.

b) A reduction in the percentage of control leads to one of the following consequences:

- maintenance outside the scope, in the event in particular that the percentage previously held
was already insufficient to confer on the consolidating company a power of control or
significant influence;
-
- removal from the scope of consolidation, the percentage held following the reduction no
longer conferring on the holder of the securities a power of control or significant influence in
the issuing company;

- change in consolidation method, to take into account the change in the degree of influence or
control exercised by the consolidating company;

- maintenance within the scope of consolidation, without change of consolidation method.

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As the entry and exit of new companies modifies the scope of consolidation, the consolidating
company must provide in the annexed State the information which makes the comparison of
the successive consolidated accounts meaningful.

A company is taken into account in the consolidation on the date on which it is controlled or
subject to significant influence and ceases to be included in the consolidation on the date on
which such control or influence ceases.

During the acquisition of a consolidated company, the excess of the acquisition cost of the
securities over the corresponding share of equity, called the first consolidation goodwill
examined in the following paragraph, is entered in the assets of the consolidated balance sheet
and divided into several items. The entry into the consolidated group of an acquired company
therefore has no effect at the time of acquisition on the shareholders' equity of this group.

During the total or partial disposal of a consolidated company, leading to an exit from the
scope or a modification of the method, a capital gain or a capital loss on the sale is generated
and recorded in the consolidated income statement.

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