Introduction:

PFRS 3 deals with the accounting for a business combination at the acquisition
date, while the PFRS 10 deals with the preparation and presentation of consolidated
financial statements after the business combination.

Consolidated financial statements is the financial statements of a group in which

the assets, liabilities, equity, income, expenses and cash flows of the parent and its
subsidiaries are presented as those of a single economic entity. Group is a parent and its
subsidiaries. Parent is an entity that controls one or more entities. Subsidiary is an entity
that is controlled by another entity.

Summary of key points:

 A parent is required to prepare consolidated financial statements except in

limited cases mentioned in PFRS 10.
 Consolidated financial statements provide information on a parent and its
subsidiaries viewed as a single reporting entity.
 The basis for consolidation is control. Control exists if an investor has the
following over an investee: (1) power; (2) exposure, or rights, to variable returns,
and (b) ability to affect returns.
 Consolidation starts when control is obtained and ceases when control is lost.
Both cases are accounted for prospectively.
 Consolidated financial statements are prepared using uniform accounting policies
and same reporting date.
 Consolidation involves the following:
1. Eliminate the ''Investment in subsidiary'' account.
a. Measure the subsidiary's assets and liabilities at their acquisition-
date fair values, net of
depreciation.
b. Recognize the goodwill.
c. Replace the subsidiary's equity accounts with NO in net assets.
2. Add, line by line, similar items of assets and liabilities.
 Consolidated retained earnings include the retained earnings of the parent's
share in the change in net assets of the subsidiary since acquisition date.
 NCI in net assets includes the NCI at acquisition date plus the NCI's share in the
change in net assets of the subsidiary since acquisition date.
 NCI in net assets is presented within equity but separate within equity of the
owners of the parent.
 The consolidated profit or loss is attributed to the (a) owners of the parent and
(b) NCI.