CONSOLIDATED AND SEPARATE

FINANCIAL STATEMENTS (IAS27)

PRESENTED BY
DEEPAK SINGH
NITIN KUMAR
PRITAM GHOSH
SUMEET SAHU
 Scope of the standard
• It applies to

o the preparation and presentation of consolidated financial

statements for a group of entities under the control of a

parent.

o accounting for investments in subsidiaries, joint ventures and

associates when an entity presents separate financial statements.

 Scope exclusion
• It does not deal with methods of accounting
for business combinations and their effect on
consolidation including goodwill arising on
consolidation including goodwill arising on
business combination
 Key terms
– 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.
A parent need not present consolidated
financial statements if
1 The parent is itself a wholly owned subsidiary
or is a partially owned subsidiary of another
entity.
2 The parent’s debt or equity instruments are not
traded in a public market
3 The parent is not in the process of filing its
financial statements with a securities
commission for the purpose of issuing any
instruments in the public market
 Presentation of Consolidated Accounts

The consolidated accounts should include all of the

parent's subsidiaries, both domestic and foreign
• There is no exemption for a subsidiary whose
business is of a different nature from the parent's.
• There is no exemption for a subsidiary that operates
under severe long-term restrictions impairing the
subsidiary's ability to transfer funds to the parent
• There is no exemption for a subsidiary that had
previously been consolidated and that is now being
held for sale
 Consolidation Procedures
• Entity combines the financial statements of the parent
and its subsidiaries line by line.
• Intragroup balances, transactions, income, and expenses
should be eliminated in full
• It must be prepared using uniform accounting policies
for transactions and other events in similar
circumstances
• Minority interests should be presented in the
consolidated balance sheet within equity, but separate
from the parent's shareholders' equity. Minority
interests in the profit or loss of the group should also be
separately disclosed.
 Cont…
• The financial statements of the parent and its
subsidiaries used in preparing the consolidated
financial statements should all be prepared as
of the same reporting date
 Control
It exist when company owns, directly or indirectly, through
subsidiaries more than half of the voting power of another
entity.

It may be evidenced by power:

– over more than one half of the voting rights by virtue of an
agreement with other investors, or
– to govern the financial and operating policies of the entity
under a statute or an agreement; or
– to appoint or remove the majority of the members of the
board of directors; or
– to cast the majority of votes at a meeting of the board of
directors.
 Accounting for investment in subsidiaries & jointly
controlled Entities
• When separate financial statements are prepared,
investments in subsidiaries, jointly controlled entities
and associates that are not classified as held for sale
in accordance with IFRS 5 shall be accounted for
either:
(a) At cost, or
(b) In accordance with IAS 39.
• The same accounting shall be applied for each
category of investments.
• Investments in jointly controlled entities and associates
that are accounted for in accordance with IAS 39 in the
consolidated financial statements shall be accounted
for in the same way in the investor’s separate financial
statements.
 Disclosure
• 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 investor does not constitute control,
• The reporting date of the financial statements of a subsidiary when
such financial statements are used to prepare consolidated financial
statements and are as of a reporting date or for a period that is
different from that of the parent, and the reason for using a different
reporting date or period; and
• The nature and extent of any significant restrictions on the ability of
subsidiaries to transfer funds to the parent in the form of cash
dividends or to repay loans or advances
Financial and operating Policies
• Generally, financial policies would be those
strategic policies that guide dividend policies,
budget approvals, credit terms, issunce of debt,
cash management, capital expenditure and
accounting policies.
• Operating policies normally would include those
policies that guide activities such as sales,
marketing, manufacturing, human resources,
human resources and acquisitions and disposals
of investments.
 Special Purpose Entity
• An special entity created to accomplish a narrow and
well-defined objective.
• E.g.: To effect a lease, research and development
activities or a securitization of financial assets.
• The following factors at a minimum, should be
considered in developing wheather an entity is, in
substance, an SPE:
(a) The nature and scope of the entity’s activities.
(b) The ability of another entity.
(c) The extent to which the entity can modify or change
the nature and scope of its operations and activities.
(d) The nature and scope of the entity’s
customer base.
(e) The nature and scope of the entity’s
decision-making ability.
(f) The extent to which the entity’s ability to
make decisions are contingent on
approvals by another entity.