“IFRS-10 CONSOLIDATED
GROUP ACCOUNTS”
Group members:
Hassaan Qaiser (F2019045021)
Hunair Arshad (F2019045013)
Muhammad Faheem Farooq (F2019045030)
Tahreem Fatima (F2019045029)
INTRODUCTION:
“Consolidated financial statements are financial statements of an entity with multiple
divisions or subsidiaries. Companies can often use the word consolidated loosely in financial
statement reporting to refer to the aggregated reporting of their entire business collectively”
In 2001 this group was issued for the consolidated financial statements, in 2003 , it was renamed
and in 2011 there was a division of this group
UNDERSTANDING
CONSOLIDATED FINANCIAL
TheSTATEMENTS
consolidation of financial statements requires a company to integrate and combine all of its
financial accounting functions together in order to create consolidated financial statements that
shows results in standard balance sheet, income statement, and cash flow statement reporting.
The decision to file consolidated financial statements is usually made on a year to year basis
and often chosen because of tax or other advantages that arise.
Generally, 50% or more ownership in another company usually defines it as a subsidiary and
gives the parent company the opportunity to include the subsidiary in a consolidated financial
statement.
In some cases less than 50% ownership may be allowed if the parent company shows that the
subsidiary’s management is heavily aligned with the decision making processes of the parent
company.
STANDARD:
Defines the principle of “control”, and establishes control as the basis for consolidation
Sets out how to apply the principle of control to identify whether an investor controls an investee and
therefore must consolidate the investee
Sets out the accounting requirements for the preparation of consolidated financial statements
Defines an investment entity and sets out the exception to consolidating particular subsidiaries of an
investment entity.
BENEFIT:
Its helps investors and external stake holders to make decisions as consolidated SOFP present
the combined growth of entities.
PURPOSE:
As, Parent company is controlling the other entity ( subsidiary) so legally both are separate
legal entity but economically both are single.
IMPORTANT TERMS
Consolidated financial statements are group financial statements of separate legal entities
controlled by a parent company into one set of financial statements for the entire group of
companies.
Ownership percentage
Net assets of subsidiary
Consideration of goodwill
Non-controlling Interest
Retained Earnings
Intra company balancing transactions
Fair value adjustments for extra depreciation
Impairment of goodwill
Mid-year acquisitions
FORMULA:
1. For consolidating the balance sheet:
100% P + 100% S assets and liabilities, ignoring the investments in subsidiary.
100% P share capital and share premium only (reporting to parent’s shareholders).
2. The non-controlling interest is measured using either of the following methods:
Proportionate share of net assets
%age of NCI X Subsidiary’s Net assets at reporting date.
Fair value Method:
%age of NCI X (Subsidiary shares in issue X subsidiary’s share price).
3. Measurement of goodwill:
Particulars Rs.
FV of the consideration (Value paid by parent) X
Add: NCI at acquisition X
Less: Fair value of net asset at acquisition X
Goodwill X
4. Mid-year Acquisitions calculation:
Particulars Rs.
Net assets of subsidiary at start of the year X
Add: (Profit of subsidiary at reporting date-Profits at X
Start of year) X time factor
5. Unrealized Profit:
In unrealized profit if parent is the seller then we subtract the unrealized profit from consolidated
retained earnings.
And if subsidiary is the seller then we subtract the unrealized profit from consolidated net assets of
subsidiary.
6. Fair Value Adjustments:
In the case of fair value adjustments we deduct the extra depreciation from net assets of subsidiary as
well as we begin to realize its effect on the face of consolidated statement of financial position.
CONSOLIDATED STATEMENT
OF COMPREHENSIVE
INCOME:
The consolidated statement of comprehensive income will show all the incomes and expenses of
the parent and all of its subsidiaries. The consolidated statement of comprehensive income
shows the profit generated by all resources disclosed in the related consolidated statement of
financial position, i.e. the net assets of parent company and its subsidiaries. The source of the
consolidated income statement is the individual accounts of the separate companies in the group.
BASIC PRINCIPLES:
The consolidated statement of comprehensive income follows these basic principles:
From revenue to profit after tax include all of parent’s incomes and expenses.
After profit for the year shows split of profit between amounts attributable to the parent’s
shareholders and non-controlling interest.
BASIC CONSOLIDATION
PROCEDURES:
Consolidate all the incomes and costs 100% on line by line basis.
Except proportionate values of subsidiary if acquired during the year by counting the number of
months from the date of acquisition and to date of consolidation.
NECESSARY ADJUSTMENTS:
Cancel out intercompany sales by subtracting it from consolidated sales and cost of sales.
Adjust any extra depreciation due to fair value adjustment by adding in in consolidated Cost of
sales.
Ignore dividend income received from subsidiary company.
Adjust any impairment of goodwill by adding it to consolidated administration cost.
Subtract intercompany loan interest from consolidate finance cost and consolidated finance
income
NCI SHARE IN PROFIT OF
SUBSIDIARY:
Particulars Rs.
P’s cost of sales X
S’s Cost of sales X
Intra group sales (X)
Unrealized profit adjustment X
Extra depreciation of fair value adj. X
Consolidated cost of sales X
NCI SHARE IN PROFIT OF
SUBSIDIARY:
Particulars Rs.
S’s Profit for the year X
Unrealized profit adj. (seller S) (X)
Extra depreciation of fair value adj. (X)
NCI share in profit of Subsidiary X
