Drafting Financial Statements (Accounting Practice,

Industry and Commerce)

 Consolidated Accounts – An introduction

 http://www.iasplus.com/standard/ias27.htm

 Single entity accounts based on principle of

CONTROL

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)
 A group consists of a PARENT (holding) company and
all the subsidiaries
 A Parent CONTROLS the subsidiary

 Under CA (85) individual companies are separate legal

entities – each company produces its own accounts

 PARENT accounts
 Investment in subsidiary at cost (or fair
value)
 Dividends receivable from subsidiaries

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting
Practice, Industry and Commerce)

 Consolidation = adjusting and combining

information from the individual financial
statements of a PARENT and its subsidiary
to present financial information for the
group as a SINGLE ENTITY
 IAS 27 and IFRS 3(Business Combinations)
 Bringing together the separate entities into
one reporting entity is called a Business
Combination

Unit 11, Week 10 Iwi Ugiagbe-Green

 Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

 Control = more than

half the voting rights
 Power to govern
financial and
operating activities
 Power to appoint or
remove directors
 50% of equity shares
(usually)

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

 Goodwill arises when cost > fair value of net

assets – it is an INTANGIBLE asset that is
amortised over its UEL

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

 Revaluation changes = IAS 16 and IAS 38

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

Unit 11, Week 10 Iwi Ugiagbe-Green

Drafting Financial Statements (Accounting Practice,
Industry and Commerce)

Unit 11, Week 10 Iwi Ugiagbe-Green