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BASIS FOR CONCLUSIONS ON IFRS 10

BASIS FOR CONCLUSIONS ON IFRS 10

BASIS FOR CONCLUSIONS ON IFRS 10: IFRS 10 establishes principles for presenting and preparing consolidated financial statements when an entity controls one or more other entities. IFRS 10:

  • requires an entity (the parent) that controls one or more other entities (subsidiaries) to present consolidated financial statements;
  • 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; and
  • defines an investment entity and sets out an exception to consolidating particular subsidiaries of an investment entity.

Consolidated financial statements are financial statements that present the assets, liabilities, equity, income, expenses and cash flows of a parent and its subsidiaries as those of a single economic entity.

BASIS FOR CONCLUSIONS ON IFRS 10: The International Financial Reporting Standards, usually called the IFRS Standards,are standards issued by the IFRS Foundation and the International Accounting Standards Board (IASB) to provide a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. They are the rules to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external. IFRS, with the exception of IAS 29 Financial Reporting in Hyperinflationary Economies and IFRIC 7 Applying the Restatement Approach under IAS 29, are authorized in terms of the historical cost paradigm. IAS 29 and IFRIC 7 are authorized in terms of the units of constant purchasing power paradigm.

IFRS began as an attempt to harmonize accounting across the European Union but the value of harmonization quickly made the concept attractive around the world. However, it has been debated whether or not de facto harmonization has occurred. Standards that were issued by IASC (the predecessor of IASB) are still within use today and go by the name International Accounting Standards (IAS), while standards issued by IASB are called IFRS. IAS were issued between 1973 and 2001 by the Board of the International Accounting Standards Committee (IASC). On 1 April 2001, the new International Accounting Standards Board (IASB) took over from the IASC the responsibility for setting International Accounting Standards. During its first meeting the new Board adopted existing IAS and Standing Interpretations Committee standards (SICs). The IASB has continued to develop standards calling the new standards “International Financial Reporting Standards”.

BASIS FOR CONCLUSIONS ON IFRS 10

Financial statements are a structured representation of the financial positions and financial performance of an entity. The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity that is useful to a wide range of users in making economic decisions. Financial statements also show the results of the management’s stewardship of the resources entrusted to it.

To meet this objective, financial statements provide information about an entity’s:

  1. Assets;
  2. Liabilities;
  3. Equity;
  4. Income and expenses, including gains and losses;
  5. Contributions by and distributions to owners in their capacity as owners; and
  6. Cash flows.

Qualitative characteristics of financial information

Fundamental qualitative characteristics of financial information include:

  • Relevance
  • Faithful representation

Enhancing qualitative characteristics include:

  • Comparability
  • Verifiability
  • Timeliness
  • Understandability

BASIS FOR CONCLUSIONS ON IFRS 10

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