IFRS Group accounting
IFRS Group accounting are the financial statements of a group of companies. These are usually presented in the form of consolidated accounts.
The objective of this IFRS is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. To meet the objective, this IFRS:
- 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; and
- sets out the accounting requirements for the preparation of consolidated financial statements.
Consolidated financial statements are 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. Presentation of consolidated financial statements The IFRS requires an entity that is a parent to present consolidated financial statements.
A limited exemption is available to some entities. The IFRS defines the principle of control and establishes control as the basis for determining which entities are consolidated in the consolidated financial statements. An investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.
IFRS Group accounting
The IFRS sets out requirements on how to apply the control principle:
- in circumstances when voting rights or similar rights give an investor power, including situations where the investor holds less than a majority of voting rights and in circumstances involving potential voting rights.
- in circumstances when an investe is designed so that voting rights are not the dominant factor in deciding who controls the investee, such as when any voting rights relate to administrative tasks only and the relevant activities are directed by means of contractual arrangements.
- in circumstances involving agency relationships.
- in circumstances when the investor has control over specified assets of an investee.
The IFRS provides an exception to the principle that all subsidiaries shall be consolidated for a class of entities defined as investment entities. An investment entity is an entity that:
- obtains funds from one or more investors for the purpose of providing investment management services;
- its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both; and
- measures and evaluates the performance of its investments on a fair value basis.
A parent that is an investment entity measures its investments in particular subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments. Consolidation procedures When preparing consolidated financial statements, an entity must use uniform accounting policies for reporting like transactions and other events in similar circumstances. Intra group balances and transactions must be eliminated. Non-controlling interests in subsidiaries must be presented in the consolidated statement of financial position within equity, separately from the equity of the owners of the parent. Changes in the ownership interests Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing control of the subsidiary are equity transactions (ie transactions with owners in their capacity as owners).
IFRS Group accounting
Loss of control If a parent loses control of a subsidiary, the parent:
- derecognises the assets and liabilities of the former subsidiary from the consolidated statement of financial position.
- recognises any investment retained in the former subsidiary at its fair value when control is lost and subsequently accounts for it and for any amounts owed by or to the former subsidiary in accordance with relevant IFRSs. That fair value shall be regarded as the fair value on initial recognition of a financial asset in accordance with IFRS 9 or, when appropriate, the cost on initial recognition of an investment in an associate or joint venture.
- recognises the gain or loss associated with the loss of control attributable to the former controlling interest. Disclosure The disclosure requirements for interests in subsidiaries are specified in IFRS 12 Disclosure of Interests in Other Entities.
IFRS Group accounting: The Standard:
- requires a parent entity (an entity that controls one or more other entities) to present consolidated financial statements
- defines the principle of control, and establishes control as the basis for consolidation
- set 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 an exception to consolidating particular subsidiaries of an investment entity*.
IFRS Group accounting : IFRS 10 History
|April 2002||Project on consolidation added to the IASB’s agenda (project history)|
|18 December 2008||ED 10 Consolidated Financial Statements published|
|29 September 2010||Staff draft of IFRS X Consolidated Financial Statements published|
|12 May 2011||IFRS 10 Consolidated Financial Statements published|
|28 June 2012||Amended by Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance (project history)|
|31 October 2012||Amended by Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27) (project history)|
|11 September 2014||Amended by Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)|
|18 December 2014|
Amended by Investment Entities: Applying the Consolidation Exception (Amendments to IFRS 10, IFRS 12 and IAS 28) (project history)
|17 December 2015|
Amended by Effective Date of Amendments to IFRS 10 and IAS 28
IFRS Group accounting
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