Under Globalised scenario, the boundaries of the business crossed the beyond from one county to many countries during the last two decades, at the same time business risk is also increased the same level for the companies and their investor. As a investor or stake holder of an entity to know the health of the business is inevitable. Based on business health only they can make decision making and plan for the strategy to achieve the business vision. To know the health of the company, we need to analysis the financials of the company which comprises the profit & loss A/c and Balance sheet & Cash flows. But when the company having operations in various countries, according to the legal and compliance requirement for a business also varies and the way of presentation and disclosure of the financials statement also varies. When analysis the separate financials it is easy to understand but when we come across the holding and subsidiaries or one entity control over another entity, analyzing the financials statement without viewing consolidated is not complete the objective and unable to compare the correct status. So consolidating the different financials is the basic requirement for any business having by way of different entities.
Indian Accounting standard -21
Consolidation of Financials statement deals the Consolidation, However the global scenario and latest trending in accounting, The International Financial Reporting Standards (IFRSs) also deals the principal and procedures of consolidated financials through IFRS-10. In this article, I am discussing about the basics of consolidation of financials under IFRS-10
Objective of the IFRS-10
To provide the guidance & establish the principals for the presentation and preparation of consolidated financial statements when an entity controls one or more entities.
As like Indian Accounting standard 21, IFRS -10 also applies the preparation of consolidated financials when one entity has control the other entity which is called subsidiary(ies) through its investment. Under IFRS-10, we can tell one entity controlling another, then controlling entity called Investor and the entity which controlled entity called Investor is called investee. To decide whether investee controlling investor, we need to check the following
Based on the above concepts, several factors will decide that one entity controlling other like
Consolidation procedures- Under IFRS-10, the parent company shall prepare the consolidation financial by using uniform accounting policies for like transactions and other events in similar circumstances, the required adjustment s need to be made to that group member`s financial statements in preparing the consolidated financial statements to ensure with group`s accounting policies.
Exempted entities in Consolidation-IFRS-10 provides the exemption consolidation of accounts for the following entities
This article gives the basics about the consolidation concept and consolidation procedure under IFRS-10. In addition to that definition and calculation of goodwill during business combinations has been defined in the IFRS-3.
I hope this article make you to understand the basic outline about the consolidation of financials under IFRS-10.
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