How to Consolidate Financial Statements under IFRS

How to Consolidate Financial Statements under IFRS?, This article is generally about how the combination of the monetary statements work under IFRS. We were having the combination of the statements under Accounting Requirement– 21, but we are slowly shifting to the global viewpoint and we are adopting the internationally accepted concepts of IFRS. How the combination is done, when t needs to be done, exemptions from the reporting, objectives of the requirement, etc. all the things is discussed here. Now check more information about “How to Combine Financial Statements under IFRS” from listed below …

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How to Combine Financial Statements under IFRS

Objectives of IFRS 10:

IFRS 10 generally explains the method the debt consolidation statement must exist and prepared when one entity has a significant control over the other. The objectives of the declaration are as follows:

  • It specifies the concept of control and establishes the control for the entities which are required for debt consolidation.
  • It chooses how to use such concepts of control.
  • It decides the specification for the exclusion from the debt consolidation of the statements.

    How to choose the control of the entity?

    In IFRS-10, the controlling entity is referred as financier and the entity managed by financier is called investee. The following points would decide the investor is having the control or not:

  • Financier has substantial returns which are arising from those returns.
  • The ability of the financier to impact those returns if the investment was not there.

    Modifications in the Ownership Interest:

    When the moms and dad loses the control of the subsidiary with the subsidiary business, then the following would be the consequences:

    1. There would be the modification in the investment pattern in the parent company’s monetary statement.
    2. The gain or the loss from such modification would be changed controlling interest.
    3. The parent recognises the financial investment maintained in the former subsidiary when the control is lost and the consequently represents it, then any amount owed by or to the former subsidiary in accordance with the pertinent IFRS.

    Treatment for Debt Consolidation:

    Action 1— First of the easy actions is to combine all the properties and the liabilities, earnings and expenditures of the parent and the subsidiaries.

    Step 2— From that deduct the financial investment portion or the equity part of the subsidiary in the books of financier and pertinent carrying quantity in the subsidiaries books of account.

    Step 3— Now we need to eliminate the inter group transactions in between the moms and dads and the subsidiaries

    Action 4— And lastly calculate Minority interest.

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