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CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

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Consolidated and Separate Financial Statements

Scope of this section


  1. 1 This section defines the circumstances in which an entity applying this Standard presents consolidated financial statements and the procedures for preparing those statements in accordance with this Standard. It also includes guidance on separate financial statements and combined financial statements if they are prepared in accordance with this Standard. If a parent entity by itself does not have public accountability, it may present its separate financial statements in accordance with this Standard, even if it presents its consolidated financial statements in accordance with full IFRS or another set of generally accepted accounting principles (GAAP).

Requirement to present consolidated financial statements


  1. 2 Except as permitted or required by paragraphs 9.3 and 9.3C, a parent entity shall present consolidated financial statements in which it consolidates its investments in subsidiaries. Consolidated financial statements shall include all subsidiaries of the parent.
  1. 3 A parent need not present consolidated financial statements if both of the following conditions are met:
    1. the parent is itself a subsidiary; and
    2. its ultimate parent (or any intermediate parent) produces consolidated general purpose financial statements that comply with full IFRS or with this Standard.
  1. 3A Subject to paragraph 9.3B, a subsidiary is not consolidated if it is acquired and is held with the intention of selling or disposing of it within one year from its acquisition date (ie the date on which the acquirer obtains control of the acquiree). Such a subsidiary is accounted for in accordance with the requirements in Section 11 Basic Financial Instruments as for investments in paragraph 11.8(d), instead of in accordance with this section. The parent shall also provide the disclosure in paragraph 9.23A.
  1. 3B If a subsidiary previously excluded from consolidation in accordance with paragraph 9.3A is not disposed of within one year from its acquisition date (ie the parent entity still has control over that subsidiary):
    1. the parent shall consolidate the subsidiary from the acquisition date unless it meets the condition in paragraph 9.3B(b). Consequently, if the acquisition date was in a prior period, the relevant prior periods shall be restated.
    2. if the delay is caused by events or circumstances beyond the parent’s control and there is sufficient evidence at the reporting date that the parent remains committed to its plan to sell or dispose of the subsidiary, the parent shall continue to account for the subsidiary in accordance with paragraph 9.3A.
  1. 3C If a parent has no subsidiaries other than subsidiaries that are not required to be consolidated in accordance with paragraphs 9.3A–9.3B, it shall not present consolidated financial statements. However, the parent shall provide the disclosure in paragraph 9.23A.
  1. 4 A subsidiary is an entity that is controlled by the parent. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. If an entity has created a special purpose entity (SPE) to accomplish a narrow and well-defined objective, the entity shall consolidate the SPE when the substance of the relationship indicates that the SPE is controlled by that entity (see paragraphs 9.10–9.12).
  1. 5 Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. That presumption may be overcome in exceptional circumstances if it can be clearly demonstrated that such ownership does not constitute control. Control also exists when the parent owns half or less of the voting power of an entity but it has:
    1. power over more than half of the voting rights by virtue of an agreement with other investors;
    2. power to govern the financial and operating policies of the entity under a statute or an agreement;
    3. power to appoint or remove the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or
    4. power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.
  1. 6 Control can also be achieved by having options or convertible instruments that are currently exercisable or by having an agent with the ability to direct the activities for the benefit of the controlling entity.
  1. 7 A subsidiary is not excluded from consolidation simply because the investor is a venture capital organisation or similar entity.
  1. 8 A subsidiary is not excluded from consolidation because its business activities are dissimilar to those of the other entities within the consolidation. Relevant information is provided by consolidating such subsidiaries and disclosing additional information in the consolidated financial statements about the different business activities of subsidiaries.
  1. 9 A subsidiary is not excluded from consolidation because it operates in a jurisdiction that imposes restrictions on transferring cashor other assetsout of the jurisdiction.

Special purpose entities


  1. 10 An entity may be created to accomplish a narrow objective (for example, to effect a lease, undertake research and development activities or securitise financial assets). Such an SPE may take the form of a corporation, trust, partnership or unincorporated entity. Often, SPEs are created with legal arrangements that impose strict requirements over the operations of the SPE.
  1. 11 An entity shall prepare consolidated financial statements that include the entity and any SPEs that are controlled by that entity. In addition to the circumstances described in paragraph 9.5, the following circumstances may indicate that an entity controls an SPE (this is not an exhaustive list):
    1. the activities of the SPE are being conducted on behalf of the entity according to its specific business needs;
    2. the entity has the ultimate decision-making powers over the activities of the SPE even if the day-to-day decisions have been delegated;
    3. the entity has rights to obtain the majority of the benefits of the SPE and therefore may be exposed to risks incidental to the activities of the SPE; or
    4. the entity retains the majority of the residual or ownership risks related to the SPE or its assets.
  1. 12 Paragraphs 9.10 and 9.11 do not apply to post-employment benefit plans or other long-term employee benefit plans to which Section 28 Employee Benefits applies.

Consolidation procedures


  1. 13 The consolidated financial statements present financial information about the group as a single economic entity. In preparing consolidated financial statements, an entity shall:
    1. combine the financial statements of the parent and its subsidiaries line by line by adding together like items of assets, liabilities, equity, income and expenses.
    2. eliminate the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary.
    3. measure and present non-controlling interest in the profit or loss of consolidated subsidiaries for the reporting period separately from the interest of the owners of the parent.
    4. measure and present non-controlling interest in the net assets of consolidated subsidiaries separately from the parent shareholders’ equity in them. Non-controlling interest in the net assets consists of:
      1. the amount of the non-controlling interest at the date of the original combination calculated in accordance with Section 19 Business Combinations and Goodwill; and
      2. the non-controlling interest’s share of changes in equity since the date of the combination.
  1. 14 The proportions of profit or loss and changes in equity allocated to the owners of the parent and to the non-controlling interest are determined on the basis of existing ownership interests and do not reflect the possible exercise or conversion of options or convertible instruments.

Intragroup balances and transactions

  1. 15 Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits and losses resulting from intragroup transactions that are recognised in assets, such as inventory and property, plant and equipment, are eliminated in full. Intragroup losses may indicate an impairment that requires recognition in the consolidated financial statements (see Section 27 Impairment of Assets). Section 29 Income Tax applies to temporary differences that arise from the elimination of profits and losses resulting from intragroup transactions.

Uniform reporting date

  1. 16 The financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements shall be prepared as of the same reporting date unless it is impracticable to do so. If it is impracticable to prepare the financial statements of a subsidiary as of the same reporting date as the parent, the parent shall consolidate the financial information of the subsidiary using the most recent financial statements of the subsidiary, adjusted for the effects of significant transactions or events that occur between the date of those financial statements and the date of the consolidated financial statements.

Uniform accounting policies

  1. 17 Consolidated financial statements shall be prepared using uniform accountingpolicies for like transactions and other events and conditions in similar circumstances. If a member of the group uses accounting policies other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements.

Acquisition and disposal of subsidiaries

  1. 18 The income and expenses of a subsidiary are included in the consolidated financial statements from the acquisition date until the date on which the parent ceases to control the subsidiary. When a parent ceases to control a subsidiary, the difference between the proceeds from the disposal of the subsidiary and its carrying amount at the date that control is lost is recognised in profit or loss in the consolidated statement of comprehensive income (or the income statement, if presented) as the gain or loss on the disposal of the subsidiary. The cumulative amount of any exchange differences that relate to a foreign subsidiary recognised in other comprehensive income in accordance with Section 30 Foreign Currency Translation is not reclassified to profit or loss on disposal of the subsidiary.
  1. 19 If an entity ceases to be a subsidiary but the investor (former parent) continues to hold an investment in the former subsidiary, that investment shall be accounted for as a financial asset in accordance with Section 11 or Section 12 Other Financial Instrument Issues from the date the entity ceases to be a subsidiary, provided that it does not become an associate (in which case Section 14 Investments in Associates applies) or a jointly controlled entity (in which case Section 15 Investments in Joint Ventures applies). The carrying amount of the investment at the date that the entity ceases to be a subsidiary shall be regarded as the cost on initial measurement of the financial asset.

Non-controlling interest in subsidiaries

  1. 20 An entity shall present non-controlling interest in the consolidated statementof financial position within equity, separately from the equity of the owners of the parent, as required by paragraph 4.2(q).
  1. 21 An entity shall disclose non-controlling interest in the profit or loss of the group separately in the statement of comprehensive income, as required by paragraph 5.6 (or in the income statement, if presented, as required by paragraph 5.7).
  1. 22 Profit or loss and each component of other comprehensive income shall be attributed to the owners of the parent and to the non-controlling interest. Totalcomprehensive income shall be attributed to the owners of the parent and to the non-controlling interest even if this results in the non-controlling interest having a deficit balance.

Disclosures in consolidated financial statements


  1. 23 The following disclosures shall be made in consolidated financial statements:
    1. the fact that the statements are consolidated financial statements;
    2. the basis for concluding that control exists when the parent does not own, directly or indirectly through subsidiaries, more than half of the voting power;
    3. any difference in the reporting date of the financial statements of the parent and its subsidiaries used in the preparation of the consolidated financial statements; and
    4. the nature and extent of any significant restrictions (for example resulting from borrowing arrangements or regulatory requirements) on the ability of subsidiaries to transfer funds to the parent in the form of cash dividends or to repay loans.
  1. 23A In addition to the disclosure requirements in Section 11, a parent entity shall disclose the carrying amount of investments in subsidiaries that are not consolidated (see paragraphs 9.3A–9.3C) at the reporting date, in total, either in the statement of financial position or in the notes.

Separate financial statements


Presentation of separate financial statements

  1. 24 This Standard does not require presentation of separate financial statements for the parent entity or for the individual subsidiaries
  1. 25 Separate financial statements are a second set of financial statements presented by an entity in addition to any of the following:
    1. consolidated financial statements prepared by a parent;
    2. financial statements prepared by a parent exempted from preparing consolidated financial statements by paragraph 9.3C; or
    3. financial statements prepared by an entity that is not a parent but is an investor in an associate or has a venturer’s interest in a joint venture.

Accounting policy election

  1. 26 When a parent, an investor in an associate or a venturer with an interest in a jointly controlled entity prepares separate financial statements and describes them as conforming to the IFRS for SMEs, those statements shall comply with all of the requirements of this Standard except as follows. The entity shall adopt a policy of accounting for its investments in subsidiaries, associates and jointlycontrolled entities in its separate financial statements either:
    1. at cost less impairment;
    2. at fairvaluewith changes in fair value recognised in profit or loss; or
    3. using the equity method following the procedures in paragraph 14.8.

The entity shall apply the same accounting policy for all investments in a single class (subsidiaries, associates or jointly controlled entities), but it can elect different policies for different classes.

Disclosures in separate financial statements

  1. 27 When a parent, an investor in an associate or a venturer with an interest in a jointly controlled entity prepares separate financial statements, those separate financial statements shall disclose:
    1. that the statements are separate financial statements; and
    2. a description of the methods used to account for the investments in subsidiaries, jointly controlled entities and associates,

and shall identify the consolidated financial statements or other primary financial statements to which they relate.

Combined financial statements


  1. 28 Combined financial statements are a single set of financial statements of two or more entities under common control (as described in paragraph 19.2(a)). This Standard does not require combined financial statements to be prepared.
  1. 29 If the investor prepares combined financial statements and describes them as conforming to the IFRS for SMEs, those statements shall comply with all of the requirements of this Standard. Intercompany transactions and balances shall be eliminated; profits or losses resulting from intercompany transactions that are recognised in assets such as inventory and property, plant and equipment shall be eliminated; the financial statements of the entities included in the combined financial statements shall be prepared as of the same reporting date unless it is impracticable to do so; and uniform accounting policies shall be followed for like transactions and other events in similar circumstances.

Disclosures in combined financial statements

  1. 30 The combined financial statements shall disclose the following:
    1. the fact that the financial statements are combined financial statements;
    2. the reason why combined financial statements are prepared;
    3. the basis for determining which entities are included in the combined financial statements;
    4. the basis of preparation of the combined financial statements; and
    5. the related party disclosures required by Section 33 Related Party Disclosures.

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