MFRS 10 effective 1 January 2013

Consolidated Financial Statements

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Who has to present consolidated
financial statements?

A parent, other than a parent described in

paragraph 4 (a) (i) (iv), shall present consolidated
financial statements in which it consolidates its
investments in subsidiaries in accordance with this
Standard.

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Exemption to prepare consolidated
financial statements para 4 (a)
(i) Parent is a wholly owned or partially owned and the
other shareholders do not object to the parent not presenting
consolidated financial statements.
(ii) Parents debt or equity are not traded in a public market.
(iii) Parent is not in a process of issuing any class of shares
or debts in a public market.
(iv) Ultimate parent or intermediate parent publishes
consolidated financial statements.

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Definitions
What are consolidated financial statements? - The
financial statements of a group in which the assets,
liabilities, income, expenses and cash flows of the
parent and its subsidiaries are presented as those of a
single economic entity
What is a group? a parent and its subsidiaries
Who is the parent? an entity that controls one or
more entities
What is a subsidiary? an entity that is controlled by
another entity
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Definitionscontd
(FRS 127 1 Jan 2010) Control power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities
Control is presumed to exist when the parent owns, directly or
indirectly through subsidiaries, more than half of the voting power
of an entity
Control (MFRS 10) an investor controls the investee when the
investor 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
Power existing rights that give the current ability to direct the relevant
activities
Rights e.g. voting rights of an investee

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Definitionscontd
Power power to appoint, reassign or
remove key management personnel
Rights substantive voting rights
Majority voting rights but no power?
Power without majority voting rights
Potential voting rights share options or
warrants convertible into voting rights

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Definitions contd
Non controlling interests equity in a subsidiary
not attributable, directly or indirectly to a parent

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Accounting requirements
Consolidation procedures
Combine like items of assets, liabilities, income and expense of
the parent with its subsidiaries
Offset (eliminate) carrying amount of parents investment in
subsidiary with the parents portion of equity in the subsidiary
Profit or losses resulting from intra-group transactions that are
recognized in assets, are eliminated in full
Profit or loss and other comprehensive income is to be
attributable to the owners of the parent and the NCI
Non-controlling interests (NCI)
To be presented in the CFS within equity but separately from
the equity of the owners of the parent
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Theories of consolidation
Proprietary theory
Stresses on ownership interest rather
than control
Proportionate consolidation
Undermines the economic resources
controlled by the group

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Theories of consolidationcontd
Entity theory
Stresses on control rather than ownership
Full consolidation
Does not differentiate between interests of
owners of the parent and the NCI

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