“ ” consolidation and separate financial statement Presented By: Karez I. Kareem Supervised By: Prof.Dr. Mehmet Civan

SON SISTER BROTHER SEPARATE Parent company IAS A IAS C IAS B

sonsisterbrother Consolidation ABC PARENR COMPANY IAS

Definition 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..

Definition of Separate Financial Statements A Separate financial statements are those presented in addition to consolidated financial statements or in addition to financial statements in which investments in associates or joint ventures are accounted for using the equity method. Separate financial statements need not be appended to, or accompany, those statements.

Control In evaluating whether an entity has control over another entity it must first be ascertained whether the entity has the power to participate in the financial and operating policy decisions of the other entity. Control is presumed to exist when the parent owns directly or indirectly, through subsidiaries, more than half of the voting power of an entity. In some instances this will be clear-cut. However, in other circumstances, such ownership may not constitute control.

Non-controlling interest non-controlling interest is measured using either the fair value method or the proportionate share method. The difference between the two is that with the fair value method, in calculating acquisition date goodwill, the non-controlling interest’s stake in the entity is valued at fair value and this is used along with what the parent paid to acquire its stake in the subsidiary to calculate goodwill arising on 100 per cent of the subsidiary.

GoodWill good will frequently is recognized in purchase-type business combinations because the total cost of the combine exceeds the current fair value of identifiable net assets of the combine. the amount of goodwill recognized on the date the business combination is consummated may be adjusted subsequently when contingent consideration become issuable.

Consolidation Procedures The consolidated financial statements present financial information about the group as a single economic entity. In preparing consolidated financial statements, an entity shall:

A_ 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. B_ eliminate the carrying amount of the parent’s investment in each subsidiary and the parent’s portion of equity of each subsidiary.

C_ 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. D_ measure and present non-controlling interest in the net assets of consolidated subsidiaries separately from the parent shareholders’ equity in them.

Question : 1 Entity A owns a 60 per cent voting interest in Entity B and a 10 per cent voting interest in Entity C. Entity B owns a 30 per cent voting interest in Entity C. How should Entity A account for its investment in Entity C in its consolidated financial statements? (a) As a subsidiary, because Entity A controls Entity C. (b) As an associate. (c) As an associate, if significant influence can be ascertained.

Question : 2 Entity A owns a 60 per cent voting interest in Entity B and a 10 per cent voting interest in Entity C. Entity B owns a 50 per cent voting interest in Entity C. How should Entity A account for its investment in Entity C in its consolidated financial statements? (a) As a subsidiary, because Entity A controls Entity C. (b) As an associate. (c) As an associate, if significant influence can be ascertained.

problem : consolidation procedures On 31 December 20X0 Entity A acquired all of the ordinary shares, which carry voting rights at a general meeting of shareholders, of Entity B for CU6,000(4) in cash and it controlled Entity B from that date. The acquisition-date statements of financial position of Entities A and B and the fair values of the assets and liabilities recognized on Entity B’s statement of financial position were:

Entity A Entity B Carrying Carrying Fair amount amount value CU CU CU Assets Non-current assets Building and other PPE 7,000 3,000 3,300 Investment in Entity B 6,000 13,000 3,000 Current assets Inventories Trade receivables Cash 1, ,500 1,450 Total assets 15,500 4,450

Equity and liabilities Equity Share capital 5,000 2,000 Retained earnings 10,200 2,300 15,200 4,300 Current liabilities Trade payables Total liabilities and equity 15,500 4,450

For One Company SME Carrying amount CU Assets Non-current assets Buildings 1,000 Investment in SME B ,900 Current assets Inventories 200 Trade receivables 400 Cash 500 1,100 Total assets 3,000

Equity and liabilities Equity Share capital 800 Retained earnings 1,400 2,200 Current liabilities Trade payables Total liabilities and equity 3,000

Combination For Two Company Column: A B C D E Entity A Entity B Consolidation Consolidation adjustments (ie Column B+ Carrying Carrying Column C+ amount amount column D) CU CU CU Assets Non-current assets Goodwill 1,300(a) 1,300 Buildings and other PPE 7,000 3, ,300 Investment in Entity B 6,000 (6,000) 13,000 3,000 11,600

Current assets Inventories ,300 Trade receivables Cash 1, ,200 2,500 1,450 4,050 Total assets 15,500 4,450 15,650 Equity and liabilities Equity Share capital 5,000 2,000 (2,000) 5,000 Reserves 10,200 2,300 (2,300) 10,200 Total equity 15, ,300 15,200 + Current liabilities Trade payables Total liabilities 15,500 =4,450 15,650 = and equity

For two company SME ASME B Carrying FairConsolidation amount value adjustments Consolidated CU CU CU CU Assets Non-current assets Goodwill 100(a) 100 Buildings 1, ,700 Investment in SME B 900 (900) - 1, ,800 Current assets Inventories Trade receivables Cash , ,650 Total assets 3,000 = 1,250 = (800) 3,450

Equity and liabilities Equity Share capital (600) 800 Retained earnings 1, (200) 1,400 2, ,200 Current liabilities Trade liabilities , ,250 Total liabilities and equity 3,000 = 1,250 =(800) 3,450

First Book : modern advanced accounting by: LARSEN second Internet : 1 _ IAS 27 — Consolidated and Separate Financial Statements 2 _ Consolidated and Separate Financial Statements - IFRS IAS 27 — Consolidated and Separate Financial Statements Consolidated and Separate Financial Statements - IFRS

3_ IAS 27: Separate financial statements | Accounting... - ICAEW gateways/accounting.../ifrs/ias-27 4 _ IAS 27 (2003/2008) Consolidated and Separate Financial... financial - reporting /.../ias consolidated... 5 _ IAS 27 Consolidated and Separate Financial Statements IAS 27: Separate financial statements | Accounting... - ICAEW IAS 27 (2003/2008) Consolidated and Separate Financial...IAS 27 Consolidated and Separate Financial Statements