Download Executive summary - Consolidated and Separate Financial Statements

Executive summary -
Consolidated and Separate Financial
Statements (GRAP 6)
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Consolidated financial statements are the financial statements of an economic entity
(a group of entities comprising a controlling entity and one or more controlled entities)
presented as those of a single entity. An entity includes all entities that it controls in
its consolidated financial statements. In certain circumstances an entity may be
exempted from preparing consolidated financial statements.
Control is the 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 an entity has
both decision making capabilities over another entity, and can benefit from its
activities. An entity is not required to hold shares or a similar interest in the net assets
of another entity for control to exist.
The fact that one entity might prescribe the regulatory framework within which other
entities should operate, does not constitute control for accounting purposes.
Economic dependence by one entity on another also does not in itself indicate that
control exists.
Consolidated financial statements:
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represent only those transactions with parties external to the economic entity. As
a result all balances and transactions undertaken between entities within the
economic entity are eliminated;
•
are prepared using the same reporting period for all entities. If the reporting
periods differ, additional financial statements should be prepared for purposes of
consolidation and adjustments made for any significant transactions; and
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are prepared using uniform accounting policies. If entities use different policies,
adjustments must be made to ensure consistency with the economic entity’s
policies.
Minority interests are that portion of the surplus or deficit and net assets of a
controlled entity that are not owned in/directly, through controlled entities, by the
controlling entity. An entity presents minorities’ interests in the consolidated
statement of financial position as part of net assets, although separately from the
controlling entity’s net assets.
Separate financial statements are those financial statements presented by a
controlling entity, an investor in an associate or a venturer in a jointly controlled
entity, in which the investments are accounted for based on the interest held in the
net assets of the other entity, e.g. based on the value of equity instruments held or
capital contributed. The Standard does not prescribe which entities should prepare
separate financial statements, it only requires that entities apply this Standard if they
do present separate financial statements.
This executive summary and related questions have been prepared by the Secretariat of the Accounting
Standards Board and have not been approved by the Board. While the summary highlights the key
features of the Standard, it is not comprehensive. Readers should refer to the relevant Standard of
Generally Recognised Accounting Practice (GRAP) for comprehensive requirements. Any examples
provided are for illustrative purposes only and are not prescriptive.
Investments in controlled entities, associates and joint ventures, except those
classified as held for sale in accordance with GRAP 100, are accounted for either at
cost or in accordance with the Standards of GRAP on Financial Instruments in the
separate financial statements of an entity.