Mfrs 10 3j1g5j

MFRS 10 – effective 1 January 2013

Consolidated Financial Statements

NAMG

Sem 1 2017/18

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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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Sem 1 2017/18

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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) Parent’s 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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Sem 1 2017/18

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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 NAMG

Sem 1 2017/18

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Definitions…cont’d  (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

NAMG

Sem 1 2017/18

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Definitions…cont’d  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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Sem 1 2017/18

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Definitions …cont’d  Non controlling interests – equity in a subsidiary not attributable, directly or indirectly to a parent

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Sem 1 2017/18

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ing requirements  Consolidation procedures  Combine like items of assets, liabilities, income and expense of the parent with its subsidiaries  Offset (eliminate) carrying amount of parent’s investment in subsidiary with the parent’s 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 NAMG

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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 NAMG

Sem 1 2017/18

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Theories of consolidation…cont’d  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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