Principles of Group Accounting under IFRS

Andreas Krimpmann

• Publisher: Wiley
• Year: 2015
• Print ISBN: 9781118751411
• eBook ISBN: 9781118751381
• Edition: 1
• Topic: Business
• Subtopic: Financial Accounting
• Index: Business

A professional perspective to implementing IFRS 10, 11, and 12

The new International Financial Reporting Standards (IFRS) 10, 11, and 12 are changing group accounting for many businesses. As business becomes increasingly global, more and more firms will need to transition using the codes and techniques described in Principles of Group Accounting under IFRS. This book is a practical guide and reference to the standards related to consolidated financial statements, joint arrangements, and disclosure of interests. Fully illustrated with a step-by-step case study, Principles of Group Accounting under IFRS is equally valuable as an introductory text and as a reference for addressing specific issues that may arise in the process of consolidating group accounts.

The new international standards will bring about significant changes in group reporting, and it is essential for accountants, auditors, and business leaders to understand their implications. Author Andreas Krimpmann is an internationally recognized authority on the transition from GAAP to IFRS, and this new text comes packaged with GAAP/IFRS comparison resources that will help make the changes clear. Other bonus resources include an Excel-based consolidation tool, checklists, and a companion website with the latest information. Learn about:

• Definitions, requirements, processes, and transition techniques for IFRS 10, 11, and 12 covering group level accounting
• Practical implementation strategies demonstrated through a clear case study of a midsize group
• Key concepts related to consolidated financial statements, joint ventures, management consolidation, and disclosure of interests
• Comparisons between GAAP and IFRS to clarify the required changes for international firms

Whatever stage of the consolidation process you are in, you will appreciate the professional perspective in Principles of Group Accounting under IFRS.

F

SUBSEQUENT CONSOLIDATION

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About this chapter:

The subsequent consolidation of a group is that recurring task that has to be executed at the end of each period. It has to be arranged in a way that external deadlines to publish consolidated financial statements have to be met. To ensure smooth and timely preparation, special attention is given in practice to the subsequent consolidation, as this is the core process in preparing consolidated financial statement.

This chapter discusses the whole subsequent consolidation process. Its focus is on all the necessary consolidation steps, particularly equity, debt and profit consolidation. It also deals with presentation issues, particularly for non-controlling interests and group transactions such as the impairment test. For all consolidation steps, detailed explanation is given on intercompany relationships, consolidation techniques and the treatment of consolidation problems and errors. This includes journal entries of each consolidation step. The chapter also covers the accounting of special intercompany business transactions like transfer pricing, dividend payments, non-current asset sales and the consolidation of multi-level groups.

The consolidation process is explained for subsidiaries. The subsequent handling of associates and joint ventures are discussed in chapters 7 - Associated companies and 8 - Joint Ventures.

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1. BASICS

Fig F.1 Lifecycle of a corporation: Subsequent consolidation

Consolidated financial statements need to be prepared at the end of each period during the lifecycle of a group. The lifecycle – and therefore, subsequent consolidation – will continue until the last subsidiary is sold, liquidated, or otherwise no longer part of the group's companies. Consolidation of the subsidiary is the process that prepares consolidated financial statements based on the various financial statements of all companies which are subject to consolidation.

The relevant standards for the subsequent consolidation are IAS 27 –Separate Financial Statements and IFRS 10 – Consolidated Financial Statements. While IAS 27 focuses on the preparation of separate financial statements, this standard is important if companies of the group apply IFRS as their local accounting standard. By contrast, IFRS 10 covers all accounting requirements for the preparation of consolidated financial statements. This standard does not care how separate financial statements of the group's companies are prepared. IFRS 10 does not differentiate between initial and subsequent consolidations. Therefore, the same accounting rules apply to both consolidations.

The preparation of consolidated financial statements is embedded in a set of accounting requirements defined by IFRS 10.B86 to 10.B99. According to these requirements, the following items need to be considered when preparing consolidated financial statements:

• Consolidation procedures
  In general IFRS 10.B86 requires elimination of all group-internal transactions. The eli...

Table of contents

• Cover
• Title Page
• Copyright
• Table of Contents
• Dedication
• LIST OF FIGURES
• LIST OF TABLES
• PREFACE
• INTRODUCTION TO THE BOOK
• A: THE CASE STUDY
• B: LEGAL REQUIREMENTS FOR CONSOLIDATED FINANCIAL STATEMENTS
• C: DEFINITION OF GROUPS
• D: PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS AND ANNUAL REPORTS
• E: INITIAL CONSOLIDATION
• F: SUBSEQUENT CONSOLIDATION
• G: ASSOCIATED COMPANIES
• H: JOINT ARRANGEMENTS
• I: CHANGES IN CONTROL
• J: DISPOSALS AND DECONSOLIDATION
• K: SPECIAL AREAS
• L: MANAGEMENT CONSOLIDATION
• M: CONSOLIDATED FINANCIAL STATEMENTS
• N APPENDIX I: FAIR VALUE MEASUREMENT
• APPENDIX II: IFRS – US-GAAP COMPARISON
• APPENDIX III: IFRS
• GLOSSARY
• REFERENCE LIST
• INDEX
• End User License Agreement