Consolidated Accounts Balance Sheet

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Consolidated Accounts Balance Sheet
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Consolidated Accounts Balance Sheet
C

UNIT 3: CONSOLIDATED BALANCE SHEET

Definition of a Group

Under IAS 27 Consolidated and Separate Financial Statements, a group exists where one enterprise (the parent) controls, either directly or indirectly, another enterprise (the subsidiary). A group consists of a parent and its subsidiaries.

Definition of Control

Under IFRS 3 Business Combinations, control is defined as ‘the power to govern the financial and operating policies of an entity or business so as to obtain benefits from its activities’. Control is presumed to exist when > 50% of the ordinary share capital (voting power) of another enterprise is acquired.

Control may exist when < 50% of the ordinary share capital of another enterprise is acquired.

Direct Control

P

S1 S2 S3 S4

Indirect Control

P

80%

P owns 80% of S

MI owns 20% of S

S 100%

75% P owns 80% of 75% of SS 60%
MI owns 20% of 75% of SS 15%

MI owns 25% of SS 25%

60% 40%

SS

P holds a controlling interest in S which in turn holds a controlling interest in SS. SS is

therefore
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a subsidiary of a subsidiary of P, in other words, a sub-subsidiary of P.

A

60% A owns 60% of B
MI owns 40% of B
100%

B
A owns 60% x 75% of C 45%

75% MI owns 40% x 75% of C 30%
MI owns 25% of C 25%
45% 55%
C

P

80% P owns 80% of S
MI owns 20% of S
100%

S 10% P owns 10% of SS 10%
P owns 80% x 75% of SS 60%
75% MI owns 20% x 75% of SS 15%
MI owns 15% of SS 15%
70% 30%

SS

In this example, SS is a sub-subsidiary of P...
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