SUMMARY OF IAS 27 | |
|Objectives of IAS 27 | | |IAS 27 has the twin objectives of setting standards to be applied: | | |in the preparation and presentation of consolidated financial statements for a group of entities under the control| | |of a parent; and | | |in accounting for investments in subsidiaries, jointly controlled entities, and associates when an entity elects, | | |or is required by local regulations, to present separate (non-consolidated) financial statements. | | |Key Definitions [IAS 27.4] | | |Consolidated financial statements: the financial statements of a group presented as those of a single economic | | |entity. | | |Subsidiary: an entity, including an unincorporated entity such as a partnership, that is controlled by another | | |entity (known as the parent). | | |Parent: an entity that has one or more subsidiaries. | | |Control: the power to govern the financial and operating policies of an entity so as to obtain benefits from its | | |activities. | | |Identification of Subsidiaries | | |Control is presumed when the parent acquires more than half of the voting rights of the entity. Even when more | | |than one half of the voting rights is not acquired, control may be evidenced by power: [IAS 27.13] | | |over more than one half of the voting rights by virtue of an agreement with other investors, or | | |to govern the financial and operating policies of the entity under a statute or an agreement; or | | |to appoint or remove the majority of the members of the board of directors; or | | |to cast the majority of votes at a meeting of the board of directors. | | |SIC 12 provides other indicators of control (based on risks and rewards) for Special Purpose Entities (SPEs). SPEs| | |should be consolidated where the substance of the relationship indicates that the SPE is controlled by the | | |reporting entity. This may arise even where the activities of the SPE are predetermined or where the majority of | | |voting or equity are not held by the reporting entity. [SIC 12] | | |Presentation of Consolidated Accounts | | |A parent is required to present consolidated financial statements in which it consolidates its investments in | | |subsidiaries [IAS 27.9] – with the following exception: | | |A parent is not required to (but may) present consolidated financial statements if and only if all of the | | |following four conditions are met: [IAS 27.10] | | |the parent is itself a wholly-owned subsidiary, or is a partially-owned subsidiary of another entity and its other| | |owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the parent| | |not presenting consolidated financial statements;...
Please join StudyMode to read the full document