Introduction MFRS110
Consolidated Financial
Statements
The learning objectives of this chapter are as follows:
• to be able to identify a group;
• to understand the concepts applied in preparing group accounts;
• to understand the consolidation procedures;
Introduction - Identification of a Group
• A group can e defined as a parent and all its subsidiaries.
• Section 5(1) of the COMPANIES ACT 1965 defines the existence of a parent-subsidiary relationship where "a corporation shall be deemed to be a subsidiary of another corporation, if –
(a) that other corporation I. controls the composition of the board of directors of the first-mentioned corporation;
II. controls more than half of the voting power of the firstmentioned corporation; or
III.holds more than half of the issued share capital of the firstmentioned corporation (excluding any part thereof which consists of preference shares); or
(b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary.
• The most commonly used test of a parentsubsidiary relationship is the "more than 50 per cent" ownership interest.
• In the case of a subsidiary company, this interest is satisfied if the parent holds “50% plus one more share" of the subsidiary company. Holds More Than Half Of The Issued Share
Capital
Shares held by a subsidiary of the parent and
Shares held by a nominee for the parent.
Permitted Structures
Requirements
• S.168 of the CA, 1965 requires that the financial years of subsidiary companies must coincide with the financial year of the holding company.
• In the case of a new subsidiary acquired or established, the Section permits different financial years, provided that:
(i) within two years after it becomes a subsidiary of the holding company, its financial year must coincide with the financial year of the holding company; and
(ii) approval has been obtained from the
Commissioner of Companies authorizing any subsidiary to continue to have different financial
Statements
The learning objectives of this chapter are as follows:
• to be able to identify a group;
• to understand the concepts applied in preparing group accounts;
• to understand the consolidation procedures;
Introduction - Identification of a Group
• A group can e defined as a parent and all its subsidiaries.
• Section 5(1) of the COMPANIES ACT 1965 defines the existence of a parent-subsidiary relationship where "a corporation shall be deemed to be a subsidiary of another corporation, if –
(a) that other corporation I. controls the composition of the board of directors of the first-mentioned corporation;
II. controls more than half of the voting power of the firstmentioned corporation; or
III.holds more than half of the issued share capital of the firstmentioned corporation (excluding any part thereof which consists of preference shares); or
(b) the first-mentioned corporation is a subsidiary of any corporation which is that other corporation's subsidiary.
• The most commonly used test of a parentsubsidiary relationship is the "more than 50 per cent" ownership interest.
• In the case of a subsidiary company, this interest is satisfied if the parent holds “50% plus one more share" of the subsidiary company. Holds More Than Half Of The Issued Share
Capital
Shares held by a subsidiary of the parent and
Shares held by a nominee for the parent.
Permitted Structures
Requirements
• S.168 of the CA, 1965 requires that the financial years of subsidiary companies must coincide with the financial year of the holding company.
• In the case of a new subsidiary acquired or established, the Section permits different financial years, provided that:
(i) within two years after it becomes a subsidiary of the holding company, its financial year must coincide with the financial year of the holding company; and
(ii) approval has been obtained from the
Commissioner of Companies authorizing any subsidiary to continue to have different financial