Accounting consolidating financial statements
Control requires exposure or rights to variable returns and the ability to affect those returns through power over an investee.
IFRS 10 was issued in May 2011 and applies to annual periods beginning on or after 1 January 2013.
This creates a total income and expenses for the entire group of companies, including the parent.
Consolidated financial statements simply eliminate the stockholder's equity section of the subsidiary.
In other words, the consolidated financial statements agglomerates the results of the subsidiary businesses into the parent company's income statement, balance sheet and cash flow statement.
Accounting treatment of both combined and consolidated financial statement eliminates intercompany transactions.
Consolidated financial statements aggregate the financial position of a parent company and its subsidiaries.
This allows an investor to check the overall health of the company in a holistic manner rather than viewing the individual company's financial statements separately.
For instance, the remuneration of the decision-maker is considered in determining whether it is an agent.
[IFRS 10: B58, IFRS 10: B60] Preparation of consolidated financial statements A parent prepares consolidated financial statements using uniform accounting policies for like transactions and other events in similar circumstances.
This avoids misrepresenting transactions that distort actual results of the parent company and subsidiary.