PFRS 10 Consolidated

Financial Statements
Definition of terms (PFRS 10)

 Parent – an entity that controls one or more

entities.
 Subsidiary – an entity that is controlled by
another entity.
 Group – a parent and its subsidiaries.
 Consolidated financial statements – the
financial statements of a group in which the
assets, liabilities, equity, income, expenses and
cash flows of the parent and its subsidiaries are
presented as those of a single economic entity.

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 2

Preparation of Consolidated FS
 A parent entity is required to present
consolidated financial statements, except
when all of the following conditions are met:
a. The parent is a subsidiary of another entity
and all its other owners do not object to the
parent not presenting consolidated financial
statements;
b. The parent’s debt or equity instruments are
not traded in a public market (or being
processed for such purpose); and
c. The parent’s ultimate or any intermediate
parent produces consolidated financial
statements that are available for public use
and comply with PFRSs.
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Elements of Control
 Control exists if the investor has all of the
following:
1. Power over the investee;
2. Exposure, or rights, to variable returns
from its
involvement with the investee; and
3. The ability to use its power over the
investee to affect
the amount of the investor’s returns.

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 Elements of Control

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Accounting requirements

 Consolidated financial statements shall be

prepared using uniform accounting policies.
 The financial statements of the parent and its
subsidiaries used in preparing consolidated
financial statements shall have the same
reporting dates. (The maximum difference
in reporting dates is 3 months.)
 Consolidation begins from the date the
investor obtains control of the investee and
ceases when the investor loses control of the
investee.

Conceptual Framework & Acctg. Standards (by: Zeus Vernon B. Millan) 6

Measurement
 Income and expenses of the subsidiary are based
on the amounts of the assets and liabilities
recognized in the consolidated financial
statements at the acquisition date.

 Investments in subsidiaries are accounted for in

the parent’s separate financial statements
either:
a. at cost;
b. in accordance with PFRS 9 Financial
Instruments; or
c. using the equity method.
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NCI in net assets of the subsidiary
 Non-controlling interests shall be presented
in the consolidated statement of financial
position within equity, separately from
the equity of the owners of the parent.

 Non-controlling interest in the net assets

consists of:
1. The amount determined at the
acquisition date using PFRS 3; and
2. The NCI’s share of changes in equity
since the acquisition date.
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NCI in profit or loss and
comprehensive income

 The profit or loss and each component

of other comprehensive income in the
consolidated statement of profit or
loss and other comprehensive income
shall be attributed to the following:
1.Owners of the parent
2.Non-controlling interests

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Preparing the Consolidated
financial statements

 Consolidated financial statements

are prepared by combining the
financial statements of the parent
and its subsidiaries line by line by
adding together similar items of
assets, liabilities, equity, income
and expenses.

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Consolidation at date of acquisition
1. Eliminate the “Investment in subsidiary”
account. This requires:
a. Measuring the identifiable assets acquired and
liabilities assumed in the business
combination at their acquisition-date fair
values.
b. Recognizing the goodwill from the business
combination.
c. Eliminating the subsidiary’s pre-combination
equity accounts and replacing them with the
non-controlling interest.
2. Add, line by line, similar items of assets and
liabilities of the combining constituents.
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