Chapter 16

Group Financial Statements: An

Introduction
  Anyone who buys ordinary shares in company has the right
 To vote at shareholders’ meetings
 To an interest in the net assets of the company
 To an interest in the profits earned by the company
Shareholders  Preference shareholders do not normally have voting rights except
under special circumstances
and Their  Loan-note holders have no rights at all to vote at general meetings
and are not owners of the company
Rights  By using voting rights at shareholders’ meetings, shareholders are
able to show approval or disapproval of election of directors and
any proposal
  If P Ltd buys 50,001 of these shares from S Ltd for

$60,000

Parents and  P Ltd will now have control of S Ltd because it has

more than 50% of the voting shares

Subsidiaries
 P Ltd is now called the parent

 S Ltd is now called the subsidiary of P Ltd

  Wherever two or more companies are in the relationship
of parent and subsidiary, a ‘group’ is said to exist.

 These group financial statements are usually known as

The Nature of consolidated financial statements, because the financial

Group statements of all the companies have had to be

consolidated together to form one set of financial
statements.