CONSOLIDATION OF FINANCIAL STATEMENTS

For groups, financial consolidation means the preparation of the financial statements of each subsidiary and of a company that controls all of them as statements of one business.

Consolidated financial statements after the IFRS areunderpinned by the financial accounting taxonomy and following international standards. If a parent company submits consolidated financial statemens, it also submits a consolidated management report.

Besides their financial statements, ministries, other national governmental agencies, and agencies that regulate utility sector property must submit consolidated financial statements of the enterprises they manage.

 

WHEN IS IT MANDATORY

If a parent company has an investor that controls investees and/or subsidiaries, they must submit consolidated financial statements.

In case an investor has rights to the results of subsidiaries activities, can affect those results, and runs all risks related to the whole group’s activities, it controls the subsidiaries.

 

WHO IS IT MANDATORY FOR

Parent companies must consolidate the Group’s financial statements.

According to the national legislation, parent companies must draw up and submit their own reporting of business activities and consolidated financial statements of their subsidiaries.

 

ACCOUNTING REQUIREMENTS

Consolidated financial statements of the group must be drawn up according to the following accounting rules::

  • items of assets, liabilities, equity, income, costs, and cash flows of parent companies must be combined with the similar items of their subsidiaries
  • book value of parent companies’ investments must be excluded from the equity of each subsidiary
  • group assets and liabilities, equity, income, costs and cash flows related to the transactions between subsidiaries must be fully excluded