Consolidating financial statement
It’s the second in a two-part series by the F1 examiner.
The accounting procedures be adopted for preparation of consolidated financial statements depends on a number of factors: When the parent doesn’t hold 100% of the outstanding common stock of the subsidiary, it means that some portion of the subsidiary is held by outside investors.
Preparing consolidated financial statements IAS 27 ‘Consolidated and separate financial statements’ defines a subsidiary as an entity that is controlled by another entity.
An entity has control if it has the ability to direct the operating and financial policies of another with a view to gaining economic benefit.
Does one entity have the ability to influence the operating and financial decisions of the other?
Perhaps one of the entities has an ongoing economic interest in the other.