Consolidating two balance sheets
However, when you look at both parent and subsidiary as at 1 company, which is the purpose of consolidation, then you find out that there’s no transaction at all.In other words, group has not performed any transaction from the view of some external user.Therefore, when a group controller calls you every five minutes to remind you the consolidation package, you’ll know why!In our case study, combined numbers looks as follows: Of course, there are some strange and redundant numbers, for example both Mommy’s and Baby’s share capital, but we haven’t finished yet!I use it this way because for me it’s easier to verify and identify mistakes, but it’s up to you.I have described the consolidation procedures and their 3-step process in my previous article with the summary of IFRS 10 Consolidated financial statements, but let me repeat it here and follow these steps: After you make sure that all subsidiary’s assets and liabilities are stated at fair values and all the other conditions are met, you can combine, or add up like items.Below there are statements of financial positions of both Mommy and Baby at 31 December 20X4.
In today’s world, most groups spread their activities abroad and logically different members of the group operate in different currencies.It’s very easy when a parent (Mommy) and a subsidiary (Baby) use the same format of the statement of financial position – you just add Mommy’s PPE and Baby’s PPE, Mommy’s cash and Baby’s cash balance, etc. It’s a full IFRS learning package with more than 40 hours of private video tutorials, more than 140 IFRS case studies solved in Excel, more than 180 pages of handouts and many bonuses included.If you take action today and subscribe to the IFRS Kit, you’ll get it at discount! ” and subsidiaries’ accountants must fill them up along with preparing own financial statements.Is the consolidation process of combining the financial statements of two (or more) companies different when they operate in different currencies? If you want to combine the financial statements prepared in different currencies, you will still follow the same consolidation procedures.You still need to eliminate the share capital and pre-acquisition profits of a subsidiary with parent’s investment in a subsidiary (plus recognize any goodwill and/or non-controlling interest). We need to follow the rules in IAS 21 The Effects of Changes in Foreign Exchange Rates for translating the financial statements to a presentation currency.