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Let’s be more practical today and learn some advanced accounting techniques.
After summaries of standards related to consolidation and group accounts, I’d like to show you how to prepare consolidated financial statements .
I’ll do it on a case study, with explaining what I do and why.
If you don’t like reading, you can skip to the end of this article and watch my video.
Companies have consolidated for centuries, reflecting the booms and busts of regional economies.
Many of today's largest corporations, including transportation, manufacturing and financial companies, resulted from high-profile mergers.
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.
If you’d like to revise a theory first, then please read my summary of IFRS 3 Business Combinations and IFRS 10 Consolidated Financial Statements, both of them contain video in the end.
Here’s the question: Mommy Corp has owned 80% shares of Baby Ltd since Baby’s incorporation.
Then we need to recognize any non-controlling interest and goodwill.
Mommy has owned 80% of Baby’s share and therefore, non-controlling interest owns .
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!