What do consolidated financial statements include?
Consolidated financial statements include the assets, liabilities, equity, income, expenses, and cash flows of the parent and its subsidiaries, presented as those of a single economic entity. They are not the parent’s own statement with a one-line investment left in place of the subsidiary.
What is added together?
Like items of assets, liabilities, equity, income, expenses, and cash flows are combined line by line. The subsidiary’s figures are included from the date the parent obtains control until the date the parent loses control. Who the parent is, under the three-element test, is on the control page.
A consolidated balance sheet is one statement in the set. The set also includes profit and loss, other comprehensive income, changes in equity, cash flows, and the notes. Uniform accounting policies are used for like transactions. If a group entity uses a different policy, adjustments are made in the consolidation.
What is eliminated?
The carrying amount of the parent’s investment in each subsidiary is eliminated against the parent’s portion of the subsidiary’s equity. Intragroup assets and liabilities, equity, income, expenses, and cash flows are eliminated in full. An unrealised gain or loss on an intragroup transaction, such as profit in inventory still held in the group, is eliminated. Non-controlling interest is presented in equity, separately from the owners of the parent.
When may a parent not present them?
A parent presents consolidated statements unless every part of the exemption is met. It is a wholly-owned subsidiary, or a partly-owned subsidiary whose other owners have been informed and do not object. Its debt or equity instruments are not traded in a public market. It is not filing, and is not in the process of filing, financial statements with a securities regulator for an issue in a public market. Its ultimate or an intermediate parent produces consolidated statements that comply with Ind AS and are available for public use.
Missing any one of those conditions means the parent presents the statements. Post-employment benefit plans to which Ind AS 19 applies are outside the scope of Ind AS 110.
What does an investment entity do?
An investment entity does not consolidate its subsidiaries. It measures them at fair value through profit or loss. The exception is a subsidiary whose main purpose is to provide services that relate to the investment entity’s investment activities. That service subsidiary is consolidated. An investment entity still applies the control test to decide which investees are subsidiaries. It then measures them at fair value instead of adding them line by line.
Frequently asked questions
Four questions cover the balance sheet, intragroup sales, the exemption, and an investment entity.
Is a consolidated balance sheet the whole set?
No. The set also includes the consolidated statement of profit and loss, other comprehensive income, changes in equity, and cash flows, with the notes.
Are intragroup sales left in revenue?
No. Income, expenses, and cash flows between group entities are eliminated in full. An unrealised profit sitting in inventory or in a fixed asset is also eliminated.
Does every parent have to publish consolidated statements?
No. A parent that meets every condition in the exemption, including that a higher parent already publishes Ind AS consolidated statements for public use, need not present its own.
Does an investment entity consolidate every subsidiary?
No. It measures subsidiaries at fair value through profit or loss, except a subsidiary that provides investment-related services, which it consolidates.
Sources
Ind AS 110 requires a parent to present consolidated financial statements unless an exemption applies. Control is a separate test.