IFRS 10

In April 2002, the problem of consolidation was added to the agenda for the IASB , and on December 18, 2008 the Draft Standard ED 10 “Consolidated Financial Statements” was published, comments on which were collected until March 20, 2009. May 12, 2011 was published IFRS standard 10, which is introduced from 01/01/2013. On June 28, 2012, joint amendments were introduced to IFRS 10, IFRS 12 and IAS 27 , which come into force on 01.01.2013. The amendments of October 31, 2012 on investment companies in IFRS 10, IFRS 12 and IAS 27 entered into force after 01/01/2014. On September 11, 2014, amendments were made explaining that in a transaction with an associate or a joint venture, the amount of recognized profit / loss depends on whether the asset sold or paid in is a business. On December 18, 2014, amendments were made to exclude from the consolidation requirements of the parent company, which is a subsidiary of an investment company, which began operating from 01/01/2016 ^[3] .

IFRS 10 replaced SIC 12 “Consolidation of a special purpose enterprise” ^[3] .

The purpose of the standard is to establish a unified approach to the consolidation of enterprises based on the availability of control ^[4] .

Consolidated financial statements - financial statements of the group, including all subsidiaries controlled by the parent company ^[4] .

The group is the parent company and all its subsidiaries ^[1] . Parent company - a company that has one or more subsidiaries ^[1] .

A subsidiary enterprise is an enterprise controlled by another (parent) enterprise ^[1] .

Control is the ability to control the financial and business policies of a company in order to benefit from its activities. Control includes authority in relation to investments, rights or risks from the activities of the investment object, the ability to use authority in relation to the investment object to influence the profitability of the investment object ^[1] . The share of non-controlling shareholders is part of the capital of a subsidiary company that the parent company does not own, directly or indirectly ^[1] .

Investment company - a company that attracts investor money in exchange for the provision of investment portfolio management services; undertakes to invest funds raised to generate income from the growth of the market value, dividends, interest, or other investment income; estimates its investment portfolio at fair value ^[5] .

The parent company is not required to provide consolidated financial statements if ^[5] :

• the company itself is a subsidiary, and the parent company does not object to this;
• Equity or debt instruments of this parent company do not circulate on the open stock market;
• the parent company should not provide financial statements to the securities commission (other similar regulatory bodies);
• The parent company's ultimate or intermediate parent company issues consolidated financial statements.

The parent investment company presents consolidated financial statements, taking into account investments in subsidiaries at fair value through the income statement ^[5] .

The financial statements of subsidiaries and the parent company are prepared on a single date, and in case of differences in dates, additional reporting is made on a single date due to adjustments to the impact of material transactions or events. For the purposes of consolidation, the financial result of the subsidiary is distributed on a time-proportion basis. The consolidated financial statements are formed on the basis of a single accounting policy of the group; in case of non-coincidence, adjustments are made ^[5] .

When consolidating statements, the company line by line summarizes the items of assets, liabilities, capital, while excluding: intragroup balances from the report; the carrying amount of the parent company's investment in a subsidiary; equity subsidiary owned by the parent company. Goodwill arising from the merger is reflected in the consolidated report as a separate line in long-term assets; the share of net assets of subsidiaries of non-controlling shareholders is determined, which consists of the amount as of the date of the merger according to IFRS 3 and for the period of the merger by separate lines from the capital of the parent company. Changes in the maternal share in a subsidiary are accounted for as operations within the capital ^[5] .

Stages of consolidation financial statements

Step 1. Calculation of the net asset value of a subsidiary at the date of acquisition and the reporting date ^[5] :

Profit and other operations of the subsidiary are recognized evenly throughout the year.

Stage 2. Calculation of goodwill

1. Goodwill at the acquisition date = Investment of the parent company + Non-controlling interest (NDU) at the acquisition date — net assets (NA) at the acquisition date.

2. Goodwill at the reporting date = Goodwill at the acquisition date - goodwill impairment from the acquisition date.

3. Impairment of goodwill from the date of consolidation, distributing in proportion to the ownership interests between the parent company and non-controlling interest.

Stage 3. Calculation of non-controlling interest (NDU):

• On the date of the merger:

• proportional to the fair value of the net assets of the subsidiary: NDU at the date of acquisition =% interest at the date of acquisition, or
• at fair value.

• On the date of the report:

NDU at the reporting date = NDU at the date of the merger +% NDU x Change of NA from the date of merger

Stage 4. Calculation of the retained earnings of the group

Undistributed earnings of the group are taken into account in the consolidated statement of financial position in equity ^[5] .

Stage 5. Group revaluation reserve (SP)

RP group = RP MK + share in the change RP RP DK after the date of acquisition

When consolidating, intragroup receivables and payables are offset. The intragroup calculations of funds transferred but not taken into account by the recipient are adjusted by adjusting the amount of receivables for intragroup calculations and the cash balances of the recipient of money. When selling goods on intra-group transactions, unrealized gains (NTP) reduces the cost of inventories and consolidated retained earnings of the group. If the intragroup seller is the parent company, the unrealized gain is eliminated through the group's retained earnings. If the seller is a subsidiary, the unrealized profit is excluded when calculating net assets (Stage 1). According to IAS 12, temporary differences arising from the exclusion of unrealized profits result in deferred taxes. When consolidating, intragroup transactions for the transfer of fixed assets are excluded: the financial result of the transaction is eliminated and the amount of accrued depreciation is adjusted ^[5] .

Consolidation of statements is carried out after all adjustments, including dividends declared but not reflected in the statements of companies within the group. Dividend adjustments that are paid from profits earned after the date of the merger are taken into account before consolidation. Company announcing dividends: Dr NPP CT Dividend Liability. When DK declares dividends, then MK recognizes its share: Дт ДЗ by dividends Кт Income statement. Intragroup receivables and payables on dividends are offset. The consolidated report reflects dividends declared by MC to its shareholders, and non-controlling interest in dividends declared by DC. Prior to consolidation, MK recognizes its share earned at declared dividends paid from profits before the acquisition date: DT DZ for dividends CT Invest ^[5] .

The scheme of the consolidated statement of financial position ^[5] .

When consolidating statements, the company line by line summarizes the income and expense items. Intra-group operations, revenues and expenses that occurred between the group companies are completely excluded. Impairment of goodwill for the reporting period is stated in the statement of profit and loss and other comprehensive income of the group. MK includes in its income statement the income from dividends received from DC, and during consolidation, excluding intragroup turnover, the amount of dividends is replaced by income and expenses of DC, part of the DC dividends related to non-controlling shareholders is recorded in the statement of financial position. The share of profit of non-controlling shareholders for the period when MK owns less than 100% of DK shares is determined, and the share of non-controlling shareholders in the profits of DK and in the total aggregate income of DK is reflected ^[5] .

The scheme of the consolidated statement of profit and loss and other comprehensive income ^[5] :

Revenue group = revenue MK + revenue DK - intragroup revenue

- Cost of sales = cost of MK + cost of DK - intragroup cost

- Unrealized profit

- Operating expenses = operating expenses of MK + operating expenses of a recreation center

- Impairment of goodwill

= Total group profit before tax

- Group tax = tax MK + tax DK

= Total profit for the period:

Uncontrolled share of profits in DC

Profit owned by shareholders of MK

Other Group Comprehensive Income (DURS) = SrK MK + SrD DK

Total group income for the period:

Uncontrolling share in total income DC

Total income MK

The consolidated report should reflect only changes in equity from the point of view of the group ^[5] .