IFRS For Dummies

Chapter 10

Getting Your Head Around the Basics of Consolidation

In This Chapter

Getting a feel for consolidated financial statements

Seeing why you need separate sets of financial statements as well

Understanding the consolidation methods

Every company has to prepare financial statements: to understand how the business has performed over the accounting period, to assess how much tax it has to pay on its profits and to inform shareholders who have a vested interest in the company. Preparing financial statements for an individual company is one thing, but preparing them for a parent company (one that owns another company or companies, or holds the majority of shares in another company or companies) is a little more taxing. Why? Because IFRS requires the parent company to prepare not only its own separate financial statements, but also consolidated financial statements. The consolidated statements combine the parent company’s financial results with the results of the other company (or companies) that it owns or of which it’s the major shareholder.

Now, consolidated financial statements can be complicated to deal with. So in this chapter I give you a good grounding in the basic concepts ...