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Chapter 2 - Chapter 2 principles of consolidation...

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Chapter 2 – principles of consolidation Objectives of CFS To show the operating result and financial position of a cluster of business entities related by control as if they were one single entity Consolidated IS shows transaction results with external parties Consolidated BS shows assets controlled by a group, liabilities owed to external parties and the equity of the collective owners of the group. CFS required by AASB 127 is based on the group’s point of view. Both the parent company and the non- controlling interested in subsidiaries (ie. minority interest; those who have less than 50% of outstanding shares) are regarded as stakeholders in the group. The consolidation process CFS must be presented as if the group were one company . A single entity can only generate revenue and earn profits by trading with external parties . Therefore any internal transactions and balances between members of a group have no impact on the CFS. (eg. Dividends paid or declared within the group and
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