Session 18  Consolidated financial statement
　　Main Contents:
　　1. Introduction to group accounting
　　2. Consolidated statement of financial position
　　3. Consolidated statement of comprehensive income
　　4. Associates
　　18.1 Introduction to group accounting
　　What is a group?
　　Everything entity is a separate legal entity. Each one is required to prepare its own financial statements that will provide useful information for making economic decisions. However, sometimes a number of entities (known as subsidiaries ) will operate under the control of another entity (known as the parent). Together they form a group, and the group operates as a single economic entity.
　　Definitions:
　　● Parent – is an entity that has one or more subsidiaries.
　　● Subsidiary – is an entity that is controlled by another entity. ( known as the parent.)
　　● Control - is the power to govern the financial and operating policies of an entity so as to
　　obtain benefits from its activities.
　　● Consolidated- From the legal point, the results of a group must be presented as a whole ( consolidated) Consolidation will be defined more formally later in the chapter. Basically, it means Presenting the results of a group of companies as if they were a single company.
　　● Acquisition method: All groups are now consolidated using the acquisition method. This “freezes” the pre-acquisition reserves of subsidiaries. This means that the group’s equity will be less than the sum of the individual companies’ equity. As a result, groups appear to be more highly geared than their constituent companies.
　　Accounting issues
　　IAS 27 states that control can usually be assumed to exist when the parent owns more than half ( i.e. over 50%) of the voting power of an entity or
　　(a)The parent has power over more than 50% of voting rights by virtue of agreement with other investors.
　　(b)The parent has power to govern the financial and operating policies of the entity by
　　Statute or under an agreement.
　　(c )The parent has the power to appoint or remove a majority of members of the board of
　　directors.
　　(d)The parent has power to cast a majority of votes at meetings of the board of directors.
　　The single-entity concept
　　Business combinations consolidate the results and net assets of group members so as to display the group’s affairs as those of a single economic entity. As already mentioned, this reflected, this conflict