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Commission Regulation
(EC) No 1725/2003 of 29 September 2003 adopting certain
international accounting standards in accordance with
Regulation (EC) No 1606/2002 of the European Parliament
and of the Council
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Consolidation Procedures
22. In preparing consolidated financial
statements, an entity combines the financial
statements of the parent and its subsidiaries line by line by adding together like
items of assets, liabilities, equity, income and expenses.
In order that the consolidated financial statements present financial information
about the group as that of a single economic entity,
the following steps are then taken:
(a) the carrying amount of the parent’s
investment in each subsidiary
and the parent’s portion of equity of each subsidiary are eliminated (see IAS
22, which describes the treatment of any
resultant goodwill);
(b) minority interests in the profit or loss
of consolidated subsidiaries
for the reporting period are identified; and
(c) minority interests in the net assets of
consolidated subsidiaries are
identified separately from the parent shareholders’ equity
in them. Minority
interests in the net assets consist of:
(i) the amount of those minority interests
at the date of the original
combination calculated in accordance with IAS
22; and
(ii) the minority’s share of changes in
equity since the date of
the combination.
23. When potential voting rights exist, the
proportions of profit or loss and
changes in equity allocated to the parent and minority
interests are determined
on the basis of present ownership interests and do not reflect
the possible exercise or conversion of potential voting rights.
24. Intragroup balances, transactions, income
and expenses shall be eliminated
in full.
25. Intragroup balances and transactions,
including income, expenses and dividends,
are eliminated in full. Profits and losses resulting from intragroup transactions
that are recognised in assets, such as inventory and
fixed assets, are eliminated in full. Intragroup losses may
indicate an
impairment that requires recognition in the consolidated
financial statements.
IAS 12 Income
Taxes applies
to temporary differences that
arise from the elimination of profits and losses resulting
from intragroup
transactions.
26. The financial statements of the parent and
its subsidiaries used in the
preparation of the consolidated financial statements shall be
prepared as of the
same reporting date. When the reporting dates of
the parent and a
subsidiary are different, the subsidiary prepares,
for consolidation
purposes, additional financial statements as of the
same date as the
financial statements of the parent unless it is
impracticable to
do so.
27. When, in accordance with paragraph 26, the
financial statements of a
subsidiary used in the preparation of consolidated financial
statements are
prepared as of a reporting date different from that of
the parent,
adjustments shall be made for the effects of significant
transactions or
events that occur between that date and the date of
the parents
financial statements. In any case, the difference
between the
reporting date of the subsidiary and that of the parent
shall be no more
than three months. The length of the reporting periods
and any difference in the reporting dates shall be the same
from period to
period.
28. Consolidated financial statements shall be
prepared using uniform accounting
policies for like transactions and other events in similar
circumstances.
29. If a member of the group uses accounting
policies other than those adopted
in the consolidated financial statements for like transactions
and events in
similar circumstances, appropriate adjustments are made to its financial
statements in preparing the consolidated financial statements.
30. The income and expenses of a
subsidiary are included in the consolidated financial
statements from the acquisition date, as defined in IFRS 3.
The income and expenses of a subsidiary are included
in the consolidated financial statements until the date on which the parent ceases
to control the subsidiary. The difference between
the proceeds from the disposal of the subsidiary and its carrying amount as of
the date of disposal, including the cumulative amount
of any exchange differences that relate to the subsidiary recognised in equity in
accordance with IAS 21 The
Effects of Changes
in Foreign Exchange Rates,
is recognised in the consolidated income
statement as the gain or loss on the disposal of the
subsidiary.
31. An investment in an entity shall be
accounted for in accordance with
IAS 39 Financial
Instruments: Recognition and Measurement from the date
that it ceases to be a subsidiary, provided
that it does not become an associate as defined in IAS 28
or a jointly
controlled entity as described in IAS 31.
32. The carrying amount of the investment at
the date that the entity ceases
to be a subsidiary shall be regarded as the cost on initial
measurement of a
financial asset in accordance with IAS 39.
33. Minority interests shall be presented in
the consolidated balance sheet
within equity, separately from the parent shareholders’
equity. Minority
interests in the profit or loss of the group shall also be
separately
disclosed.
34. The profit or loss is attributed to the
parent shareholders and minority interests.
Because both are equity, the amount attributed to minority interests is not income
or expense.
35. Losses applicable to the minority in a
consolidated subsidiary may exceed
the minority interest in the subsidiary’s equity. The excess,
and any further losses
applicable to the minority, are allocated against the
majority interest except to the extent that the minority has a
binding obligation and
is able to make an additional investment to cover the losses.
If the subsidiary subsequently reports profits, such profits
are allocated to the majority interest until the minority’s
share of losses
previously absorbed by the majority has been recovered.
36. If a subsidiary has outstanding cumulative
preference shares that are held
by minority interests and classified as equity, the parent computes its share of
profits or losses after adjusting for the dividends on
such shares, whether or not dividends have been declared.
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