Consolidated financial statements are the financial statements of a corporation presented as the financial statements of a business. This report is prepared on the basis of consolidating reports of the parent company and its subsidiaries. Find out with LawFirm.Vn through the following article:
1. General principles when preparing and presenting Consolidated Financial Statements
1. When preparing a consolidated financial statement, the parent company must consolidate its own financial statements and those of all domestic and foreign subsidiaries directly or indirectly controlled by the parent company.
2. The parent company is not excluded from the Consolidated Financial Statements for:
a) The subsidiary has business activities that are different from those of the parent company and other subsidiaries in the group.
b) Subsidiaries are Trust Funds, Mutual Funds, Venture Capital Funds or similar enterprises.
3. Consolidated financial statements are prepared and presented according to accounting principles such as financial statements of independent enterprises according to the provisions of Vietnamese Accounting Standards “Presentation of financial statements” and regulations of other relevant accounting standards.
4. Consolidated financial statements are prepared on the basis of applying uniform accounting policies to transactions and events of the same type in similar circumstances throughout the Group.
5. The parent company’s separate financial statements and the subsidiary’s financial statements used for consolidation must be prepared for the same accounting period.
6. The business results of the subsidiary must be included in the Consolidated Financial Statements from the date the parent company takes control of the subsidiary and terminates on the date the parent company actually terminates control. Subsidiaries.
Investments in enterprises must be accounted for according to Accounting Standards “Financial Instruments” from the time that enterprise is no longer a subsidiary nor becomes a joint venture or associate company.
7. The parent company’s and non-controlling shareholders’ shares of the subsidiary’s identifiable net assets at the date of acquisition must be presented at fair value.
8. If there is a difference between the fair value and the book value of the subsidiary’s net assets at the acquisition date, the parent company must record deferred corporate income tax arising from the business combination transaction. .
9. Goodwill or gain from a bargain purchase is determined as the difference between the cost of the investment and the fair value of the subsidiary’s identifiable net assets at the date of acquisition by the parent company. holding (when the parent company holds control of the subsidiary).
10. After controlling the subsidiary, if the parent company continues to invest in the subsidiary to increase the percentage of interests held, the difference between the cost of the additional investment and the book value of the assets The net income of the additional subsidiary purchased must be recorded directly in undistributed after-tax profits and considered as equity transactions (not recorded as goodwill or gain from low-cost purchases). .
In this case, the parent company does not record the subsidiary’s net assets at fair value as at the time of controlling the subsidiary.
11. The indicators in the Consolidated Balance Sheet and Consolidated Business Performance Report are prepared by adding each indicator in the Balance Sheet and Business Performance Report of the Company parent and subsidiaries within the group.
Then make adjustments for the following:
a) The carrying value of the parent company’s investment in each subsidiary and the parent company’s capital share in the subsidiary’s equity must be eliminated in full while recording goodwill or profit. from cheap purchases (if any);
b) Allocation of goodwill;
c) Non-controlling shareholder interests are presented in the consolidated Balance Sheet as a separate item under the equity section.
The ownership portion of non-controlling shareholders in the Group’s Business Results Report must also be presented as a separate item in the Consolidated Business Results Report;
d) Balances of accounts receivable, payable, loans… between units within the same group must be completely eliminated;
d) Revenues, income, and expenses arising from transactions within the group must be completely eliminated;
e) Unrealized profits arising from intra-group transactions that are included in the value of assets (such as inventory, fixed assets…) must be completely eliminated.
Unrealized losses arising from internal transactions that are reflected in the value of assets (inventory, fixed assets, etc.) must also be eliminated unless the costs causing such losses cannot be recovered. recovered.
12. The difference between the proceeds from divestment at the subsidiary and the value of the net assets of the divested subsidiary plus (+) the value of unallocated goodwill is recognized immediately. during the arising period according to the principle:
– If the divestment transaction does not cause the parent company to lose control over the subsidiary, the entire difference mentioned above is recorded in the target “Undistributed after-tax profits” on the Consolidated Balance Sheet. .
– If the divestment transaction results in the parent company losing control over the subsidiary, the entire difference mentioned above is recorded in the Consolidated Income Statement.
The investment in a subsidiary will be accounted for as a normal financial investment or accounted for using the equity method since the parent company no longer holds control of the subsidiary.
13. After making all adjusting entries, the difference arising from the adjustment of indicators in the Business Results Report must be transferred to undistributed after-tax profits.
14. The consolidated cash flow statement is prepared based on the consolidated balance sheet, consolidated business performance report, and cash flow statements of the parent company and subsidiaries according to rule:
The consolidated cash flow statement only presents cash flows between the group and entities outside the group, including cash flows arising from transactions with joint ventures, associates and non-controlling shareholders. group’s control.
This report is presented according to 3 types of activities: Business activities, investment activities and financial activities.
All cash flows arising from transactions between the parent company and subsidiaries within the group must be completely eliminated on the Consolidated Cash Flow Statement.
15. In case a parent company has subsidiaries that prepare financial statements in a currency different from the parent company’s reporting currency, before consolidating the financial statements, the parent company must convert the entire report. Subsidiaries’ finances into the parent company’s reporting currency according to the provisions of Chapter VI of this Circular.
16. The notes to the consolidated financial statements are prepared to explain additional financial and non-financial information, based on the Consolidated Balance Sheet and Consolidated Income Statement. ; Consolidated cash flow statement and related documents in the process of consolidating financial statements.
2. Procedure for consolidating the balance sheet and business performance report between the parent company and its subsidiaries
1. Combine the indicators in the Balance Sheet and Business Performance Report of the parent company and subsidiaries in the group.
2. Exclude the entire book value of the parent company’s investment in each subsidiary, the portion of the parent company’s net assets held in the subsidiary’s equity and record goodwill or Profit from cheap purchases (if any).
3. Allocation of goodwill (if any).
4. Separation of non-controlling shareholder interests.
5. Exclude all internal transactions within the group.
6. Prepare a summary table of adjusting entries and a summary table of consolidated indicators.
After making the adjusting entries, based on the difference between the increase and decrease of the indicators in the business performance report, the accountant makes a transfer entry to reflect the total. Effects arising from adjusting revenue and expenses on undistributed after-tax profits.
7. Prepare a consolidated financial statement based on the summary table of consolidated indicators after being adjusted and excluded for transactions arising within the group.
3. Summary table of adjusting entries and Summary table of consolidated indicators
1. A summary table of adjusting entries is prepared for each item to summarize the amounts adjusted and excluded when consolidating the financial statements.
2. The summary table of consolidated indicators is prepared to summarize the indicators on the financial statements of the parent company and subsidiaries in the group and reflect the total impact of the exclusion and adjustment entries. adjusted upon consolidation to each target in the Consolidated Financial Statements.
4. Consolidated Financial Report Form
The consolidated financial statements apply the Financial Report form of independent enterprises specified in the Enterprise Accounting Regime and supplement the following indicators:
a) Additional indicators in the Consolidated Balance Sheet:
– Adding indicator VI “Goodwill” – Code 269 in the “Assets” section to reflect goodwill arising in business combination transactions;
– Adding the indicator “Non-controlling shareholder interests” – Code 429 and presented as an indicator in the equity section to reflect the value of non-controlling shareholder interests in subsidiaries .
b) Supplementing indicators in the Consolidated Business Results Report:
– Add the indicator “Share of profit or loss in joint venture or associate companies” – Code 24 to reflect the profit or loss portion owned by the investor in the profit or loss of joint venture or associate companies when Investors apply the equity method.
– Add the indicator “Profit after tax of shareholders of the parent company” – Code 61 to reflect the value of profit after tax belonging to parent shareholders in the period.
– Add the indicator “Profit after tax of non-controlling shareholders” – Code 62 to reflect the value of profit after tax of non-controlling shareholders in the period.
