It would be a fundamental mistake in any consolidation question to ever pro-rate a subsidiaries statement of financial position where there is less than 100% ownership. However, in However, when it comes to the measurement of non-controlling interests (minority interests under the PERS framework), there is a significant difference. This is presented as ‘Share of profits of Associate’ as a new heading immediately before the consolidated profit before tax. a) its share of the jointly controlled assets, classified according to the nature of the assets, c) its share of any liabilities incurred jointly with the other venturers in relation to the joint venture, d) any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture, and. The Financial Reporting Framework in Malaysia very simply, works like this – registered companies in Malaysia are all required to prepare statutory financial statements. IFRS 10, Consolidated Financial Statements Please note the syllabus does not cover Joint Ventures but IAS 28 is applicable to Associates which are covered. A 1 and 2 Under the Companies Act a parent company is not required to prepare consolidated financial statements for a financial year in which the group headed by that company qualifies as a small group or a medium-sized group. For claiming exemptions, the subsidiary companies are required to comply with conditions mentioned under Second Proviso to Rule 6 of Companies (Accounts) Rules, 2014. See Illustration 5 below for a typical MCQ on goodwill. Statement (2): Despite only 18% of the ordinary share capital being held by Indigo Co, as we have already discussed, we do not just consider the percentage of equity shares held, but also look at whether there can be an exercise of significant influence. (1) How is a parent-subsidiary relationship identified? Cr. What should be the consolidated revenue for the year ended 30 September 20X2? The PUP is added back to cost of sales, which reduces/eliminates the profit. Statement (1): Although a 30% holding appears to fall within the 20–50% range, it is a 30% holding in non-voting preference share capital. Illustration (2) And the financial reporting framework serves as a guideline to ensure each criterion that is needed is being fulfilled. In this situation, the information needs of certain users may not be served by the consolidated financial statements at a whole-of-government level alone. At each reporting date, an investor shall measure its investments in associates at fair value, with changes recognised in profit or loss, using the fair valuation guidance in section 11 of MPERS. Black Co – by looking at the percentage of equity shares, you may incorrectly conclude that Black Co is not a subsidiary, as Green Co has less than half of the voting rights. Remember that at Paper FA, a good solid platform of understanding the principles of consolidation is required. The treatment for JCOs and JCAs under PERS and MPERS is rather similar. A group is made up of a parent and its subsidiary. What should be shown as the consolidated figure for receivables and payables? Small company reporting exemption. If a venturer does not prepare consolidated financial statements, it uses the cost method or revalued amount to measure its interest in JCE in its financial statements, with the effects of equity accounting shown in the notes. Even though we only own 80% of the share capital, the full goodwill method brings 100% of the goodwill on to the consolidated statement of financial position. Therefore, the consolidated revenue is calculated as: Had the question stem asked for the consolidated cost of sales figure, the answer would be correctly calculated as: $54,990 + $17,940 + $500 – $5,000 = $68,430. Under MPERS, there is no prohibition on the equity method if there are no consolidated financial statements presented. Having two out of the five directors effectively gives Indigo Co influence, but not control, over decision making in the company and, therefore, Blue Co is an associate and would be equity accounted. Section 9 of MPERS requires a parent entity to present consolidated financial statements in which it consolidates its investments in subsidiaries. This article was first published in the February 2017 Malaysia edition of Accounting and Business magazine. But just like associates, a venturer shall measure its investments in jointly controlled entities for which there is a published price quotation using the fair value model. Another common adjustment that you could be asked to deal with is the removal of unrealised profit. Under the PERS framework, a parent is exempted from consolidating its subsidiary if it operates under severe long-term restrictions; however, such an exemption is not available under MPERS. 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