The concept of consolidated reporting:

As a result of market transformations in Russian Federation old system accounting could not fully reflect the new financial and economic operations of large organizations (holdings, corporations). Changes in legislation were required, clarification of the conceptual framework and methodology of accounting and reporting in these organizations, which led to the emergence of the concept of “Consolidated accounting statements”.

Consolidated financial statements are reporting information presented in a user-friendly form, reflecting the financial position as of the reporting date and financial results for the reporting period of a group of related organizations, compiled by the parent organization.

Consolidated financial statements have the goal of showing, first of all, to investors and other interested parties the results of the financial and economic activities of a group of interconnected enterprises that are legally independent, but in fact are a single economic organism. The main need for drawing up consolidated reports is the exclusion from consideration of individual indicators of enterprises included in the group, in order to exclude repeated calculations in the final (consolidated) report of the group.

Characteristics of consolidated statements:

In accordance with international standards, consolidated reporting is a summary of the commercial and financial results of a group of enterprises considered as a single economic unit. Companies with subsidiaries in their structure began to prepare consolidated statements.

According to IFRS, consolidated statements must be based on certain principles:

1. The principle of completeness. All assets, liabilities, deferred expenses, and deferred income of the consolidated group are accepted in full independently of the parent company. The minority interest is shown as a separate item on the balance sheet under the appropriate heading.

2. The principle of equity. Since the parent company and subsidiaries are treated as a single economic unit, equity is determined by the book value of the shares of the consolidated enterprises, as well as the financial results of operations of these enterprises and reserves.

3. The principle of fair and reliable assessment. Consolidated accounts must be presented in a clear and easy-to-understand manner and give a true and fair view of the assets, liabilities, financial position and profits and losses of the entities in the group considered as a whole.

4. The principle of constancy in the use of consolidation and evaluation methods and the principle of a functioning enterprise. Consolidation methods should be applied for a long time, provided that the enterprise is functioning, i.e. does not intend to cease its activities in the foreseeable future. Deviations are permissible in exceptional cases, and they must be disclosed in appendices to the reporting with appropriate justification. This principle applies to both the forms and methods of preparing consolidated financial statements.

5. Principle of materiality. This principle provides for the disclosure of such items, the value of which may affect the adoption or change of decisions on the financial and economic activities of the company.

6. Unified assessment methods. The assets, liabilities, deferred expenses, profits and expenses of the consolidated company must be taken into account in their entirety. It does not matter how they are presented in the current accounting and reporting of the enterprises included in the group, since the parent company does not impose a ban or exercise selective accounting approaches. It is important that during consolidation, the assets and liabilities of the parent company and subsidiaries are valued using the same methodology used by the parent company. The valuation techniques required by the laws that the parent company complies with must be applied when preparing consolidated financial statements.

7. Single date of compilation. Consolidated financial statements must be prepared as of the balance sheet date of the parent company. The financial statements of subsidiaries must also be restated as of the consolidated financial statements date.

All of the above principles must be applied when preparing consolidated financial statements simultaneously, otherwise they will not be considered as such.

A company that has subsidiaries does not prepare consolidated financial statements if, in turn, it is a subsidiary, and its parent company prepares consolidated financial statements, but Consolidated financial statements are not prepared if:

Temporary control is assumed because the subsidiary was acquired with the intention of selling in the near future;

The subsidiary operates under strict restrictions, which significantly reduces the ability to transfer funds to the parent company;

The subsidiary is not significant to the group;

Several enterprises taken together do not occupy a significant place in the group;

The activities of the subsidiary differ from the activities of the enterprises included in the group (otherwise the concept of fair and reliable assessment is violated);

The cost and significant delay in submitting the information and documents required for consolidation is high.

In Russian legislative and regulatory acts, the reporting of such companies that meets the above requirements is called consolidated, which allowed us to conclude that the concepts of consolidated and consolidated reporting are equivalent.

Methods for preparing consolidated statements:

Consolidation techniques involve collecting and processing a large amount of information. The choice of consolidation methodology depends on the share of ownership of the company (subsidiary, associate, or the company simply has investments that do not provide control), and on the nature of the group of companies (there are investment or contractual relationships between the companies, or they are owned by one person or group of persons) . The chosen methodology, in turn, determines the essence, quantity and nature of consolidation procedures.

In general, the procedure for consolidating financial statements consists of the following steps:

1) preparation of reports by all enterprises - members of the group;

2) if necessary, making appropriate adjustments during the consolidation process;

3) preparation and presentation of consolidated reports.

Acquisition method

Acquisition method- this is a method of consolidation, which implies a form of combination of companies in which one of the companies has control over the others, that is, one company is essentially a parent and the other a subsidiary. When preparing consolidated financial statements using this method, it is necessary to clearly define the group structure and identify the parent and subsidiary companies; It is also necessary that the accounting policies of the parent and subsidiaries be similar in all significant respects.

The method involves summing up data on the same-named items of the balance sheet and profit and loss statement of parent and subsidiary enterprises, and completely excluding intra-group transactions between them:

goodwill is displayed;

the carrying amount of the parent enterprise's investment in each subsidiary and the parent enterprise's share in the capital of each subsidiary are mutually exclusive;

other intragroup balances, transactions, income and expenses are excluded;

non-controlling interests in the profits or losses of consolidated subsidiaries for the reporting period are determined.

Proportional consolidation method

One of the specific methods of consolidation is the creation of joint companies or, which is more typical for Russian realities, the conclusion of an agreement on joint activities. This method of consolidation is applicable if there is an agreement between the merged companies, which clearly states the rights and obligations of each of the merged companies. For accounting and reporting purposes, the following three main types are distinguished: joint activities:

jointly controlled transactions;

jointly controlled assets;

jointly controlled companies

Jointly controlled transactions

This form of joint company arises when the assets and other resources of the participants in the joint company are used without the establishment of any separate financial structure. An example of a jointly controlled transaction is an agreement in which two or more joint venturers combine their activities, resources and knowledge to jointly produce, market and distribute a product. Each of the joint venture participants uses its own fixed assets and has its own inventories. Each of the participants also bears its own expenses and assumes obligations, and independently attracts financing, which implies its own responsibility.

For its interests in jointly controlled transactions, a venturer must recognize in its financial statements:

the assets it controls and the liabilities it assumes;

the expenses it incurs and the share of income it receives from the sale of goods or services produced under the joint venture.

Because assets, liabilities, income and expenses are recognized in the joint venturer's financial statements, no adjustments or consolidation procedures are required in respect of these items when the venturer presents its consolidated financial statements.

The need to prepare consolidated financial statements, as follows from international standards, is dictated by the expediency of providing external reporting users with comprehensive information about the financial condition and performance of consolidated enterprises.

Consolidation of financial statements is the process of combining and synchronizing the indicators of the financial statements of a group of enterprises in order to present this group in a single reporting package of the parent (holding) enterprise. 1

The group is created at the moment enterprise consolidation, in other words, when one enterprise acquires a share in the capital of another enterprise of a size sufficient to act as a controlling participant in relation to it - the parent enterprise, or when several enterprises merge into a holding.

The acquisition of a share in the capital can be carried out either by creating a subsidiary or by purchasing a controlling stake from a third party. The smallest group consists of two enterprises. There is no upper limit limiting the number of enterprises forming a group.

If the purchasing enterprise acquires another enterprise entirely as a property complex, but the second is not absorbed by the first (i.e., the acquired enterprise does not lose the status of a separate legal entity), then such a merger is also called consolidation, and therefore also entails the obligation to draw up consolidated statements. Often, enterprises are consolidated with the goal that the owners of the merging enterprises become the owners of these enterprises as a single economic complex - a holding company, i.e., also without the loss of the status of each of the merging enterprises legal entities. In this case, each participant, in exchange for his old shares, receives new shares in the holding company in proportion to his share.

1. horizontal– merger of enterprises of the same industry;
2. vertical– association of enterprises of the same industry, but operating at different stages of the production cycle;
3. conglomeration– association of enterprises from various industries. 2

In each of the three cases, consolidation is possible both on the basis of the “daughter-mother” principle and on the terms of creating a holding company.

In the domestic specialized literature there is a rather clumsy attempt by authors to distinguish “types of groups” in a similar way. For example:

1. “horizontal group” is a group in which the parent company’s participation in each of its subsidiaries is conditioned by ownership of more than 50% of their shares (votes);
2. “vertical group” is a group in which the parent enterprise controls the capital of the “grandchild” enterprise through its subsidiary - the direct founder of such an enterprise;
3. A “mixed group” is a group characterized by the presence of sequential-parallel connections between controlling and dependent enterprises.

It seems that such “typing of groups” is absolutely unnecessary theorizing. Firstly, vertical or horizontal groups in their pure form are very rare and therefore almost all groups fall under the category of “mixed”. Secondly, within any group consisting of many enterprises, changes can constantly occur in relation to control over certain subsidiaries (and “grandchildren”), which entails a transition from one “type of group” to another. At the same time, such current transformations do not cause any legal or economic consequences for third-party investors or creditors (in a word, external users of reporting). And, most importantly, for none of these persons, it does not matter what this group of enterprises is called as of a particular reporting date: horizontal, vertical or mixed.

Another thing is the types of associations based on the characteristics identified by D. Middleton. They clearly show the purpose of the merger (consolidation): economies of scale (horizontal consolidation), product quality control (vertical consolidation), joint control over sales markets (conglomeration), etc., the list of goals is not exhaustive, but however, it is always possible to find out whether consolidation borders on monopolization. Because in all three cases government bodies those who give permission for the consolidation of enterprises can check how much this act complies with antimonopoly legislation.

What is the difference between goodwill during consolidation and “just” goodwill?

Only by the fact that goodwill is reflected in the accounting registers and in the reporting, and goodwill during consolidation is reflected only in the consolidated report. In this connection, the depreciation of goodwill is also accrued and reflected in the accounting registers, and the depreciation of goodwill during consolidation is only in the consolidated report, moreover, once a year when this report is compiled.

In both the first and second cases, the appearance of goodwill is determined by the identification of the difference between the acquisition price of the enterprise (or a share in the capital giving the buyer the right to control) and the market (fair) value of its assets. This difference arises from a well-known rule: the whole is not always equal to the sum of its parts. Likewise, the value of an enterprise, as a rule, differs significantly from the amount that could be gained if all its assets were sold separately.

Example 1. When 100% of the capital of another enterprise is acquired.

The cost of acquiring the enterprise is 180.0 thousand units. 3

The market (fair) value of net assets as of the date of acquisition (or consolidation) is equal to 135.0 thousand units.

The book value of net assets at the date of acquisition (or consolidation) is 75 thousand units.

Therefore, the difference is:

135.0 – 75.0 = 60.0 thousand units. will be included item by item in the cost of the acquired assets.

And goodwill:

180.0 – 135.0 = 45.0 thousand units. subject to separate reflection.

Moreover, if we are talking about the takeover of an enterprise by an enterprise, goodwill is reflected not only on the balance sheet, but also in the accounting registers and remains there until it is completely depreciated (which will happen after many years). And if we are talking about creating a group, goodwill is reflected only in the consolidated balance sheet, and is transferred from period to period, from the previous report to the subsequent one, also until it is fully depreciated.

The latter circumstance is explained by the fact that during consolidation, unlike a takeover, there is no transfer of the assets of one enterprise to another, since these two enterprises, which have become, respectively, parent and subsidiary, remain economic units operating separately.

Example 2. When only a certain share in the capital is acquired, giving the right of control.

The cost of acquiring a 60% share in the capital of the enterprise is 180.0 thousand units. This means that the valuation of the enterprise as a whole at the date of sale is 300.0 thousand units. At the same time, the market (fair) value of net assets as of the acquisition date is equal to 135.0 thousand units.

The book value of the share of net assets, constituting 60% of the value of their entire aggregate (75.0 thousand units), at the date of acquisition is 45 thousand units: 75.0 x 0.6 = 45.0.

Therefore, it is necessary to take into account only 60% of the excess of the market value of assets over their balance sheet valuation:

• (135 – 75) x 0.6 = 36.0 thousand units.

Thus, the ownership share of the parent enterprise will be:

• 45.0 + 36.0 = 81.0 thousand units.

• (75 x 0.6) + (60 x 0.6) = 81 thousand units.

The appropriate minority interest in the carrying amount of net assets must then be added to this estimate when preparing consolidated financial statements. This share is 40% of the amount of 75.0 thousand units. and equal to 30.0 thousand units.

• 75.0 – 45.0 = 30.0 thousand units.

Therefore, the estimate of the share of net assets owned by the parent in the consolidated statements will be:

• 81.0 + 30.0 = 111.0 thousand units.

Goodwill in this case will be calculated as the difference between the amount of investment in the subsidiary and the parent company’s share in the balance sheet valuation of its share of assets in the subsidiary, as well as the excess of their market value over the balance sheet value distributed to the relevant assets:

• 180.0 – 45.0 – 36.0 = 99.0 thousand units.

This amount (99.0 thousand units) is shown in a separate (entered) line of the first consolidated balance sheet as “Goodwill on consolidation”. This amount is gradually amortized in all subsequent consolidated balance sheets.

Under opposite initial conditions (when the amount of investment in an enterprise is lower than the market value of its net assets), negative goodwill is determined in a similar way.

And one last thing about goodwill. It is probably hardly worth reminding that when creating a subsidiary from scratch, no goodwill arises and cannot arise.

Report consolidation procedure

American scientists Enders, Watfield and Mohr identified consolidation into a separate accounting principle. It can be argued whether consolidation should be elevated to the rank of a principle at all, because the procedure for consolidating financial statements, as other American scientists Eldon S. Hendriksen and Michael F. van Breda note, has not yet developed into a consistent logical model, therefore an ideal, unified guide there is no consolidation clause. 4 And this is true, since a lot in these procedures depends on many related and unrelated factors. In particular, on the organization of document flow within the group, which, in turn, depends on the specifics of the enterprises’ activities and, therefore, is established individually.

However, the entire procedure for consolidating financial statements can be divided into two large stages:

1. consolidation (consolidation) of reporting data of all enterprises included in the group;
2. exclusion from summary indicators of quantities related to internal operations, which, in particular, include (these procedures are sometimes called elimination):
1. investments between enterprises belonging to the group;
2. income, expenses and profits/losses from mutual transactions between group enterprises;
3. settlement transactions between group enterprises and the balance of such settlements;
4. mutual loans and borrowings.

Thus, the following is carried out: capital consolidation, consolidation of intragroup settlement balances and consolidation of financial results from intragroup transactions.

If we are talking about consolidated statements of a group in which the parent company does not own all the funds of the controlled enterprise(s), i.e. only a certain share in the capital, then in this case, between the first and second of these stages, it becomes necessary to determine the n. minority share.

The minority interest in each subsidiary is determined as the product of the percentage of voting rights not held by the parent divided by the equity (including net income/loss) of the subsidiary. In the consolidated balance sheet, the minority interest is reflected in a separate (write-in) “Minority Interest”, and in the income statement, the minority interest in profit/loss is reflected in the line under the same title.

The need for the procedures listed in paragraph 2 is explained by the need to eliminate the undesirable effect of “re-accounting”: everything earned through joint efforts is not shown twice in one report. By the presence of such procedures, consolidated reporting differs from consolidated reporting, where only mechanical aggregation of items is assumed.

Consolidated reporting is a special case of consolidated reporting, provided that the parent company owns 100% of the capital of all enterprises of the group, and no intra-group turnover was carried out during the period. Although in this case there is one “but”: such a report should not show either the authorized capital of subsidiaries, or the investments of the parent company in subsidiaries. All other indicators are summarized.

Consolidated balance

When preparing a consolidated balance sheet, a consolidated balance sheet is initially compiled by line-by-line summation of the corresponding items in the reports of subsidiaries and adding the results of such addition to similar items in the balance sheet of the parent enterprise: count 2 + count 3 + count 4 = count 5 (see table).

Next, it is determined which adjusting entries, in order to eliminate the possibility of repeated accounting, must be entered into the consolidation journal. Such work is performed only during the preparation of financial statements and is not reflected in the accounting registers of either the parent or subsidiaries. In such a journal (since we are not talking about accounting entries), instead of the entries “Debit” and “Credit”, it is more correct to designate “+” and “–”. You can do without a consolidation journal if the auxiliary tables in which the calculations are made are saved as registers from period to period.

So, all assets of subsidiaries are added to the corresponding assets of the parent enterprise, and all accounts payable of subsidiaries are added to the corresponding types of liabilities of the parent enterprise, with the exception of:

1. assets (incl. accounts receivable) and liabilities arising as a result of transactions between consolidated enterprises, the amount of which should be adjusted to the balance of the general balance sheet;
2. investments of the parent enterprise in subsidiaries - the share of capital of subsidiaries that belongs to the parent; in this case, the excess of the costs of investments in subsidiaries over their balance sheet valuation is reflected in the consolidated balance sheet as goodwill (in the entry line “Goodwill on consolidation”).

Minority interests are reflected in the consolidated balance sheet because this statement should reflect information about the capital contributed by all shareholders, and not just that owned by the group.

Consolidated income statement

When preparing a consolidated statement of financial results, as well as when preparing a consolidated balance sheet, a consolidated report is compiled by line-by-line summation of the relevant items in the reports of subsidiaries and adding the results of such addition to similar items in the report of the parent enterprise: count 2 + count 3 + count 4 = count .5 (see table).
Next, it is determined which adjusting entries, in order to eliminate the possibility of repeated accounting, must be entered into the consolidation journal.

For example, the consolidated item “Income from sales” should include only income from those transactions that were made with entities not included in the group, and the cost of goods sold (products, work, services) should include only the cost of goods, inventories, work and services purchased externally. Thus, amounts received/transferred through internal settlements are eliminated.

Intragroup transactions may include:

1. revenue from the sale of products (goods, works, services) to subsidiaries and vice versa: revenue from the sale of products (goods, works, services) of subsidiaries to the parent enterprise, as well as revenue received as a result of the sale of assets of one subsidiary to another subsidiary within the group;
2. cost of products (goods, works, services) sold to subsidiaries and vice versa: cost of products (goods, works, services) sold by subsidiaries to the parent, as well as sold by subsidiaries to each other;
3. interest paid (accrued) or received (accrued receivable) on intragroup loans and borrowings;
4. other income and proceeds received as a result of intragroup transactions;
5. other expenses and payments made as a result of intragroup transactions;
6. dividends received (accrued receivable) from subsidiaries;
7. dividends paid (accrued for payment) to the parent company.

Minority share in net profit deducted from total profit. The consolidated income tax accrued for payment is distributed by the parent enterprise within the group in proportion to the profits of the participants or is not distributed if the parent enterprise pays this tax on its own behalf.

A consolidated movement report is prepared in a similar way. Money, more precisely, its second and third parts. If the first part of the cash flow statement is compiled indirectly and on the basis of indicators of the first two forms (balance sheet and income statement), then consolidation in this part does not require any adjusting entries; it is enough to summarize all indicators line by line. However, the second and third parts of the cash flow statement, since they are compiled, in any case, in a direct way, require many adjustments in the event of internal turnover in investment (financial) activities. But all adjustments ultimately come down to one model: the separation of internal cash flows from the total inflows and outflows and their removal from consolidated indicators.

The table in the financial results statement also provides an approximate scheme for bringing it to a consolidated form, which does not take into account all possible circumstances developing in the relations between the group's enterprises.

Thus, if during the period one of the group’s enterprises sold goods to another enterprise included in the group, and the latter, in turn, did not manage to sell them to third parties by the end of the period or sold them partially, then this circumstance should be taken into account accordingly in the consolidated report . Namely, it is necessary to distinguish the amounts that make up the internal turnover in these operations, and the amounts attributable to the external turnover, and in all its manifestations: income, expenses and profit. An ideal report under such circumstances can only be compiled theoretically; in practice, one must simply strive for maximum accuracy, which, in turn, is only possible with ideal organization accounting both at the parent and subsidiaries and with an ideally planned subordination of enterprises (especially when “subsidiaries” have their own “daughters,” i.e., “granddaughters” of the parent company, and so on along the chain). What if the group includes several dozen enterprises “scattered” throughout the country? What if at least one of the group’s enterprises is located outside the country?

Therefore, it makes no sense to expect reports that, in a consolidated form, could accurately reflect the state of affairs for the group as a whole. It should be remembered that the purpose of consolidating financial statements is simply to combine and synchronize the indicators of the financial statements of a group of enterprises in order to present its performance indicators in a single package.

Who is interested in reporting consolidation?

So, a consolidated report is just an attempt to provide generalized information about the group’s enterprises with a minimum number of indicators.

Investors and creditors study consolidated statements instead of studying a pile of disparate reports. But this raises another question: are there really that many investors who invest money in all the group’s enterprises at once? Each of them, as a rule, is only interested in the reporting indicators of the enterprise in which his funds are invested. Perhaps, after all, accountants of parent enterprises should not expend so much effort for an insignificant effect? In general, the problem of consolidating the reports of the “daughter-mother” group seems to the author of this work to be artificially created. Moreover, not by those people who should solve this problem for unknown reasons.

It would seem that holding is another matter. Investors (not the founders of the holding) invest their funds in the holding company as a whole, and not in any specific enterprise included in this group. But wouldn’t it be simpler to create a system for notifying investors and creditors about where, to which enterprises of the group (and, if necessary, to what programs) the funds of a particular investor were directed? It seems impossible, but with all the complexity of organizing such work, it is no more impossible than drawing up a consolidated report that really reflects the state of affairs in a group of several dozen, a hundred or more enterprises.

In the author's opinion, consolidated reports make no more practical sense than if all 100% state-owned enterprises in one country suddenly decided to draw up a “consolidated group report”, which would not take into account “internal” calculations and, accordingly, debts to each other, and only the results of external (export-import) operations would be recognized as financial results, because there is only one owner - the state.

In connection with the above, the author takes the liberty of declaring that all attempts by specialists to develop any specific algorithms for compiling consolidated reporting, except general recommendations, are nothing more than exercises in logic, useful only to the developers themselves.

1 Consolidation – from lat. consolidatio - strengthen, join.

2 See D. Middleton, “Accounting and Financial Decision Making.” M.: “Audit”, IO “UNITY”, 1997, p. 387.

3 [D.]units. – monetary units, – let’s take this designation as an example (so as not to confuse it with cu, which traditionally means US dollars)..

4 See E. S. Hendriksen, M. F. van Breda. Accounting theory. M.: “Finance and Statistics”, 2000, pp. 493 – 500.

When preparing consolidated statements for a group of companies, there are nuances that can significantly affect financial performance. These include: accounting for assets at fair value, the chosen procedure for assessing goodwill, the presence of control, investments, etc.

The legal division of a group of companies into different companies (legal entities) reflects either the history of the formation of the group (mergers and acquisitions), or a scheme for optimizing the work of companies (risk management, brand representation in the market, tax optimization, etc.), but often not the economic essence. IFRS requires information about the group as a whole to be presented as if it were a single entity, prioritizing 'substance' over 'form'. Consolidated reporting has some advantages over individual reporting and is more valuable to the user. However, the consolidation procedure has its own characteristics, which we will consider in this article.

Benefits of consolidated reporting

From the point of view of the usefulness of information for investors, consolidated reporting has the following main advantages over individual reporting of group companies:

• The notes to the consolidated financial statements set out the management/ownership structure of the group;
• from the consolidated statements it is possible to estimate the amount of “overpayment” for the acquisition of subsidiaries (reporting item “Goodwill”);
• the capital of the consolidated company reflects (DNA) - that part of retained earnings and reserves that does not belong to the shareholders of the parent company;
• intra-group transactions between group companies are eliminated, as are intra-group balances. Consolidated statements reflect the results of transactions only with third parties, therefore eliminating the possibility of a “paper” increase in financial results (for example, due to the sale of assets at an inflated price between group companies) and balance sheet currency (accounts receivable and payable between group companies for transactions of purchase and sale of assets overpriced).

Basic principles of reporting consolidation

A parent company must present consolidated financial statements in which it consolidates all investments in subsidiaries (IAS 27, IFRS 10). The consolidation procedure consists of the following points.

Basic principles

1. Consolidated statement of financial position, balance sheet (BB). The assets and liabilities of the parent and subsidiary companies are added up line by line, and appropriate adjustments are made for intragroup balances and the elimination of unrealized profits. At the date of purchase, the assets of the subsidiary must be measured at fair value.
2. Consolidated statement of comprehensive income, profit and loss statement (P&L). The summation procedure is carried out for articles of profit and loss of the group companies from the moment of their inclusion in the consolidation perimeter. Intra-group turnover and unrealized profits are excluded. Profits earned by a subsidiary before the date of its entry into the group are not consolidated in the statement of comprehensive income because they were not earned by the group.

Goodwill (BB assets) and non-controlling shareholders' interest (BB capital)

Goodwill valuation:

1. 100% acquisition of the company. Goodwill represents the excess of the price paid (the consideration transferred) for a subsidiary over the fair value of its net assets at the acquisition date. Transaction costs (costs of carrying out a transaction, such as consultants) should not be included in the cost of acquiring a company. Such expenses are immediately written off to profit or loss for the current period and disclosed in the notes to the financial statements (IFRS 3).
2. There are non-controlling shareholders. If a company acquires less than 100 percent of the shares of a subsidiary, then the share of non-controlling interests (NCS) is separately disclosed in the consolidated statements as part of equity. Today, the use of two methods for assessing goodwill in the presence of DNA is permitted (IFRS 3.19):

• the "partial goodwill" or partial value method (DVA is calculated as a corresponding percentage of the value of the company's net assets at the date of consolidation; it is assumed that goodwill does not belong to non-controlling shareholders);
• the “full goodwill” or full value method (DVA is calculated as a percentage of the company’s net asset value plus the portion of goodwill that belongs to non-controlling shareholders).

IFRS allows the use of any method of valuation for each acquisition of a subsidiary.

Calculation of capital and reserves in consolidated statements

In the consolidated statement of financial position, equity consists of the equity of the shareholders of the parent company and the non-controlling interests of subsidiaries. The equity held by the shareholders of the parent company is calculated as shown in Table 1.

Table 1. Calculation of capital due to shareholders of the parent company

The share of non-controlling shareholders is calculated as follows.

When using the “partial goodwill” (partial cost) method:

DNA = Book value of the subsidiary's net assets × DNA in the subsidiary's capital (%)

When using the “full goodwill” (full value) method, see table 2.

Table 2. Calculation of the bottom line using the “full goodwill” method

Investments of the parent company in subsidiaries

During consolidation, all assets and liabilities of group companies are added up line by line. If we leave the item “Investments” (in subsidiaries), it turns out that the assets of the subsidiaries are reflected twice. Therefore, such investments are eliminated (the arithmetic of elimination is presented in the examples below).

Example

No goodwill. The parent company organizes the subsidiary on the following terms: 51% is the “mother’s” contribution to the authorized capital (AC), the remaining 49% is the share of other shareholders. The subsidiary company was organized on September 21, 2013. The group's reporting date is December 31, 2013. The balance sheets of the parent and subsidiary companies as of the date of contribution to the capital company and the reporting date are shown in Table 3.

Table 3. Balance sheets of parent and subsidiary companies

** During the consolidation procedure, the capital of a subsidiary is not summed up with the capital of the parent company, intragroup investments are removed, and the share of non-controlling shareholders of the company is reflected as a separate line in the capital.

The example described above is very simple, but useful due to the widespread use of this practice. Often, a business separation scheme is used to optimize business processes, optimize taxation, or reduce commercial and other risks by transferring part of the business to a separate company.

Example

Practical aspect. In real life, company reporting and item detailing can be much more complex. Therefore, it is inappropriate to prescribe the consolidation algorithm with one formula (as in the above example). It is more practical to add up all items of assets, liabilities and capital, and then enter an adjusting consolidation entry (see tables 4 and 9).

Table 4. Application of adjusting consolidation entry in practice e

Table 9. Application of an adjusting consolidation entry for the “full goodwill” method

“Partial goodwill” (partial cost) method. The parent company acquires an 80% stake in the subsidiary on June 1, 2013. As of the date of purchase, the subsidiary’s retained earnings amounted to RUB 65 million. (there are no changes in the Criminal Code between the date of acquisition and the reporting date).

The value of the assets and liabilities of the subsidiary at the acquisition date reflects their fair value.

When checking goodwill for impairment as of December 31, 2013, it turned out that its fair value at the reporting date was RUB 50 million.

Calculation of the value of goodwill:

The cost of acquiring a stake in a subsidiary (80%) “Investment in (D)” from the parent company’s balance sheet = RUB 188 million. (see table 6).

Table 6. Impairment of goodwill (through profit and loss)

Parent's share of the subsidiary's net assets (as of acquisition date):

(40 + 30 + 65) million rubles. × 80% = 108 million rubles.

188 – 108 = 80 million rubles.

Important: goodwill is calculated on the date of acquisition of the subsidiary. Its value cannot be increased for subsequent reporting dates. Goodwill is tested for impairment at least once a year. Many analysts are skeptical about this asset, since its calculation is purely arithmetic and often does not carry economic essence. In the absence of economic substance (a recognizable brand, a unique team of specialists), many companies write off goodwill, since it is simply a markup when purchasing a company. In this case, the need for its annual revaluation disappears.

Negative goodwill is recognized as income as part of profit or loss at the time of its formation. Value of non-controlling shareholders' share:

NA (D) as of the reporting date × DNA% = 160 million rubles. × 20% = 32 million rubles.

Let's calculate retained earnings in the consolidated statements (see Table 5).

Table 5. Calculation of retained earnings in consolidated statements

As a rule, impairment of goodwill in profit or loss is included in administrative expenses or is allocated as a separate line item (if the impairment is material to the financial result of the period).

Example

“Full goodwill” (full value) method. Let's use the conditions of the previous example. The calculation of the value of DNA and goodwill will change as follows (see tables 7 and 8):

Table 7. Cost of DNA as of the reporting date

Table 8. Retained earnings in consolidated statements

The cost of the entire subsidiary (100%) = 188 million rubles. : 0.8 = 235 million rubles.

It is assumed that the value of the company is evenly distributed among shareholders. However, most often you have to pay a premium for control, so one share is cheaper for non-controlling shareholders. If cost data is available, it is best to use it.

Net assets of the subsidiary (as of acquisition date):

40 + 30 + 65 = 135 million rubles.

Goodwill at the date of acquisition of the subsidiary:

235 – 135 = 100 million rubles.

Of these, DNA:

100 million rub. × 20% = 20 million rubles.

"Difficult" groups

In a “simple” group, the ownership structure looks like this.

The “complex” group looks like this.

In a vertical structure, company A has a subsidiary company B, and B has a subsidiary company C. The accounts of all companies are consolidated as part of the group. Company A has control over both companies. Over Company B directly, over Company C through Company B, although the effective ownership interest is 45 percent (75 × 60).

In a mixed structure scheme, A controls B directly. A's direct ownership of C's share capital is 40 percent, and A's ownership of C's share capital through company B is another 20 percent, for a total of 60 percent.

Note that the calculation of DNA in “complex” groups is somewhat different from “simple” groups (see Table 10).

Table 10. Calculation of DNA in the “complex” group

Consolidation of “complex” groups occurs in two stages (using the example of a vertical structure): first, group B - C is consolidated, and then A is consolidated with group B - C.

Associated companies

An associate is a company over which the investor has significant influence; it is neither a subsidiary nor an interest in a joint venture. The investment in an associate must be accounted for using the equity method (IFRS 28) and shown in one balance sheet line item.

According to this method, the balance sheet is reflected in the item “Investments in an associated company” as follows (see Table 11).

Table 11. Calculation of investments in an associated company for inclusion in the balance sheet

In the operating statements, changes in the value of such investments are also reflected in one article - “Share of profit/loss in an associated company.”

Other company reporting aggregations

Some group companies have no formal legal structure but are controlled by one person or group of people. Consolidation of such companies is not provided for by IFRS 3, but their statements can be combined and even audited. This reporting format is often used for management purposes.

The rules for combining are practically the same as the rules for consolidation. The exception is the elimination of the parent company's investments in subsidiaries and the capital of the subsidiaries themselves. This exception means that goodwill and non-controlling interest (as defined under IFRS) do not arise when the statements are combined.

To pass an audit in combined reporting, it is necessary to clearly state the principles according to which companies are included in the perimeter of the group - the basis for the presentation of combined reporting.

Implementation of reporting consolidation in practice

IFRS, unlike RAS, does not regulate the procedure for recording transactions in analytical accounts. The reporting itself is important, and the procedure for its formation remains with the company’s management. The level of automation of consolidated reporting depends on the complexity and detail of accounting, and most importantly, on the financing of this area.

The advantage of automation is the speed of reporting, which is important not only for investors, but also for company management when making operational decisions. Of the minuses, we note:

• the need to hire new employees, since changes in the system must be registered using software code, or the need for constant software support from provider companies;
• It usually takes two to three annual shutdowns before the system starts operating with minimal disruption.

To summarize, let us pay attention to the following points in the preparation of consolidated financial statements. The acquirer must measure the identifiable assets acquired and liabilities assumed at their fair values ​​at the date of purchase. Current assets (except inventories) most often reflect real (fair) value. To evaluate fixed assets and inventories, you will most likely have to engage independent appraisers.

Goodwill must be assessed for impairment annually, as are investments in associates. In addition, it is necessary to assess how economically feasible goodwill is and consider the possibility of writing it off at the first reporting date.

When consolidating complex groups, the existence of control over the company must be carefully assessed. Mechanical accounting of shares may not provide a true picture of control.

The company's investment policy provides for the company to make a profit.

The company's profits can be used for the following purposes: reinvestment in operating assets used in the course of core business, acquisition of marketable securities, repayment of debt, distribution among shareholders. There is a relationship: the more current profits are allocated to the development of the company, the less money is left to pay current dividends. Dividend policy also affects cash flow, liquidity, capital structure, share price and company value. Thus, the most important aspect of dividend policy is to determine the optimal ratio of profit distribution between dividend payments and the part that remains in the company for its development.

A company's decision to pay dividends and their size play a large role in investors' assessment of the advisability of investing in a company's shares, since a company's ability to pay dividends indicates its financial condition.

Increased attention to various aspects of dividend policy is caused by the following reasons.

Firstly, dividend policy affects relations with investors (shareholders). Shareholders view companies that cut dividends negatively because they associate such cuts with the company's financial difficulties and may sell their shares, causing their market price to decline.

Secondly, dividend policy affects the company's financial program and capital budget.

Third, dividend policy affects cash flow. Thus, a company with low liquidity may be forced to limit dividend payments to shareholders.

Fourth, dividend policy reduces equity capital, since dividends are paid from retained earnings. As a result, this leads to an increase in the debt-to-equity ratio.

When deciding on the amount of dividends to be distributed, it is necessary to be guided by the principle of achieving maximum shareholder value for the company.

Developing a dividend policy involves deciding whether to pay out profits to shareholders or retain them to invest in companies.

Therefore, the dividend payout ratio, defined as the share of net income payable to shareholders, should be largely determined by investors' choice between cash dividends and capital income. This choice is examined using a stock valuation model under conditions of constant dividend growth:

V0 = D1 / (ke- g),

Where V0 - the market price of the stock at the moment;

D1

ke- the rate of return required by investors;

g- constant growth rate of dividends.

The same formula is also applicable for the case of shares with zero dividend growth, i.e. g = 0:

V= D1 / ke.

This assessment of the value of companies is based on determining the value of shares as the sum of discounted cash receipts, i.e. dividends. With this approach, changes in market value reflect changes in expectations regarding future dividends. Dividend yield plays an important role when comparing stock prices of individual companies and the market as a whole.

If the ratio of dividend to share price falls below a certain value, then the shares are considered overvalued, i.e. this value becomes less than the return on alternative investment options and makes the shares unattractive to investors.

Example 1

Shares of companies “A” and “B” are currently sold at 100 USD. e. per share; the rate of return required by investors for these shares is 15%; dividends expected to be paid at the end of the year by company A - 15 cu. e. per share, and by company “B” - 14 USD. e.

Therefore, the market value of company A's shares is V0 = 15 / 0.15 = 100 cu. e., and company “B” - V0 = 14 / 0.15 = 93.33 cu. e. At the same time, shares of company “B” provide a return in the amount of ke= 14 / 100 = 14%. This means that the shares of company “B” are currently overvalued and investors will not be interested in purchasing shares of this company.

Thus, a company's optimal dividend policy should strike a balance between current dividend payments and the company's future growth in order to maximize share price.

Total expected return = dividend yield + capital return:

ke= D1 / V0 + g= D1 / V0 + (V1 - V0 ) / V0 ,

Where V0 - current market price of the stock;

V1 - market price of the share in the subsequent period;

D1 - cash dividends paid at the end of the first period;

ke- the rate of return required by investors.

Example 2

Shares of company “A” are currently sold at 100 USD. That is, per share, the expected return is 15%. The company expects that its shares will be sold at 112 USD in a year. e. per share. It is necessary to determine the amount of dividends to be paid at the end of the year in order to provide the expected return to shareholders.

D1 / V0 = ke- (V1 - V0 ) / V0 = 0,15 - (112 - 100) / 100 = 0,03.

Thus, the dividend amount will be:

D1 = 100 x 0.03 = 3 y. e. per share.

In practice, the process of forming a dividend policy is complex and includes several main stages. At the first stage, it is necessary to assess the factors determining the dividend policy. These factors can be divided into four groups:

1. Restrictions on the payment of dividends.
2. Investment opportunities.
3. Availability and cost of alternative sources of capital.
4. The impact of dividend policy on the company's cost of capital.

At the second stage of forming a dividend policy, taking into account the assessment of the above factors and in accordance with the company's strategy, it is necessary to select the type of dividend policy (conservative, moderate, aggressive).

At the third stage, it is necessary to determine the level of dividend payments and the amount of dividend per share. If share capital The company consists of ordinary and preferred shares, the general fund of dividend payments consists of a fund of payments for preferred shares and a fund for ordinary shares. In this case, the dividend payment fund for ordinary shares and the dividend per share are established after the formation of the payment fund for preferred shares.

Cumulative preferred shares - These are preferred shares, dividends on which accumulate if the issuer does not pay them on time.

Non-cumulative preferred shares - These are preferred shares, the holders of which may not receive dividends when the company misses its next dividend payment.

Example 3

100,000 pieces of 10% preferred non-cumulative shares with a par value of 10 USD. e.;

200,000 USD e. retained earnings will be paid as dividends.

Dividends on preferred non-cumulative shares:

100,000 shares x 10 y. e. x 10% = 100,000 y. e., or 1 cu. e. per share (100,000 cu / 100,000 shares).

Consequently, holders of ordinary shares account for:

200,000 USD e. - 100,000 USD e. = 100,000 USD e., or 0.20 cu. e. per share (100,000 cu / 500,000 shares).

Example 4

The company has the following shares outstanding:

100,000 pieces of 10% preferred cumulative shares with a par value of 10 USD. e.;

500,000 ordinary shares with a par value of 5 cu. e.

200,000 USD e. retained earnings will be paid as dividends. At the same time, dividends on cumulative shares were not paid in the previous year.

Let's calculate the amount of dividends paid for each class of shares.

Dividends on cumulative preferred shares consist of dividend arrears for the previous year in the amount of: 100,000 shares x 10 cu. e. x 10% = 100,000 y. e. and dividends for the current year also in the amount of 100,000 USD. e.

There are no dividends to holders of common shares.

Example 5

The company has the following shares outstanding:

100,000 pieces of 8% cumulative preferred shares with full participation with a par value of 10 USD. e.;

500,000 ordinary shares with a par value of 5 cu. e.

400,000 USD e. retained earnings will be paid as dividends. At the same time, dividends on cumulative shares were not paid in the previous year.

Let's calculate the amount of dividends paid for each class of shares.

Dividends on cumulative preferred shares consist of dividend arrears for the previous year in the amount of: 100,000 shares x 10 cu. e. x 8% = 80,000. e. and dividends for the current year in the amount of 80,000 USD. e.

Dividends on ordinary shares: 500,000 shares x 5 y. e. x 8% = 200,000 y. e.

Dividends on shares with the right to participate are distributed in the amount of:

400,000 - 80,000 - 80,000 - 200,000 = 40,000 USD e.

Distributed among preferred shares: 40,000 USD. e. x (1,000,000 c.u. / 3,500,000 c.u.) = 11,428 c.u. e.

Distributed to ordinary shares: 40,000 USD. e. x (2,500,000 c.u. / 3,500,000 c.u.) = 28,572 c.u. e.

At the fourth stage, the company determines the form of dividend payments (cash dividends or dividends in the form of shares).

At the last stage, it is necessary to analyze and evaluate the effectiveness of the established dividend policy.

IAS 32 states that examples of equity instruments are non-puttable ordinary shares and certain types of preference shares. Preferred shares may be issued with different rights, so when classifying preferred shares as a liability or an equity instrument, an entity must evaluate those rights.

All dividends on common stock, other than stock dividends, reduce the company's equity as equity is reduced by the distribution of assets. Declared cash dividends are generally a current liability:

As of the announcement date:

Dt"Retained earnings"

CT"Dividends payable"

On the date of payment:

Dt"Dividends payable"

CT"Money"

According to paragraph 18(a) of IAS 32, preference shares that require redemption by the issuer for a fixed amount on a specified date in the future or give the holder the right to require the issuer to repurchase the instrument on or after a specified date at a fixed price are a financial liability. Accordingly, dividends paid on shares that are fully recognized as a liability are recognized as dividend expense in the same way as interest on bonds, that is, charged to the current period's profit or loss account. According to paragraph 40 of IAS 32, dividends classified as an expense may be presented in the income statement or with interest on other liabilities, or as a separate line item:

As of the announcement date:

Dt"Dividend expenses"

CT"Dividends payable"

On the date of payment:

Dt"Dividends payable"

CT"Money"

If the issuer has an option to repurchase the preference shares, they do not meet the definition of a financial liability because the issuer has no current obligation to deliver the financial assets and, therefore, the shares would qualify as an equity instrument. Dividends will then be reported as changes in equity and represent a distribution of profits.

When payments of income to holders of preferred shares, cumulative or non-cumulative, are made at the option of the issuer, the shares are an equity instrument and, accordingly, the dividends represent a distribution of profits.

Shareholders prefer cash payments to other forms of dividend payments. It is important to them not only what part of the profit the company distributes as dividends, but also in what form they receive them.

In practice, cash dividends are the most common form of payment. For shareholders, paying cash dividends is the most convenient form of receiving cash. Moreover, they do not need to buy or sell their shares to receive a dividend, and therefore transaction costs are zero or minimal.

However, a company may offer to pay dividends in its own shares if investment opportunities and limited other sources of financing require reinvestment of profits, but the company has systematically paid dividends in the past. The positive aspect of this approach is that paying dividends in shares has the same information value as cash dividends, but the cash remains in the company.

Dividends may also be paid in the form of additional shares rather than cash, especially when there are liquidity problems. While this does not provide direct cash returns to shareholders, it is considered a significantly better option than losing the dividend due to liquidity issues.

A stock dividend provides for the transfer of additional shares of common stock to the company's shareholders, i.e., the reclassification of the amount of earnings received into the company's paid-in capital. Such a payment represents a redistribution of the company's equity between capital items. At the same time, the share of each shareholder in the company's ownership remains unchanged.

Dividends paid by a small percentage of shares that result in less than a 25% increase in the volume of shares of common stock previously outstanding are considered dividends paid by a small percentage of shares (small or ordinary dividends). Accounting for this type of stock dividend entails the capitalization of a portion of the earnings, that is, the transfer of earnings to common stock and additional paid-in capital based on the fair value of the shares.

Example 6

Company A decides to pay its shareholders a 10% dividend in the form of shares. The market value of shares at the moment is 25 USD. That is, per share, the par value of the share is 5 USD. e. The equity capital of company A before payment of dividends in shares consists of the following items:

Share premium 30,000,000 USD e.;

Total 45,000,000 USD e.

1,000,000 shares x 10% = 100,000 shares, in market prices this will be: 100,000 shares x 25 y. e. = 2,500,000 USD e.

Share capital (nominal value - 5 cu., quantity - 1,100,000 shares) 5,500,000 cu. e.;

Share premium 32,000,000 USD e.;

Total 45,000,000 USD e.

As the number of common shares outstanding increases by 10%, the company's earnings per share decrease proportionately.

Shareholders ended up with more shares, but earnings per share decreased. However, each shareholder's share of the total earnings allocated to common stockholders remains unchanged. Regardless of the fair value of the shares at the time the dividend is paid, each shareholder's proportionate ownership will remain the same.

The payment of stock dividends in an amount greater than 25% of the volume of ordinary shares previously issued is considered significant (large dividends). Under IAS 39, fair value reflects the creditworthiness of the instrument, so dividends paid by a small percentage of shares are not expected to have a material effect on the market price of one share, but dividends paid by a significant percentage of shares would significantly reduce the market price of the share, and therefore such shares transferred are accounted for at nominal value.

Example 7

Company A decides to pay its shareholders a 50% dividend in the form of shares. The market value of shares at the moment is 25 USD. That is, per share, the par value of the share is 5 USD. e. The equity capital of company A before payment of dividends in shares consists of the following items:

Share capital (nominal value - 5 c.u., quantity - 1,000,000 shares) 5,000,000 c.u. e.;

Retained earnings 10,000,000 c.u. e.

Total 45,000,000 USD e.

Payment of dividends in shares will be made in the amount of:

1,000,000 shares x 50% = 500,000 shares.

The equity capital of company A after payment of dividends in shares will be:

Share capital (nominal value - 5 c.u., quantity - 1,500,000 shares) 7,500,000 c.u. e.;

Additional paid-in capital 30,000,000 USD. e.;

Retained earnings 7,500,000 c.u. e.

Total 45,000,000 USD e.

The advantage of paying dividends in the form of shares is the following:

Cash remains in the company for the implementation of further investment opportunities of the company.

They have the same information value as cash dividends.

If liquidity is limited, then paying dividends in shares helps maintain the level of stability of the dividend flow and maintain the company's status in the market.

They are effective means for shareholders who want to increase their shareholdings in a company, by circumventing transaction costs and other expenses that would be incurred if they received cash dividends and then purchased additional shares of the company in the market.

When declaring dividends paid in kind, the entity must restate the fair value of the asset by recognizing as profit or loss the difference between the fair market value and book value on the date of dividend declaration.

Example 8

On December 25, 2007, the company announced the payment of property dividends. Payment will be made on February 1, 2008. Dividends paid in kind represent an investment in securities in the amount of 3,000,000 USD. e. As of the announcement date, the fair market value of these securities was $3,400,000. e.

Dt“Investments in securities” 400,000

CT“Income from changes in the value of securities” 400,000

Dt"Retained earnings" 3,400,000

CT

Dt“Dividends in kind” 3,400,000

CT“Investments in securities” 3,400,000

Some companies use paid-in capital to pay dividends. Dividends that are not based on retained earnings but are paid from other sources are called liquidation dividends, i.e., any dividend not paid from earnings is considered to represent a reduction in paid-up capital, a return on investment.

As of the announcement date:

Dt"Additionally paid-in capital"

CT"Dividends payable"

On the date of payment:

Dt"Dividends payable"

The development of market relations between states contributes to the entry of groups of interconnected companies into the international arena to attract new investors. As a result, there is a need to provide interested parties with information about the financial position of large organizations in the form of a consolidated report.

What is consolidated reporting and why is it needed?

The definition of consolidated financial statements is related to the definition of a group of companies.

Company group- these are two or more enterprises that have legal status and are united into one group, which as an economic unit is not considered a legal entity.

Control over enterprises (subsidiaries) is exercised by the parent (parent or management) company, which determines the financial and economic activities of its subsidiaries to obtain financial benefits. The most common forms of creating groups of enterprises are holding companies and concerns.

Consolidated financial statements (KFO)– this is a type of reporting that contains reliable information about the property and financial condition of a group of companies, the economic results of its activities, and the prospects for future development.

The CFO is compiled independently of the financial statements and is not submitted to the tax service or other government bodies. The document gives only a general idea of ​​the affairs of the entire interconnected group as one whole, but not for each enterprise separately.

The CFR must comply with IFRS standards and be for informational purposes only. It is provided to third party users interested in the group of companies and is aimed at increasing their trust. Based on such a report, users make decisions regarding a group of enterprises.

REFERENCE. To improve the level of accounting and reporting, the Government of the Russian Federation carried out a corresponding reform that brought Russian accounting and reporting standards closer to International Financial Reporting Standards (IFRS).

List of legal entities providing CFO

In the Russian Federation, any groups that have subsidiaries are required to provide such reporting. The preparation, presentation, audit and disclosure of financial statements is regulated by the Federal Law “On Consolidated Financial Statements” dated July 27, 2010 No. 208-FZ (latest edition). According to Art. 2 clause 1 of the above law, CFOs are obliged to form:

• credit organizations;
• clearing organizations;
• NPF - non-state pension funds;
• companies whose securities are participating in trading;
• insurance companies, except for the medical sector;
• management companies of non-state pension funds and investment funds, including mutual funds;
• other groups of companies, the list of which is determined by law.

By whom and for whom are consolidated statements prepared?

The KFO is compiled by the head enterprise of a group of companies. Art. 4 of the Federal Law “On Consolidated Financial Statements” defines the categories of reporting recipients. These are:

1. Participants and owners of enterprise property - shareholders, founders, board of directors. They are the first to receive annual/interim reporting within the deadlines established by law: 120 and 60 days, respectively, from the end of the reporting period.
2. The Central Bank of the Russian Federation receives the CFO in the manner and within the time limits established by the Central Bank of the Russian Federation.
3. Users of interest are suppliers, investors and others. For them, reporting is posted on public resources such as media and Internet portals for 30 days.

Composition and features of CFO

KFO has some differences from standard financial statements. Firstly, information about economic activities comes not from one, but from several organizations. Secondly, consolidated reporting has a different range of users. Thirdly, a different report generation technique is used.

What KFO contains:

• the entire balance sheet with the necessary attachments and summaries (Form 1);
• a complete profit/loss report for the entire group of companies (Form 2);
• information summary about the group members: their full list, registration addresses and the share of the parent company in the authorized capital.

Consequently, the essence of the formation of the CFO is to combine the reports of the management and subsidiaries into one document. In this case, settlement transactions carried out between group members are excluded from the results of financial activities. This is done to provide information related to the group's performance in the external environment. Otherwise, the final indicators will be distorted.

When preparing reporting, the size of the share in the authorized capital of a subsidiary owned by the parent company plays an important role. If the share is more than 51% or the company holds a controlling stake, then the full financial indicators of the subsidiaries are included in the report. If the share of participation is less than 20%, the financial indicators of this organization are not included in the report. In other cases, indicators are proportional to the share of participation.

Other consolidated reporting requirements

• The assessment of the reports of subsidiaries should be carried out according to principles common to all.
• The report must be generated in one language and in one currency (for the Russian Federation - Russian and in rubles).
• The accuracy of all information and the order in which it is presented must be observed. The head of the parent company is responsible for this.
• A uniform procedure and exact deadline for submitting reports to the parent organization by subsidiaries is mandatory.
• The reporting requirement must be met by absolutely all group members.
• The CFO must have an auditor's report, which must be presented and disclosed along with the financial statements.

IMPORTANT! If the parent company has subsidiaries located abroad, then their data on financial and economic activities must be reflected in the report. Moreover, all information must be in Russian or with a translation attached to the document.

Methods for forming CFO

In order to process a large amount of data, several methods for generating CFOs are used. The choice of method is made by the parent organization, which is influenced by the nature of the enterprise’s activities and the share of the company that it owns.

Full consolidation

The method is used when consolidating reports by the parent organization from dependent (subsidiary) enterprises. This approach requires a clear definition of the structure of the group of companies. Here, the method of adding up the indicators of the balance sheet items of the same name minus intragroup settlement transactions is used.

Share

The method is relevant if the investor has a share of the capital of the organization, but is not its member. Consequently, profit and loss are determined on the basis of the actual cost of the share, followed by an adjustment to the share in the profit of the organization.

Interest pooling method

When several firms equally own an enterprise, but there is no parent organization in the structure, the pooling of interests method is used. In this case, when preparing reports, each owner must reflect information regarding all subsidiaries.

Combined reporting

Combined reporting is formed in cases where there is a group of companies without a parent company, but essentially owned by one owner without any legal connection. As a result, reports are first compiled for each organization, after which all indicators (including capital) are summarized in one document, after which intra-group calculations are subtracted.

Proportional consolidation method

Applicable in cases where an agreement on joint activities is drawn up between enterprises. It specifies the rights and obligations of all parties, and any consolidation method is chosen based on an agreement. There are the following forms of joint activities: by assets, by operations and by companies.