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CONSOLIDATED FINANCIAL STATEMENT ACCORDING TO IFRS Preliminary adjustments…
CONSOLIDATED FINANCIAL STATEMENT ACCORDING TO IFRS Preliminary adjustments
Preliminary Adjustments Before Consolidation
Same reporting date (or adjusted statements within 3 months max).
Same accounting standards/policies.
Same currency.
Uniformity of Reporting Date & Period (IFRS 10)
All companies in the group must prepare financials as of the same date.
If not possible
Adjust subsidiary statements for any significant events/transactions.
The maximum allowable gap between parent and subsidiary reporting dates = 3 months.
Must be consistent from period to period.
Currency Uniformity (IAS 21)
Group financials are presented in the Parent’s currency.
Conversion rules
Assets/Liabilities: closing rate at balance sheet date.
Revenues/Expenses: exchange rate at transaction date.
Differences go to Other Comprehensive Income (OCI).
Uniform Accounting Policies (IFRS 10)
Same classification and evaluation methods for all group entities.
If differences exist, make adjustments to bring them in line with group policy.
Example: LIFO (Last-In, First-Out) is common in Italy but not allowed under IFRS.
Intercompany Transactions
Even though balances should match, mismatches happen due to
Timing (e.g., bank transfers, goods in transit).
Errors in recording.
Disagreements (e.g., about goods quality).
Identify and eliminate these mismatches in consolidation.