Quiz 3 Flashcards
(19 cards)
The financial statements of a group in which assets, liabilities, etc. of the parent and its subsidiaries are presented as those of a single economic entity.
Consolidated Financial Statements
When does an investor control an investee?
When the investor is:
1. exposed to or has rights to variable returns from its involvement with the investee
2. has the ability to affect those returns through its power over the investee
This is an entity with decision-making rights that is either a principal or an agent for other parties
Decision Maker
It’s the parent and its subsidiaries
Group
It is an entity that:
1. obtains from one or more investors for the purpose of providing those investors with investment management services
2. commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income, or both
3. measures and evaluates the performance of substantially all of its investments on a fair value basis
Investment Entity
It is the equity in a subsidiary not attributable directly or indirectly to a parent
NCI
An entity that controls one or more entities
Parent
Existing rights that give the current ability to direct the relevant activities
Power
An entity that is controlled by another entity
Subsidiary
Rights designed to protect the interest of the party holding those rights without giving that party power over the entity to which those rights that relate
Protective Rights
Activities of the investee that significantly affect the investee’s returns
Relevant Activities
Rights to deprive the decision maker of its decision-making authority
Removal Rights
When does collective control happen?
When they must act together to direct the relevant activities
(It would fall under joint arrangements, investments in associates, and
When does an investor have power?
When it has existing rights that give it the current ability to direct the relevant activities
What are the steps in consolidation?
- Combine like items (assets, liabs, equity, etc.) of the parent and its subsidiaries
- Eliminate the carrying amount of the parent’s investment in each subsidiary and the portion of equity in each subsidiary
- Eliminate in full intragroup assets, liabs, etc. relating to intercompany transactions
What must an entity do if the group uses accounting policies other than those adopted in the consolidated financial statements?
Adjustments are made to to the group member’s FS to ensure CONFORMITY.
Where does a parent present non-controlling interests in the consolidated SOFP?
Within equity, separately from the equity of the owners of the parent
