1 Groups and consolidation: an overview

 
415 

 
Consolidation means presenting the results, assets and liabilities of a group of companies as if they were 
one company
. 

 
Consolidate as if you owned everything, and then show the extent to which you do not. 

 
A 
subsidiary
is an entity 
controlled
by another entity. 

 
An 
associate
is an entity over which another entity exerts 
significant
influence
. Associates are accounted 
for in the consolidated statements of a group using the equity method. 

 
A 
trade
investment
is a simple investment in the shares of another entity that is not an associate or a 
subsidiary. 

 
Consolidated financial statements present the results of the group; they do not replace the separate 
financial statements of the individual group companies. 
 
1
Fill in the blank.
A …………….. is an entity controlled by another entity. 
2
When the parent owns over 50% of the voting power of an entity, control can be assumed. True or false?
3
What accounting treatment does IFRS 10 require of a parent company?
4
What is a non-controlling interest?
5
Define an associate in no more than 25 words.
 
6
 
How should trade investments be accounted for in the consolidated financial statements of the investor? 
A
They should be consolidated on a line by line basis. 
B 
They should be equity accounted for. 
C 
A percentage of the investment's profits and assets and liabilities should be consolidated on a line 
by 
line 
basis. 
D 
The amount paid for the investment at cost should be shown in the statement of financial 
position.