1 Groups and consolidation: an overview

 
1
Introduction to the consolidated statement of profit or loss 
The consolidated statement of profit or loss is prepared by combining the statements of profit or loss of 
each group company on a line by line basis.
How are consolidated financial statements prepared? IFRS 10 lays out the basic procedures in paragraph 
B86 and we will consider these in the rest of this chapter. 
The consolidated statement of profit or loss summarises the revenue and expenses of the group as if it 
was a
single entity. As with the consolidated statement of financial position, the source of the 
consolidated statement of profit or loss is the individual accounts of the separate companies in the group. 
The consolidation procedure is also the same: consolidate as if you owned everything, then show the 
extent to which you do not.
Consider the following example. 
 EXAM FOCUS POINT 
In the July to December 2014 ACCA examining team's report, the ACCA examining team provided the 
following comments which may help students to improve their performance: 
Know the format for a consolidated statement of profit or loss and understand consolidation 
techniques. Some questions may require you to calculate key figures such as a profit figure when given 
a mark-up percentage, before you can calculate unrealised profit.
Some of the common errors when preparing the consolidated statement of profit or loss include 
not
: 

Adjusting the revenue figure and cost of sales figure for the intra-group transactions 

Adjusting the cost of sales for the goods remaining unsold at the year end 

Clearly showing the profit attributable to the parent company and the non-controlling interest 

Adjusting the subsidiary profit for unrealised profit 

Showing workings for the calculation of the non-controlling interest
BPP Tutor Toolkit Copy

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CHAPTER 25
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THE CONSOLIDATED STATEMENT OF PROFIT OR LOSS