Principles of Group Accounting under IFRS

A professional guide to implementing IFRS 10, 11 and 12

Group accounting is highly complex, combining financial accounting, management and cost accounting, taxation, law, organization and similar disciplines across multiple jurisdictions.

Principles of Group Accounting under IFRS is designed as a handbook for practitioners, written by a practitioner. It provides practical guidance on managing the issues which are particular to international group accounting under IFRS 10, 11 and 12, presenting an integrated view of group accounting covering all relevant disciplines.

Beginning with a general introduction to group accounting, the book goes on to demonstrate the process of group accounting in practice through the use of a step–by–step case study of a midsize group. The case study covers all of the main stages from initial accounting to changes in the company′s status and, finally, disposal. Throughout the book, examples are presented for selected topics to demonstrate the accounting treatments and show how issues can be resolved.

Principles of Group Accounting under IFRS is not only a complete guide to the process of preparing consolidated financial statements, it also provides a convenient reference to resolve specific issues which may arise when consolidating group accounts under IFRS.

List of figures xiv

List of tables xvii

Preface xix

Introduction to the book xx

A The case study 1

1. About the group 1

2. Allocation of examples 1

B Legal requirements for consolidated financial statements4

1. IFRS standards 5

2. Exemptions 18

3. Local accounting standards 19

4. Taxation 20

5. Definitions 21

C Definition of groups 22

1. The control concept 23

2. Joint control 28

3. Loss of control 31

4. Group compositions 33

5. Special cases 34

D Preparation of consolidated financial statements and annualreports 37

1. Lifecycle of subsidiaries 38

2. Structures 39

3. The preparation process 48

4. Organization 54

E Initial consolidation 55

1. Basics 56

2. Mergers and acquisitions 62

3. Purchase price allocation 66

4. Other aspects of purchase price allocations 94

5. Consolidation techniques 96

6. Special cases 107

F Subsequent consolidation 121

1. Basics 122

2. Subsidiary preparation 125

3. Equity consolidation 131

4. Debt consolidation 136

5. Consolidation of income and expenses 144

6. Unrealized profits 156

7. Non–controlling interests 170

8. Group–level transactions 173

9. Special cases 186

G Associated companies 213

1. Basics 214

2. Consolidation techniques 216

3. Treatment of losses 236

4. Impairments 237

5. Special cases 238

H Joint arrangements 242

1. Basics 243

2. Accounting and consolidation 246

3. Disposals / Deconsolidation 249

I Changes in control 253

1. Basics 254

2. The parent s view 254

3. Increase in investments 255

4. Decrease in investments 266

5. Acquisitions and disposals without changes in control 275

6. Special cases 285

J Disposals and deconsolidation 288

1. Basics 289

2. Control 290

3. Deconsolidation techniques 291

4. Discontinued Operations 306

K Special areas 320

1. Currency translation of foreign operations 321

2. Deferred taxes in groups 334

3. Cash flow statements 344

4. Partnerships 350

5. Restructuring of groups 352

L Management consolidation 361

1. Basics 362

2. Business units 363

3. Projects and cost units 368

4. Dependency between management consolidations and consolidatedfinancial statements 370

M Consolidated financial statements 371

1. Basics 372

2. Statements 372

3. Notes & group disclosures 373

4. Management report 377

Appendix I: Fair value measurement ccclxxix

1. History ccclxxix

2. Definition ccclxxx

3. Measurement ccclxxxi

4. Measurement techniques for selected assets and liabilitiesccclxxxiii

Appendix II: IFRS – US–GAAP comparison ccclxxxv

Appendix III: IFRS ccclxxxviii

1. List of IFRS ccclxxxviii

2. IFRIC and SIC interpretations ccclxxxix

Reference list cccxci

Glossary cccxcii

Index cccxcvi