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Hello, dear Mr Little,
Is it justifiable for a parent not to prepare consolidated financial statements if the subsidiary is held for sale or was bought to be held for sale?
Thanks beforehand.
That’s correct – it’s one of the acceptable reasons for excluding a subsidiary from consolidation
Mr Little,
I have just reviewed relevant IFRS and they specify only 4 conditions, this one was not there. As far as I understood, IFRS 5 removed this exception. Could you confirm this, please?
Tell me, is it the thrill of proving me wrong that has led you to asking the question in this way? Why did you not write something like “Mike, I think IFRS 5 has changed the rule about exemptions from consolidation – or am I wrong?”
Then I could have checked it out and come back to say “Thank you for pointing this out to me and, no, you are not wrong”
“I have just reviewed relevant IFRS ….” is utter bull***t – and you know it!
However, I still maintain that, for the purposes of F7, I am correct. You will not be faced in the exam room with a consolidation where there is an investment in a subsidiary that has been classified as held-for-sale and you are expected to include its net profit after tax as a single line item and its assets and its liabilities as separate one line items within current assets and current liabilities
So, in that respect, I’m safe in my statement that such an investment is not consolidated
Severe restrictions still applies as an exemption
An entity that is acquired with a view to resale and has either been disposed of or is classified as held-for-sale meets the definition of a discontinued operation
Although still brought in to the consolidated financial statements the figures for a discontinued operation are separated from those figures applicable to continuing operations – after tax profit is disclosed as a single figure and assets and liabilities are separately disclosed / included as two single amounts included within current assets and current liabilities respectively
You say in your post “I have just reviewed relevant IFRS and they specify only 4 conditions, …”
As a matter of interest, what are the 4 conditions?
Dear Mr Little,
To eliminate any misunderstanding, I was referring to the circumstances in which parent is exempted from preparing consolidated financial statements, not to the circumstances in which subsidiary is exempted from consolidation.
A parent need not present consolidated financial statements if and only if all of the following are fulfilled:
The parent is itself a wholly-owned or partially-owned subsidiary of another entity, and its other owners (including those who are not entitled to vote) have been informed about, and do not object to, the parent not presenting consolidated financial statements;
Its securities are not publicly traded;
It is not in the process of issuing securities in public security markets; and
The ultimate or intermediate parent publishes consolidated financial statements that comply with International Financial Reporting Standards.That’s ok – just remember those four for when an mcq comes your way on this very topic
🙂
Dear Mike,
So, if, for example, I face the following MCQ:
Choose from the following statements the ones that give a parent an exemption from preparing consolidated accounts:
1) The ultimate parent publishes ifrs compliant FS
2) a parent’s shares are not publicly traded
3) its not in the process of issuing shares
4) it has/acquiries a subsidiary to sell it soonI will choose the first three statements as correct then?
My reasoning is that the first three are included in the list of four circumstances giving the parent sn exemption from preparing consolidated reports; while the last one refers to circumstances that leade to an exclusion of subsidiary, which is not the same with an exemption for parent?
Thank you.
You’re never going to get a question that expects three answers – I suppose that you could where the options given are:
a) 1, 2 and 3
b) 1, 2 and 4
c) 1, 3 and 4
d) 2, 3 and 4The question would more likely be phrased as “Which of the following options is NOT a pre-requisite for a parent to exclude a subsidiary from qualification?” and then you would chose option 4 from your question
Mr Little,
The options mcqs looked exactly like you wrote and asked for when parent can be exempted. I chose A option:1,2,3
Yes, but you’re only being asked to select 1 option. You’re not being asked to click 3 boxes
You posted “I will choose the first three statements as correct then?” that suggests you selected option 1 and then also option 2 followed by a third selection of option 3
Whatever, it doesn’t matter – let’s move on and, no offence, unless you have another question, please don’t respond to this post of mine.
In order that I may instantly see if there are any posts that need my attention I make sure that my post is the last on the thread
OK?
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