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Hi John !
Could you explain to me a little what does this statement specifically mean !
“A parent is exempted from consolidation, if the parent itself is a wholly or partly owned subsidiary of another entity and ITS OTHER OWNERS HAVE NO OBJECTION”
What does it mean its other owners have no objection ?? I dont get the point here
Ok, first of all, it’s Mike, not John!
We’re in the situation of a “vertical group” – that’s something you’ll come across at P2 level and is only grazed upon (not even touched upon) at F7 level.
The sub-topic is about non-consolidation and, within your quote there are two situations for non consolidation by a parent
First is where the parent of a group is itself a wholly owned subsidiary of another company. So whereas company B has a 70% subsidiary company C, clearly company B should prepare consolidated statements for the B Group.
But if company A owns 100% of the shares in company B, what’s the point of preparing the financial statements for the B Group when the only shareholder interested in the B Group results is company A?
That’s situation 1
Situation 2 is where company A owns only, say, 80% of company B and 20% is owned by other investors in company B. clearly again, company B should prepare financial statements for the B Group and then company A will prepare financial statements for the A Group incorporating the results of the B Group. So two lots of consolidated financial statements
However, if the 20% holders of company B say to company A “we’re not bothered about receiving consolidated financial statements for the B Group” then there is the second situation “if the parent (B) is a partly owned subsidiary of another entity AND ITS OTHER OWNERS HAVE NO OBJECTION” then company B can avoid having to prepare consolidated financial statements for the B Group
Clearer?
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