when to exclude subsidiary from cons??

@arwa said:
plz anyone can tell me the reasons when a director may wish to exclude subsidiary from consolidation??? and what are the exemptions for the group from preparation of financial statements????

I am copying pasting this stuff. Hope this will help….

There are several reasons why a parent may not wish to consolidate a particular
subsidiary, for example:
? The subsidiary’s activities are dissimilar from those of the parent, so that the
consolidated financial statements might not present the group’s financial
performance and position fairly.
? The subsidiary has been acquired only so that it can be re-sold within a short
time.
? Obtaining the information needed would be expensive and time-consuming and
might delay the preparation of the consolidated financial statements.
? The subsidiary operates under severe long term restrictions, so that the parent is
unable to manage it properly. For example, a subsidiary might be located in a
country badly disrupted by a war or a revolution.
None of these is allowed as a reason for excluding a subsidiary from consolidation.
However:
? Sometimes a subsidiary is acquired with a view to its sale in the short term. An
example of this is when the parent company acquires a group but does not wish
to keep all the subsidiaries within that group and intends to dispose of the
subsidiaries it does not want. The accounting treatment for this is to consolidate
the subsidiary and treat it as a discontinued operation in accordance with IFRS 5
Non-current assets held for sale and discontinued operations.
? If a parent actually loses control over an entity which has been a subsidiary, it is
no longer a subsidiary, even if the parent still holds more than 50% of its equity
shares. This means that it does not have to be consolidated. This may be the case
where there are long-term restrictions in place that make it impossible to control
the entity. IAS 27 states that it should not be consolidated. This may happen if
the subsidiary is located in a foreign country and the laws of that country do not
allow the repatriation of funds to the parent company.