Consolidation Procedure ( E & Y 09-Dec-2010)

8/12/2019 Consolidation Procedure ( E & Y 09-Dec-2010)

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International Accounting and Auditing

International Financial Reporting Standards

Ernst & Young

Q&As

Standards applicable for annual periods beginning on 1 January 2010

IAS 27 - CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

IAS 27.1-1 - Combined financial statements

IAS 27.1-1 - Combined financial statements

Was this Q&A helpful?

Issue

Are combined financial statements acceptable as general-purpose financial

statements under IFRS?

Fact pattern

A client wishes to prepare general-purpose financial statements under IFRS that

combine the financial statements of various legal entities, segments, reportable

segments, branches, divisions, geographical jurisdictions, or some other entities

that can be described coherently (the preceding list is not all-inclusive) that are

under common control.

Conclusion

There are limited circumstances in which combined financial statements present

fairly the financial position, financial performance, and cash flows for general

purposes under IFRS. The preparation of general-purpose combined financial

statements does not alleviate the need to prepare consolidated financial

statements.

Engagement teams are required to consult in accordance with the

policies noted in Section 3.4.2.2 of the Global Assurance Policy Manual,

when preparing combined financial statements, to determine if such

financial statements are general-purpose.

To prepare general-purpose combined financial statements, allof the following

must be clearly identified:

l Whether the entities are under common control for the full or a portion of

the reporting period

l The purpose of the financial statements

l The intended users.

The client must be able to coherently describe the various legal entities,

segments, reportable segments, branches, divisions, geographical jurisdictions,

or other units (the preceding list is not all-inclusive) that will be included in the

combined financial statements. Careful consideration is required when

concluding that it is appropriate to exclude any units from the combined

financial statements (such as unprofitable operations) that are similar to the

units that are being included in the combined financial statements. Such

exclusion must be assessed for appropriateness in the context of the purpose of

the financial statements, the intended users, and the terms and conditions of

any relevant agreements (e.g., acquisitions, spin-offs).

Once it is determined what units are being included in the combined financial

statements, the comparative information presented is the comparative

information for such units.

See Appendix Afor application guidance.

Common Control

See Q&A IFRS 3.Appendix B2-1 Families and entities under common control

for a discussion of whether entities are under common control in the context of

families and/or a limited number of shareholders. Where management asserts

that common control exists outside of a legal structure (e.g., written agreement

for management, families), evidence that common control exists is usually

needed to conclude that combined financial statements are appropriate.

General-purpose combined financial statements can only be prepared if the

entities are under common control for the full or a portion of the reporting

period. Furthermore, the financial results of each combined entity can only be

included in the general-purpose combined financial statements for the period in

which the entity was under common control. Events that occur after the end of a

reporting period that result in common control are non-adjusting events.

Purpose and users of combined financial statements

A reporting entity is an entity for which there are userswho rely on the

financial statements as their major source of financial informationabout

the entity. Therefore, it is a matter of judgment, whether it is appropriate to

prepare general-purpose combined financial statements, depending upon the

facts and circumstances related to both the purpose and the users of the

financial statements, which are interrelated.

To illustrate the conclusions of this Q&A, facts and circumstances that indicate it

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is usually appropriate to prepare general-purpose combined financial statements

is when they are required by regulators on behalf of investors (e.g., the US

Securities and Exchange Commission). This is because the regulators purport to

represent the needs of a wide range of users ( investors) for a general purpose,

for which the investors cannot otherwise command the financial information.

Situations where regulators typically require combined financial statements

include:

l Carve-out transactionsl Spin-off transactionsl Financing transactions that require approval by a broad group of investors

l

Transactions in which the combined entity will become the predecessorFinancial statements of a new entity,

l Transactions in which the combined entity will be a material acquisition (by

the acquirer)

In addition, there may be circumstances when several third parties (banks,

acquirers in a private bidding process) all request financial statements that

combine the same entities that is, the same combined financial statements. In

such cases, the combined financial statements might be general-purpose

because they are used by a wide range of users.

When preparing general-purpose combined financial statements, the entity

mustinclude all normal consolidation entries (such as elimination of group

transactions, unrealised profit elimination, etc). In addition, the entity must

disclose the following:

l The fact that the financial statements are combined financial statements

l The reason why combined financial statements are preparedl The basis for determining which units are included in the combined financial

statementsl The basis of preparation of the combined financial statementsl The comprehensive related party disclosures.

In addition, the entity must consider who has the appropriate knowledge and

authority to authorise the general-purpose combined financial statements for

issue.

Engagement teams are required to consult in accordance with Section

3.4.2.2 of the Global Assurance Policy Manual regarding any allocation

methods used with respect to overhead expenses of the combined

entities, as such allocations may indicate that the combined financial

statements are pro forma (and therefore special-purpose and not

general-purpose). In addition, engagement teams are required to

consult in accordance with Section 3.4.2.2 of the Global Assurance

Policy Manual if the combined financial statements include the first-

time adoption of IFRS.

When combined financial statements are not general-purpose

General-purpose combined financial statements are usually notappropriatewhen requested by parties that have the ability to otherwise command the

desired combined financial information through other means. In such cases, the

combined financial statements are often deemed special-purpose, which means

that they do not present fairly the financial position, financial performance, and

cash flows for general purposes under IFRS. Examples of facts and

circumstances that might illustrate such situations include:

l Lenders (banks) for the purpose of approving a loan or ensuring covenant

compliance;l Governments and their agencies other than investor regulators (e.g., tax

authorities);l A single potential acquirer;l Board of directors or management;

When a group of family members requests combined financial statements,

judgment is required to assess the facts and circumstances; whether or not

combined financial statements are general-purpose or special-purpose

depends on the purpose for which the family intends to use the combined

financial statements (see relevant guidance above).

In cases where it is concluded that combined financial statements are not

general-purpose and do not present fairly the financial position, financial

performance, and cash flows for general purposes under IFRS, alternative

options might include:

l Financial statements of each of the entities that would have been included in

the combined financial information

l Special-purpose financial statements (and restricted use audit report) or an

agreed-upon procedures report that addresses the process of combining the

individual financial statements and eliminations therein, and the procedures

performed, without referring to a "true and fair view" under IFRS. See

Section 4.2 in the Global Assurance Policy ManualAssociation with

Unaudited Financial Statements in Compilation, Review, Agreed-Upon

Procedures and Other Engagementsfor additional information.

Reasons for conclusion

The term reporting entity is not yet defined in The Conceptual Framework for

Financial Reporting(the Framework). However, paragraph 8 of the Frameworkfor the Preparation and Presentation of Financial Statements,which preceded

the current Frameworkstated:

A reporting entity is an entity for which there are users who rely on




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the financial statements as their major source of financial

information about the entity.

Paragraph OB12 of the Frameworkstates:

The objective of general purpose financial report ing is to provide

financial information about the reporting entity that is useful to

existing and potential investors, lenders and other creditors in

making decisions about providing resources to the entity. Those

decisions involve buying, selling or holding equity and debt

instruments, and providing or settling loans and other forms of

credit.

Paragraph OB5 of the Frameworkstates:

Many existing and potential investors , lenders, and other creditors

cannot require reporting entities to provide information directly to

them and must rely upon general purpose financial reports for much

of the financial information that they need. Consequently, they are

the primary users to whom general purpose financial reports are

directed.

Thus, in justifying the preparation of general-purpose combined financial

statements, it must be clear what the purpose or intended use is and who the

users are expected to be, in order to adequately define the reporting entity.

In May 2008, the IASB published a discussion paper on Phase D of the

Frameworkon The Reporting Entity, which states in paragraph 1:

The boards existing conceptual frameworks do not include a

reporting entity concept. The IASBs Framework for the Preparation

and Presentation of Financial Statementsdefines the reporting entity

in one sentence with no further explanation. The FASBs Statements

of Financial Accounting Conceptsdo not contain a definition of a

reporting entity or discussion of how to identify one. As a result,

neither framework specifically addresses the reporting entity

concept.The objective of this phase of the project is to develop a

reporting entity concept for inclusion in the boards common

conceptual framework. (Emphasis added)

While normally a Discussion Paper is not a sufficient basis for interpreting or

applying current IFRS, the above statement in the Discussion Paper states the

Boards views on current IFRS, not what they intend future IFRS to be, and

therefore, it is appropriate to consider. Since the IASB concluded that current

IFRS does not clearly define the reporting entity concept, there is some latitude

in defining the reporting entity in the preparation of general-purpose combined

financial statements.

In July 2009, the IASB issued IFRS for Small and Medium-Sized Entities (SMEs).

Paragraph P6 of IFRS for SMEs states:

IFRSs set out recognition, measurement, presentation and

disclosure requirements dealing with transactions and other events

and conditions that are important in general purpose financial

statements. They may also set out such requirements for

transactions, events and conditions that arise mainly in specific

industries. IFRSs are based on the Framework, which

addresses the concepts underlying the information presented

in general purpose financial statements. The objective of the

Framework is to facilitate the consistent and logical formulation of

IFRSs. It also provides a basis for the use of judgement in resolving

accounting issues. (Emphasis added)

IFRS for SMEs defines combined financial statements as:

The financial statements of two or more entities control led by a

single investor.

Paragraphs 9.28-9.30 of IFRS for SMEs state:

Combined financial statements are a s ingle set of financial

statements of two or more entities controlled by a single investor.

This IFRS does not require combined financial statements to be

prepared.

If the investor prepares combined financial statements and

describes them as conforming to the IFRS for SMEs, those

statements shall comply with all of the requirements of this IFRS.

Intercompany transactions and balances shall be eliminated; profits

or losses resulting from intercompany transactions that are

recognised in assets such as inventory and property, plant and

equipment shall be eliminated; the financial statements of the

entities included in the combined financial statements shall be

prepared as of the same reporting date unless it is impracticable to

do so; and uniform accounting policies shall be followed for like

transactions and other events in similar circumstances.

The combined financial statements shall disclose the following:

(a) the fact that the financial statements are combined financial

statements.

(b) the reason why combined financial statements are prepared.

(c) the basis for determining which entities are included in the




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combined financial statements.

(d) the basis of preparation of the combined financial statements.

(e) the related party disclosures required by Section 33 Related

Party Disclosures.

The definition of general-purpose financial statements in IFRS for SMEs is very

similar to the reference to general-purpose financial statements in paragraph

OB2 of the Framework. In addition, IFRS for SMEs is based on the same

Frameworkas full IFRS. Therefore, if IFRS for SMEs and full IFRS have the same

purpose and the same basis, if IFRS for SMEs allows combined financial

statements, then full IFRS must also allow combined financial statements,because none of the individual standards under full IFRS prohibits combined

financial statements. IFRS for SMEs establishes that the units must be under

common control to present combined financial statements.

In November 2009, the IFRS Interpretations Committee received a request to

address the issue of combined and carve-out financial statements, and whether

such financial statements are general-purpose under IFRS.

The staff paper for the November 2009 meeting presented multiple views

regarding combined financial statements. The IFRS Interpretations Committee

declined to discuss the issue and issued an Agenda Decision in January 2010 not

to add this item to its agenda. The Agenda Decision states:

The IFRIC noted that the ability to include entities within a set of IFRS

financial statements depends on the interpretation of 'reporting entity' in

the context of common control.

As none of the views were dismissed by the IFRS Interpretations Committee,

there are multiple views that may be supportable under IFRS. While normally aStaff Paper is not a sufficient basis for interpreting or applying current IFRS, the

Agenda Decision states the IFRS Interpretations Committees view that it is

necessary to interpret reporting entity. Since current IFRS does not clearly

define the reporting entity concept (which is supported by the Discussion Paper

on the Reporting Entity), the Agenda Decision provides some latitude in defining

the reporting entity in the preparation of general-purpose combined financial

statements.

In March 2010, the IASB issued an ED Conceptual Framework for Financial

Reporting: The Reporting Entity. The ED does not contain a definition, only a

description of reporting entity:

RE2 A reporting entity is a circumscribed area of economic activities whose

financial information has the potential to be useful to existing and

potential equity investors, lenders and other creditors who cannot directly

obtain the information they need in making decisions about providing

resources to the entity and in assessing whether management and the

governing board of that entity have made efficient and effective use of

the resources provided.

RE3 A reporting entity has three features:

(a) economic activities of an entity are being conducted, have been

conducted or will be conducted;

(b) those economic activities can be objectively distinguished from

those of other entities and from the economic environment in

which the entity exists; and

(c) financial information about the economic activities of that entity

has the potential to be useful in making decisions about providing

resources to the entity and in assessing whether the management

and the governing board have made efficient and effective use of

the resources provided.

These features are necessary but not always sufficient to identify a reporting

entity.

The ED also specifically addresses combined financial statements:

RE12 Combined financial statements include information about two or more

commonly controlled entities. Combined financial statements do not

include information about the controlling entity and are often prepared

when the controlling entity does not prepare financial reports. Combined

financial statements might provide useful information about the

commonly controlled entities as a group.

Neither the description of reporting entity, nor the specific paragraph on

combined financial statements contain specific guidance regarding the

accounting for general-purpose combined financial statements. Therefore, it is

appropriate to use paragraphs 10-12 of IAS 8 and analogise to accounting

pronouncements of other standard-setting bodies, if those pronouncements are

consistent with IFRSs and the Framework(for example, see Appendix A US

GAAP).

An entity may wish to consider the guidance in US GAAP in determining whether

it is appropriate to present general-purpose combined financial statements.

However, whereas in some circumstances US GAAP might allow general-purpose

combined financial statements where there is not common control (but there is

common management), our view is that general-purpose combined financial

statements are only prepared under IFRS when common control exists (in

addition to the other factors noted above). That being said, a fact pattern in




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which family members together control two entities might be considered

common control under IFRS (see Q&A IFRS 3.Appendix B2-1 Families and

entities under common control).Therefore, it might be possible to reach the

same conclusion under US GAAP and IFRS regarding the preparation of general-

purpose combined financial statements, via different logic.

Appendix A - US GAAP

Guidance in US GAAP on carve-out financial statements is in a SEC Staff

Accounting Bulletin Topic 5.Z.7Accounting for the spinoff of a subsidiary:

Facts: A Company disposes of a business through the distributionof a subsidiary's stock to the Company's shareholders on a pro rata

basis in a transaction that is referred to as a spinoff.

Question: May the Company elect to characterize the spinoff

transaction as resulting in a change in the reporting entity and

restate its historical financial statements as if the Company never

had an investment in the subsidiary, in the manner specified by

paragraph 34 of APB Opinion 20?

Interpretive Response: Not ordinarily. If the Company was

required to file periodic reports under the Exchange Act within one

year prior to the spinoff, the staff believes the Company should

reflect the disposition in conformity with Statement of Financial

Accounting Standards No. 142. This presentation most fairly and

completely depicts for investors the effects of the previous and

current organization of the Company. However, in limited

circumstancesinvolving the initial registration of a company under

the Exchange Act or Securities Act, the staff has not objectedto

financial statements that retroactively reflect the reorganization ofthe business as a change in the reporting entity if the spinoff

transaction occurs prior to effectiveness of the registration

statement. This presentation may be acceptable in an initial

registration if the Company and the subsidiary are in

dissimilar businesses, have been managed and financed

historically as if they were autonomous, have no more than

incidental common facilities and costs, will be operated and

financed autonomously after the spinoff, and will not have

material financial commitments, guarantees, or contingent

liabilities to each other after the spinoff.This exception to the

prohibition against retroactive omission of the subsidiary is intended

for companies that have not distributed widely financial statements

that include the spunoff subsidiary. Also, dissimilarity contemplates

substantially greater differences in the nature of the businesses than

those that would ordinarily distinguish reportable segments as

defined by Statement of Financial Accounting Standards No. 131.

From the EY SEC Accounting Manual 2.2.4

For purposes of S-X Rule 3-05, a business is identified if, after

evaluating all available facts and circumstances, there is sufficient

continuity of operations so that disclosure of prior financial

information is material to an understanding of future operations.

There is a presumption that a separate entity, subsidiary, division,

or investment accounted for under the equity method is a business.

However, the acquisition of a component of an entity, such as a

product line, also may be considered a business

Because these guidelines are not all-inclusive, management must

use judgment in this area. The SEC staff's analysis of whether an

acquisition constitutes the acquisition of a business, rather than of

assets, focuses primarily on whether the nature of the revenue

producing activity associated with the acquired assets will remain

generally the same after the acquisition. New carrying values of

assets, or changes in financing, management, operating procedures,

or other aspects of the business are not unusual following a

business acquisition. The SEC staff believes that such changes

typically do not eliminate the relevance of historical financialstatements. The SEC staff encourages registrants who have

succeeded to a revenue-producing activity by merger or acquisition

with at least one of the factors described above remaining after the

acquisition, to consult with the SEC staff before deciding to omit

financial statements and pro forma information from their SEC

filings.

Excerpt from Accounting Research Bulletin No. 51 (paragraph 22-23) as

amended by SFAS No. 160 (ASC 810-10-55-1B and ASC 810-10-45-10)

To justify the preparation of consolidated financial statements, the

controlling financial interest should rest directly or indirectly in one

of the entities included in the consolidation. There are

circumstances, however, where combined financial statements (as

distinguished from consolidated financial statements) of commonly

controlled companies are likely to be more meaningful than their

separate financial statements. For example, combined financial

statements would be useful where one individual owns a controlling

financial interest in several entities that are related in their

operations. Combined financial statements might also be used to

present the financial position and the results of operations of entities

under common management.




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If combined financial statements are prepared for a group of related

entities, such as a group of commonly controlled entities, intra-

entity transactions and profits or losses shall be eliminated, and

noncontrolling interests, foreign operations, different fiscal periods,

or income taxes shall be treated in the same manner as in

consolidated financial statements.

From US FRD Noncontrolling Interests in Consolidated Financial Statements

(Chapter 8)

Control is the pr imary basis for presentation of consolidated

financial statements. There are, however, certain circumstances

when the presentation of financial statements of individual entities is

not as meaningful as the presentation of combined financial

statements for related entities. Combined financial statements may

be needed to present related entities under common control or

related entities with common management. Combined financial

statements are often presented for filings in accordance with various

statutory or regulatory requirements.

The fundamental difference between combined and consolidated

financial statements is that there is no controlling financial interest

present between or among the combined entities.

Question:What is the definition of common management as used in the

requirement for combined financial statements?

Response:We believe that the determination of whether entities are under

common management is a determination to be made based on individual facts

and circumstances. To justify combined presentation, we would expect evidence

to exist that indicates that the subsidiaries are not operated as if they wereautonomous. This evidence could include:

l A common CEO

l Common facilities and costsl Commitments, guarantees or contingent liabilities among the entities

l Commonly financed activities

This list is not all-inclusive and there could be other factors relevant to the

determination of whether or not subsidiaries are under common management.

Fact pattern Analysis

1 - IPO of

subsidiaries

Group A will complete a legal

reorganisation after the end of the

reporting period, but at the same

time as a proposed IPO. Subsidiaries

C and D will be spun-off in the IPO,

but the Parent A and subsidiary B

will not. The regulator is requiring

financial statements of C/D.

Management also wants to prepare

combined financial statements for

A/B.

General-purpose combined financial statements can likely be prepared for

Entities C and D.

l Common control entities A, B, C, and D are all under common control as

of the reporting date.

l Purpose and Users an IPO is a broad purpose and the financial statementswill be required by the regulator for use by a wide range of users (the

investors) after the IPO.

Further analysis is needed to determine the purpose and users of the combined

financial statements for A/B, and whether they are general purpose or special

purpose (see other Scenarios).

2 - Entities

brought

together by

written

agreement

A Board of Directors manages Entity

A and Entity B as one economic

entity through a written agreement.

The Board of Directors wants to

prepare combined financial

statements of Entity A and Entity B.

Further analysis is needed.

l Common control the terms and conditions of the written agreement meet

the criterion in paragraph B2 of Appendix B to IFRS 3, such that the Board

of Directors controls both Entity A and Entity B, and thus common control

exists; therefore, general-purpose combined financial statements might be

allowed.

l Purpose and Users additional information is needed. If required by the

Board of Directors of Entity A and Entity B solely for management purposes,

combined financial statements are likely special-purpose, because the

Board of Directors can command the desired information to meet its specific

needs. However, if the combined financial statements are required for

regulatory reasons (e.g., Entity A and B will be combined in an IPO) they

would be general-purpose combined financial statements, because they will

meet the informational needs of a wide range of users.

3 - Decision to

sell a segment

Group A operates in 40 countries and

has four business segments. Group

As management decided to sell one

of the segments, which

manufactures medical appliances. In

some countries, the medical segment

is a single subsidiary; in other

countries, the medical segment is a

division of a legal entity. Group A

wants to prepare combined financial

statements for the medical appliancesegment.


l Common control the segment (which consists of subsidiaries and divisions

within legal entities) are all under the common control of Group A as of the

reporting date.l Purpose and Users additional information is needed. If the potential

acquirer requests them solely for the needs of the potential acquirer, such

combined financial statements might be deemed special-purpose, because

the potential acquirer can command the desired information as a condition

to closing the transaction. However, if they are required by a regulator

(e.g., the acquisition of the segment will be a material acquisition for theacquirer financed by an offering of shares to the public) or several parties

are interested in financial information for that segment, they might be

general-purpose combined financia l statements, because they meet the

informational needs of a wide range of users.




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4

Unprofitable

operations in a

segment

Same as Scenario 3. Of the 40

countries with medical appliance

segments, country Y and Z are

unprofitable, whereas the rest are

profitable. Group A intends to sell

the entire segment, but it is likely

that the acquirer will subsequently

close the medical appliance

segments in country Y and Z.

Further analysis is needed for the reasons described in Scenario 3to

determine whether combined financial statements would be general-purpose

or special-purpose.

If the combined financial statements are deemed general-purpose, then the

operations of country Y and Z are included and then subsequently reflected as

discontinued operations, because they were acquired, even if control of those

businesses is transitory.

If the fact pattern were altered such that the acquirer does not acquire the

operations in country Y and Z, then these operations would not be included in

the general-purpose combined financial statements (if applicable).

5 Geo-

graphic

segment

Group A operates in three business

segments in three countries (X, Y

and Z). Group A manages along

business segment lines:

l manufacture of confectionary;

l retail banking; andl construction of industrial

properties.

Group As management want to


statements of all of its operations in

country Z, which are owned by

different legal entities in the group.


l Common control operations in country Z (which consist of segments

within legal entities) are under the common control of Group Al Purpose and Users additional information is needed. If required for tax

purposes, combined financial statements are special-purpose, because the

tax authority can command the desired information through its

governmental authority, to meet its specific needs. However, if the

combined financial statements are required for regulatory reasons (e.g., the

operations in country Z will be spun-off into an IPO) they might be general-

purpose combined financial statements, because they meet the needs of a

wide range of users.

6 - In-

progress

restructuring

by single

shareholder

Shareholder Z owns companies (A,

B, and C) that have different

businesses and do not trade with

each other. Shareholder Z created a

holding company X, to hold the

shares in all of the companies. To

date, X acquired A and B.

Shareholder Z intends to complete

the reorganisation over the next

year. Shareholder Z wants to


statements of A, B, and C.


l Common control because shareholder Z is the sole shareholder of A, B

and C, Shareholder Z has control over such entities (as defined in paragraph

B2 of Appendix B to IFRS 3); therefore, common control exists.

l Purpose and Users additional information is needed. If required by a bank

for lending purposes, combined financial statements are likely to be special-

purpose, because the bank can command the desired information as a

condition to the loan, to meet its specific needs. However, if the combined

financial statements are required for regulatory reasons (e.g., shares in

company X, including A, B, and C will be issued in an IPO) and thus financial

statements will be used broadly by investors, they might be general-

purpose combined financial statements, because they meet the needs of a

wide range of users.

7 - In-

progress

restructuring

by two

shareholders

Same as Scenario 6, but

Shareholder Z shares ownership over

each of the entities with

shareholder Y, and together they

plan the reorganisation. Shareholder

Y and Z want to p repare combined

financial statements of A, B, and C.

Further analysis is needed to determine whether general-purpose combined

financial statements can be prepared that include companies A, B, and C.

l Common control judgment is required to determine if shareholder Y and Z

are acting collectively to control companies A, B, and C. See Q&A IFRS

3.Appendix B2-1 Families and entities under common controlfor a

discussion of whether entities are under common control in the context of

families.l Purpose and Users additional information is needed. Same as Scenario 6.

8 Exclusion

of part of a

legal entity

(See graphic below). A group has

two lines of business. Subsidiary D, a

division within subsidiary E and a

division in Parent A all develop

software, and are being sold as a

group. Parent B, Parent C,

subsidiary F, and the remaining

divisions of Parent A and subsidiary

E all manufacture hardware. Holding

Co. has no operations.

Management wants to prepare

combined financial statements for

each of the hardware and software

business.

Further analysis is needed to determine whether general-purpose combined

financial statements can be prepared for each of the hardware and software

businesses.

l Common control all of the parents and subsidiaries that include the

hardware and software businesses are under the common control of the

Holding Co.l Purpose and Users additional information is needed as described in

scenarios above.

This example illustrates that it might be possible to combine parts of legalentities (and exclude other parts of legal entities) if the parts that are included

can be coherently described and the inclusion and exclusion is appropriate

based on the intended purpose and users of the financial statements.




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Go To Document ID: EY QA IAS 27R.1-1

Last Modified Date:03 Dec 2010

Date approved by IFRS Policy Committee: May 2009

Date amended by IFRS Policy Committee: May 2010

Date amended by IFRS Policy Committee: December 2010

