2103AFE Company Accounting:AASB 10 Consolidated Financial Statements
Q1. a) Discuss four prescriptions contained in AASB 10 Consolidated Financial Statements when applying to the consolidation process.
b) Discuss four issues that may challenge existing policies and procedures of the consolidation process when applying AAASB 10 Consolidated Financial Statements.
Q2. Why is it necessary to make adjustments for intragroup transactions? When does an intragroup transaction consolidation adjustment require us to perform a consolidation adjustment to tax expense?
Answers:
Q 1.
a).
The Australian Accounting Standard Board (AASB) has prescribed several implementations for the consolidated financial statement at the time of applying to the consolidation process. The main objectives of the changes are to align with the IFRS standard. For this particular purpose, Australian Accounting Standard Board (AASB) formed Accounting Standard AASB 10 Consolidated Financial Statements and the AASB 10 standard has been made under the section 334 of the Corporation Act 2001. It includes the relevant, pertinent changes contained in the other AASB standards formed by AASB. The purposes of this AASB 10 standard is to establish the principles for preparing and presenting of consolidated financial statements at the time one or more entities are controlled by one entity (Russo, 2013). In order to meet the objective, the following tasks are recognized by the AASB, which support in the effective alignment of IFRS standard.
- Needs an entity, which controls one or more subsidiaries or entities in order to present a consolidated financial statement
- Determining the principles of the control as well as set up control based on consolidation.
- An investor irrespective of the nature of its association with an entity shall decide, whether it is the parent by analyzing whether is manage the investee.
- An investor manages an investee at the time of discovered or has right to inconstant returns from its association with an investee.
b).
The four issues that may challenge existing policies and procedures of the consolidation process when applying AASB 10 Consolidated Financial Statements are provided in the following points which are described below:
- As per this standard, the changes in the consolidation assessment will show the negative impact on the administrative and the future arrangements and also it will lead the company to a loss. The disturbances in the future strategic decisions will be made by showing the enhancement of the study and also the future rights and the sustainable position cannot be achieved in an appropriate way.
- The exercising of the excessive power will show the downfall in the relationships maintained by the organization and also the exposures are depicted to be determining the inappropriate achievement of the future goals.
- The assessments are showing the inappropriate changes that are providing the implementation of the guidance for which the issues regarding the Disclosures of the interest may arise for the other entities (Stevenson, 2012).
- The relevant legislation can also be shown in the form of identifying the issues of misutilization of the powers and the returns. This shows the deployment of the trust factor in the organization which is becoming the vital reason for the future downfall of the organization.
Q 2.Reason to make adjustments for intragroup transactions
The intra-group transactions are depicted to be playing an important role in the establishment of the appropriate balance sheet for the organization. This shows the proper construction of the financial statement and also the elimination of the intra-group analysis is defined to be harmful for the organization. Therefore, the enhancement of the values can be easily made by showing the enhancement of the structure that also represents the proper analysis as illustrated in this case. If the statements are related to the related to the financial position and also the subsidiary is being stated, the balance in the statement can be made by analysis the financial position of the group (Russo, 2013). This appropriately undertakes the adjustments that are necessary for the organization and also the consolidation process must be involved for the betterment of the structure as undertaken in this study.
ASB 112 Income Tax govern accounting for tax. Few consolidated adjustments outcome in altering the carrying amount of the assets plus liabilities. Where this happens, a temporary differentiation gets up because of no changes to the basis of tax. In these conditions, tax-effect entries need rising of deferred tax of the assets plus liabilities are essential. In these particular situations, an intragroup transaction consolidation adjustment requires performing a consolidation adjustment to tax expense (Stevenson, 2012).
References
Russo, A. (2013). The consolidated financial statement: an ongoing problem. International Journal Of Economics And Accounting, 4(4), 389.
Stevenson, K. (2012). The Changing IASB and AASB Relationship. Australian Accounting Review, 22(3), 239-243.
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