Preparation of

Consolidated Financial
Statements- 1/2

Chapter 2
Abhishek Behl

Financial Statements

Learning Preview
[1] Consolidated Financial Statements-Introduction
[2] Group Cash Flow Statements.
[3] Format of Cash Flow Statements
[4] Statements of Changes in Equity
[5] Presentation of Financial Statements
[6] Subsidiaries

Financial StatementsDefinition*
Statement of Comprehensive Income
Statement of Financial Position
Cash Flow Statements
Statement of changes in Equity
Notes to Accounts
Notice and directors Report
Auditors Report
Explanatory Statements
*As per IAS 1
Notes: Acquiring dates of Subsidiaries may be different. Thus
annual basis of these statements should be made as per IAS
1, IAS 27, IAS 28, IFRS 3

Group Cash Flow Statement

Profit
Includes non cash items also. For eg:
Depreciation, Goodwill, closing stock, etc.

Cash Flow
Document giving info about cash inflows and
outflows.
Indian Companies provide it every quarter
Includes data on domestic and foreign
currency.

Accounting Methods

Accrual
Method
Cash
Method

Accrual v/s Cash Method

Accrual Basis
Accounting

Cash Basis
Accounting

Revenue recognition: Revenue

is recognized when both of the
following conditions are met:
a. Revenue is earned.
b. Revenue is realized* or
realizable**.
Revenue is earned when products
are delivered or services are
provided.

Revenue recognition:
Revenue is recognized when
cash is received.

Expense recognition: Expense

is recognized in the period in
which related revenue is
recognized

Expense recognition:
Expense is recognized when
cash is paid.

*Realized means cash is received.

**Realizable means it is reasonable to expect that cash will be received in the
future.

 Activities which change equities and

borrowing composition of a
company
Cash flow received from
investments and payments for
making investment.
Includes Asset Acquisition
Inflow or outflow from Sales and
services.
Includes cash flows from principal
activities of business

Financing
Activities
Operatin
g
Activities
Investing
Activities

Activities Under IAS 7

Objectives
To disclose the investors, lenders and
users of financial statement every
change in equity
To value equity at fair value
To disclose quantum of investment in
subsidiaries and sub-subsidiaries
To disclose non-controlling interest

Share
capital
Opening Balance
Total comprehensive income for
the year
Transactions with the owners of
company

Issue of share capital

Issue of bonus shares
Own shares sold
Dividends
Buyback
Income for the year
Revaluation gain
Changes in ownership interest

Share
Premium

Reserv
es

Retained
earnings

Noncontroling
Interest

Total
equity

Statement of Changes in
Equity

Issue of New Shares

Issue of Bonus Shares
Issue of Rights Shares
Any Buy Back
ESOPs Issued
Subsidiary Acquisition
Share Premium
Movement in Reserves
Any movement in unrealized loss or gain reserves
Reserve changes in foreign exchange gain or loss

Consolidated Statement of Financial

Position
Particulars
Note No. Current Year Previous year
Assets
Property, plant and equipment

Intangible assets and goodwill

Biological assets

Trade and other receivables

Investment property

Other investments

Deferred tax

Employee benefits

Non-Current Assets
Inventories

Biological Assets

10

Other Investments

11

Current tax assets

12

Trade and other receivables

13

Particulars
Equity

Note No.
16

Share Capital
Share Premium
Reserves
Retained Earnings

17

Non-controlling interest

18

Total Equity

Non-Current Liabilities
Loans and borrowing

19

Employee Benefits

20

Trade and Other payables

21

Defereed Tax

22

Provisions

23

Current Liabilities

Current Year

Previous year

Subsidiaries
A company whose
voting stock is more
than 50% controlled by
another company,
usually referred to as
the parent company or
holding company.

A subsidiary is a
company that is partly
or completely owned
by another company
that holds a controlling
interest in the
subsidiary company.

Classification of Subsidiaries
Wholly Owned Subsidiaries
100% shares acquired by parent company

Partly Owned Subsidiaries

50% or more acquired by parent company. Case
of minority stakeholders which are called
Minority Interest

Accounting Treatment: Subsidiary acquired at the beginning of the year

Subsidiary acquired during the year