This document outlines the standards for IAS 27 Consolidated and Separate Financial Statements. It details that a parent company must produce consolidated financial statements including all subsidiaries under its control, with control determined by power over operating and financial policies rather than just legal ownership. Consolidation procedures require combining financial statements of parent and subsidiaries, eliminating intra-group transactions and investments, and following accounting methods in IFRS 3. Disclosures must include all interests in group entities.

1. IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 10/6/2009 1 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

2. SCOPE Preparation and presentation of consolidated financial statements for a group of entities under the control of a parent company Accounting for investments in subsidiaries Accounting for jointly controlled entities and associates in separate financial statements IFRS 3 business combinations deals with methods of accounting for consolidated accounts 10/6/2009 2 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

3. Definitions 10/6/2009 3 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

4. Definitions 10/6/2009 4 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

5. Definitions 10/6/2009 5 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

6. Presentation of consolidated financial statements A parent must produce consolidated financial statements unless: The parent is a subsidiary Wholly owned subsidiary, or Partially owned subsidiary and Other owners do not object, and Debt or equity instruments are not traded in a public market, and Parent not in the process of issuing instruments in a public market, and Ultimate or intermediate parent produces consolidated FS Available for public use Comply with IFRS 10/6/2009 6 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

7. Presentation of consolidated FS 10/6/2009 7 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

8. Scope of consolidated FS Consolidated FS include all subsidiaries of the parent >50% of voting power owned by the parent In exceptional cases ownership ≠ control Do not exclude a subsidiary from consolidation because activities are dissimilar to parent’s Use IAS 14 Segment reporting to explain dissimilar activities Do not include a subsidiary when parent loses control to government or another contract <50% of voting power through shares where shareholder agreement gives Power over > 50% of voting rights Power to govern financial and operating policies Power to appoint/remove majority board members Power to cast majority vote at meetings of the board of directors Do not include unexercised convertible shares until they allow control over financial and operating policies 10/6/2009 8 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

9. Consolidation procedures 10/6/2009 9 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

10. Consolidation procedures Combine FS of parent and subsidiaries line by line Add together similar assets, liabilities, equity, income and expenses Eliminate Carrying amount of each investment by parent in subsidiary Parent’s portion of equity in each subsidiary Disclose resulting goodwill according to IFRS3 Identify separately Minority interests in net assets of consolidated subsidiaries Amount of minority interest at date of original combination (IFRS3) Minority share of changes in equity since that date Reflect only present ownership (not potential conversion to equity) 10/6/2009 10 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

11. Consolidation procedures Eliminate intra-group balances, transactions, income and expenses Eliminate profits and losses of intra-group transactions recognised in assets Recognise deferred tax on temporary differences that arise from elimination of profits and losses above Recognise impairment of investment in consolidated accounts if subsidiaries suffered losses 10/6/2009 11 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

12. Consolidation procedures Prepare separate FS for each consolidated entity at the reporting date of the parent unless impracticable to do so When subsidiary reporting date is different, adjust for significant transactions between reporting date of the sub and the parent Difference not > 3 months Length of reporting periods must be the same Difference in reporting dates shall be the same from period to period 10/6/2009 12 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

13. Consolidation procedures Use uniform accounting policies for parent and subsidiaries (make appropriate adjustments to align accounting policies) Include subsidiary income and expenses from the date of acquisition to the date on which the parent ceases to control the subsidiary Show gain or loss on disposal of subsidiaries in the consolidated income statement Present minority interests separately: Consolidated balance sheet within equity, separately from parent shareholder’s equity Minority interest in profit or loss in consolidated income statement Allocate minority loss > minority interest in equity to majority interest unless minority will increase its investment Allocate future profit to majority until minority loss allocated to majority interest has been recovered Adjust majority share of profits or losses for minority dividends due on cumulative preference shares whether or not they have been declared 10/6/2009 13 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

14. Accounting for investments in subsidiaries, jointly controlled entities and associates in separate FS Either at cost or in accordance with IAS 39 If held for sale, in accordance with IFRS5 Use same method in separate and consolidated FS of the parent 10/6/2009 14 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

15. Disclosure Consolidated FS Nature of control if not via >50% voting power Reason why >50% voting power via ownership does not constitute control Reporting date of subsidiary if different from parent Nature and extent of significant restrictions on control 10/6/2009 15 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

16. Disclosure Separate FS for parent who elects not to prepare consolidated accounts Statement that the FS are separate FS (not consolidated) The exemption has been used Name of country of incorporation of ultimate parent who produces consolidated FS Residence of entity if different Address where publically available FS can be obtained List of investments in subsidiaries, jointly controlled entities and associates Name Country of incorporation or residence Ownership interest Voting power if different from ownership interest Description of the method used to account for investments 10/6/2009 16 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

17. Disclosure Separate FS of parent, venturer in jointly controlled entity or investor in associate State that the statements are separate FS Reason why prepared if not required by law List of significant investment in Subsidiaries Jointly controlled entities Associates Name Country of incorporation or residence Proportion of ownership interest Voting power if different to ownership interest Description of accounting methods used 10/6/2009 17 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

18. Summary A parent company must produce consolidated financial statements including all subsidiary companies under its control Control is determined by power to control operating and financial policies rather than legal ownership In a large group, only the ultimate controlling parent needs to produce consolidated FS if strict conditions are met Follow consolidation procedures, eliminating all intra-group transactions and investments Follow accounting methods set out in IFRS 3 Present disclosures of all interests in group entities 10/6/2009 18 IAS 27 CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS