Company Accounting - Technical Aspects of Consolidation

Running head: COMPANY ACCOUNTING
Company Accounting
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Name of the University:
Author’s Note:

1COMPANY ACCOUNTING
MEMORANDUM
To: The board of directors
From: [Name, Designation]
Date: 26 August 2019
Subject: Technical aspects of consolidation
Introduction:
This memorandum is prepared to explain the essence and requirements of consolidation
of financial accounts for group of companies and statutory compliances in connections with the
consolidation of accounts as per the respective accounting standards. Business for a group of
companies, it is essential that the overall financial performance and financial position of the
company be presented in a consolidated manner, which will exhibit the true financial
performance and the true financial position of the group.
Concept of consolidation of financial statement:
Consolidation of financial statement means, presentation of the financial statement
including all the companies as a whole. Individual financial performance and financial position
of all the companies of a group are summed up and presented in the consolidated financial
statement. It exhibits the actual financial performance and financial position of the group as a
whole.
Essence of consolidated financial statement:

2COMPANY ACCOUNTING
A group of companies have various business units located into various places of the
country even in abroad. Each of the company is measuring their financial performance and
presenting their financial position individually in compliance with the respective accounting
standards and statutory requirements of the respective country. Not all the companies in a group
might have the same profitability and same financial strength. Investors or stakeholders cannot
build a correct perception about the financial performance and position of the group unless the
individual financial performance and position are not added together. Therefore, there is an
essence of the consolidation of the financial performance and position of the group. There are
certain legal and statutory requirements and to comply with those requirements all the parent
companies need to prepare the consolidated financial statement despite having individual income
statement and statement of financial position for each of the companies in a group. As per the
provision of AASB 10 and IFRS 10, it has been made mandatory for the parent companies to
prepare and publish consolidated financial statement for their business operations including their
subsidiaries.
Availability of key information in the Group Financial Report:
Company’s group financial statement reveals the company’s corporate governance
practices and policies, which are adopted for operation of the business. From the group financial
statement of the Transurban Group, their corporate governance practices can be easily
understood. In page number 15 of the group financial statement of the Transurban Group, in the
Governance section, some of their governance related practices have been disclosed, such as,
their policies and management approaches towards the investors and stakeholders and the role of
the board which is to provide overall strategic guidance for the company and their effective
oversight. Disclosure of corporate governance practices in the annual report gives a clear idea to