Consolidation Financial Statements: Analysis and Challenges of AASB 10

This report provides a detailed analysis of AASB 10, focusing on the consolidation of financial statements. The report examines the prescriptions outlined in AASB 10, including the conditions under which a parent company is not required to present its own financial statements, the use of standard accounting principles, the consolidation of investor control, and the inclusion of non-controlling interests. Additionally, the report discusses various challenges that can arise in the consolidation process, such as the impact of current accounting policies, the need for accurate financial statements, the identification of financial risks, the importance of debt and equity balance, and the significance of non-controlling interests. The report emphasizes the importance of disclosures in financial accounts to improve current business conditions and complete the process of consolidation effectively. This analysis aims to provide a clear understanding of the complexities and requirements associated with AASB 10 in the context of financial reporting.

DISCUSS FOUR
PRESCRIPTIONS
CONTAINED
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a) Explain four prescriptions contained in AASB 10 Consolidated Financial Statements when
applying to the consolidation process
There are prescriptions given by AASB 10 which is concerns with the consolidation of
financial statements need to be used by an entity in order to improve the process of consolidation
of financial statement of all the subsidiaries company along with the parent company. There are
four prescriptions given in this accounting standard to be followed by an entity in order to
simplify the existing process is given as below:
Parent company is not required to present their own financial statements in the
consolidation process by following several conditions. Various conditions which needs to be
fulfilled by an individual involves that an entity has wholly owned subsidiaries, debt or equity of
an entity are not invested in the public market, no processing of financial statements with the
securities commission and parent company produces its financial statements held for use of IFRS
matters.
Parent or holding company shall prepare its financial statements by utilising standard
accounting principles for all kinds of business transactions takes places in an entity.
The process of consolidation includes consolidation of investor when the investor gets
overall control in their hands.
Non- controlling interest will be included in the consolidated financial statements such as
it will include in the positional statements of an entity. Balance sheets of the firm will separately
present the equity component in the balance sheet in form of non-controlling interest incurred in
the business. It is essential to record all the separate entries as this would help an entity owner in
order to streamline the overall process to generate good results.
b) Discuss four issues that may challenge existing policies and procedures of the consolidation
process when applying AAASB 10 Consolidated Financial Statements
The process of consolidating financial statements is not an easy task which needs to be
managed by using various tool and technique that emphasises on the existing efficiency of all the
business activities as their desired motive is to achieve the desired aims and targets to be
completed in the best suitable manner. Current accounting policies used in the business needs to
be checked properly as this will affect an entity's performance in the consolidation process.
Financial statements prepared using standard accounting principles needs to be checked properly
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so that any material changes found in the system will be rectified by making disclosure to
financial statements. Financial risks is another issues which will be identified by an entity by
conducting audit of the business in order to verify all the financial statements. The balance of
debt and equity need to be checked that helps an individual in order to improve their current
business efficiency. Knowing specific proportion of non-controlling interest an entity will
improve its existing business performance in order to gain higher market advantage. Disclosures
to the financial accounts is essential in considering each and every factor responsible for
improving the current business conditions and completing the process of consolidation.
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