On April 1, 2001, the International Accounting Standards Board (IASB) was created to replace the International Accounting Standards Committee (IASC). One of the many roles that the IASB plays is the creation and issuance of International Financial Reporting Standards (IFRS). Defined, IFRS is the standards and interpretations set forth by the IASB and its predecessor IASC. Two of the most recent regulations set forth by IFRS after the Enron scandal are IFRS 10 and IFRS 12. IFRS 10 addresses the consolidation of financial statements by an entity when it controls one or more child companies or special entities. As for IFRS 12, it addresses the interest disclosure in other entities, such as: subsidiaries, and unconsolidated ‘structured entities’. …show more content…
However, on May 12, 2011, IFRS 10 and IFRS 12 were issued and superseded SIC-12 and IAS 27. SIC-12 SIC-12 Consolidation and Separate Financial Statements was issued by the Standards Interpretation Committee on November of 1998. The main purpose that SIC-12 served was to layout when a special purpose entity had to be consolidated through the use of the consolidation principles that are laid out in IAS 27. SIC-12 stated that an entity had to consolidate a special purpose entity when such entity had control over the special purpose entity. What SIC-12 would use to identify if an entity had control over a SPE, according to International Finance Reporting Standards would be as follows: • SPE conducts activities to meet the parent entity’s specific needs • The parent entity has decision-making power in order to obtain the majority of the benefits produced by the activities of the SPE • The parent entity is able attain majority, if not all, of the benefits of the SPE’s activities through the use of an ‘auto-pilot’ …show more content…
IAS 27 (2008) also sets forth that a parent entity is required to present consolidated financial statements in which is consolidates and discloses all investments in subsidiaries or other entities. Of course like anything, IAS 27 has and exception. As per IAS 27 (2008), “A parent is not required to present consolidated financial statements if and only if all of the following four conditions are met:” 1. A parent entity is a wholly-owned subsidiary, or is partially-owned by another entity and its other owners, including those whom cannot vote, have been informed about and do not oppose to the parent entity not presenting consolidated financial statements; 2. Parent’s debt or equity instruments are not traded in public market; 3. Parent entity did not file or is not in the process of filing its financial statements with a securities commission or other regulatory organizations for the purpose of issuing any class of instruments in a public market; and 4. The ultimate or immediate parent of the parent entity produces consolidated financial statements available for public use that comply with IFRS. IAS 27 states that the consolidated accounts should include all the entities controlled by the parent entity, either domestic or foreign. It does not matter if the entity has different nature of business from
In addition, ASC 852-10-45-21 illu strated that “the effects of the adjustments on the reported amounts of individual assets and liabilities resulting from the adoption of fresh-start reporting and the effects of the forgiveness of debt shall be reflected in the predecessor entity 's final statement of operations”. Thus, with the fresh-start reporting, financial statements for both Parent and Pool Son will be affacted.
The corporation is established at no time to make a profit or always to be in debt or thinly capitalized with insufficient capital to meet current financial obligation
Due to the use of the company’s annual report for users to make decisions, ensuring that the financial reports convince the objective of general purpose financial reporting and qualitative characteristics of useful financial information as outlined in the IASB September 2010 ‘Conceptual Framework for Financial Reporting’ (CF) have become extremely important. Such failure of disclosures can mislead information on the company’s financial statements.
What is IFRS, and what is its significance in the world market? In 2001 the International Accounting Standards Board, or IASB, was created to develop a set of standards by which global financial statuses could be reported. According to financialstabilityboard.org, this set of standards, known as the International Financial Reporting Standards, or IFRS, falls under the jurisdiction of the IFRS Foundation, which is a non-profit, private and independently run entity that exists for the public interest, is based on four principle objectives. The first is to develop a single set of international financial reporting standards (IFRS). This set would be high in quality, readily understandable, easily enforceable, and acceptable world-wide. The second objective is to encourage the use of this set of standards in the international business world. Thirdly, the ISAB would like to monitor the needs of different sizes and types of businesses in different settings. The fourth objective is to promote the adoption of the IFRS by converging national accounting standards wit...
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
The public company, JB Hi-Fi, is a reporting entity which is defined in SAC 1, as those that are expected to have users who depend on the entity’s general purpose financial reports for information that will be useful for making and evaluating decisions about the allocations of scarce resources. SAC 1 provides three main indicators to identify whether JB Hi-Fi Limited is a reporting entity. Firstly, the separation of management
A consolidated financial statement can be defined as the financial statements of a parent and its subsidiaries combined to form a single economic entity (AASB 10, 2011). The entity, which acquires the other entity, is known as the parent and the entity, which has been acquired, is known as the subsidiary. Consolidation financial reports arise when one entity purchases another entity, to then form a group. The purpose of preparing the consolidated financial statements is to combine the identifiable assets and liabilities (and contingent liabilities) and equity of two separate entities. At the date of acquisition, assets and liabilities are measured at their fair value in order to ensure that assets are not overstated and liabilities not understated and also ensure more relevant information (IFRS 10, 2012).
REASONING: The court applied distinct 4 factors to determine whether a parent corporation is liable for the acts of its subsidiary. The following four factors are considered: (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control.
Completely constituted trusts are segmented into executory and executed trusts. Executory trust is when a declaration or instrument requires the successive execution of further instruments while an executed trust is when the settlor has clearly and expressly stated what the interests of the beneficiaries are in the trust instrument. When a trust is not properly constituted, there will be no equitable proprietary interest for the beneficiaries. In such situations, the trust is enforceable under contract otherwise the beneficiaries are regarded as “volunteers”. A volunteer is a beneficiary who does not have valuable consideration for a promise or agreement for property to be transferred to him through trustees. Settlors must do everything within their power as necessary according to the nature of the property so that the settlement would be binding. There are three wa...
It outlines the interconnection of a company’s financial and non-financial elements and aims to combine them and show value creation and maintenance. It identifies resources and their effective and responsible usage. It intends to create a dialogue between the shareholders and other stakeholders and provides them with detailed information.
(i) Judgement and materiality play a significant role in helping to ensure that the selection of accounting policies in presenting the financial statements for a true and fair picture of the company’s financials. This means that entities should provide the financial statements with comparability, consistency and clarity to users of these statements. Entities must follow accounting policies required by IFRS and AASB should be relevant to particular circumstance.
[7] Cavendish Lawcards Series (2002) Company Law (3rd edn), p.15 [8] [1976] 3 All ER 462, CA. [9] Griffin, S. (1996) Company Law Fundamental Principles (2nd edn), p.19 [10] [1990] Ch 433. [11] Lecture notes [12] Lecture notes [13] [1939] 4 All ER 116.
The globalization of business has resulted in the need for compatible accounting standards that can be used internationally for financial reporting. As a result, the International Financial Reporting Standards (IFRS) were developed by the International Accounting Standards Board (IASB) to unify the various financial reporting methods and create a single accounting standard which can be applied to any financial statement worldwide (Byatt). The global standardization of financial reporting will increase the readability and enhance comparability of globally traded companies’ financial statements, without the need of conversion or translation. There are a few main differences between the International Financial Reporting Standards (IFRS) and the U.S. Generally Accepted Accounting Principles (U.S GAAP). The increasing recognition and acceptance of the International Financial Reporting Standards by accounting professionals in the United States, will affect the way in which the U.S will record financial statements in the future.
The main objective of the IASC was the development of International Accounting Standards, in an effort to reduce the differences in accounting practices across countries. Harmonization is the name given to the process of reducing differences in financial reporting practices and increasing comparability of financial statements in various countries. As such the intent of the IASC was to create a set of accounting rules that would be relevant and consistent to all countries ...
Financial communications involves financial reporting, McCarty’s engages in financial reporting which involves communication, several individuals and firms alike hold an interest in how McCarty’s performs as a company, these individuals or firms can be called stakeholders. Stakeholders can learn about a company’s performance, in this case, McCarty’s, by reviewing the yearly published financial statements. Stakeholders can use the income statement to find out the company’s profitability, the balance sheet communicates the company’s ability to obtain and invest its resources. The statement of cash flows communicates McCarty’s ability to manage its cash, whereas; financial results are communicated through published financi...