Reconsideration of Consolidation Accounting

Question: Discuss about the Reconsideration of Consolidation Accounting. Answer: The main objective of accounting is to manage the data in appropriate form and present financial information relating to financial position, performance during the period and information relating to cash flows. The present study emphasises to explanation and application of AASB10 and AASB 101 Australian Accounting Standard through practical illustration. The first part of the report deals with the practical application of AASB 10 and journal entries has been accounted for an explanation of same. The second part deals with the preparation of financial position and statement of change in equity in accordance with AASB 101. Australian Accounting Standards are applied by entities which require preparing financial reports as per Corporations Act 2001, government sector and entities including both profit and non-profit sectors preparing general purpose financial statements. AASB 10 deals with Consolidated Financial Statements (AASB, C.A.S. Consolidated Financial Statements, 2016.). It provides principals and guidelines to provide assistance in making and presenting consolidated financial statements and report of an entity which controls one or more subsidiaries (Leo, Hoggett and Sweeting, 2012). The standard defines the principle of control and establishes control as a basis for consolidation. According to Howieson (2013), it also provides an explanation regarding accounting requirement for preparation of the consolidated financial statement. It applies to industries falling under the category of Tier 1 and Tier 2. According to Mayorga and Sidhu, B.K. (2012), the entities which are profit oriented, and apply the standard, will also be subjected to the application of IFRS 10. The major purpose of establishing this standard is to set up rules for the presentation and preparation of consolidated financial statements for entities with subsidiaries. For an entity to be eligible to apply this standard, it is important that the parent entity has total control over its subsidiary (Knapp, 2013). The AASB 101 Standard lays down the foundation for the presentation of general purpose financial statements (GPFS). The main objective of this standard is to make certain that the financial statements are comparable with the preceding years. It also ensures an easy comparison with the financial statements of other business units. Overall requirements for the presentation of financial statements are prescribed including guidelines for their structure and their content. This Standard is applicable to: Every entity which prepares financial reports in accordance with the provisions of Corporations Act; The GPFS of all the entities those are eligible to reporting; Financial statements that are included in, or are considered to be, GPFS. According to ACCOUNTING STANDARD AASB 10 (2012), the standard was applicable to entities reporting with effect from 1 January 2005. The standard is not applicable to the structures who report their statements in accordance with AASB 134 and content of interim financial statements (Hodgson and Russell, 2014). However, some clauses do apply to these structures also. This Standard also applies to full consideration to all the units, which present separate and consolidated financial statements as provided in AASB 127 (Carey, Potter and Tanewski, 2014). All the terminology used in AASB Standard 101 is appropriate for entities which work for profit motives, both public and private. As per the study of Grossi (2015), if any non-profit entity applies this Standard, they are required to revise the clauses which are used for particular items. Conclusion It can be concluded that, it is essential for business entities to apply the applicable clauses of AASB 10 and AASB 101 to provide an appropriate presentation of financial statements. The scope, objective and applicability of the standards have been described in the explanations thereon. The practical part illustrates the accounting of the same. The above queries have been solved as per the provisions of the standards. The accounting process followed to solve the preceding questions is according to the clauses laid by The Board of Australian Accounting Standard. The directions of Corporations Act 2001 and the standards laid in IFRS have also been considered for accounting. References Carey, P., Potter, B. and Tanewski, G. 2014. AASB Research Report. Grossi, G. 2015. Consolidated financial statements in the public sector. Public sector accounting. Pp.63-76. Hodgson, A. and Russell, M. 2014. Comprehending comprehensive income. Australian Accounting Review. 24(2). Pp.100-110. Howieson, B. 2013. Defining the Reporting Entity in the Not?for?Profit Public Sector: Implementation Issues Associated with the Control Test. Australian Accounting Review. 23(1). Pp.29-42. Knapp, J. 2013. A Reconsideration of Consolidation Accounting Requirements and Pre?acquisition Dividends. Australian Accounting Review. 23(3). Pp.190-207. Leo, K.J., Hoggett, J. and Sweeting, J. 2012. Company Accounting. John Wiley Sons. Mayorga, D.M. and Sidhu, B.K. 2012. Corporate disclosures of the major sources of estimation uncertainties. Australian Accounting Review. 22(1). Pp.25-39. AASB, C.A.S. Consolidated Financial Statements. 2016. [PDF]. Available through aasb.gov.au. [Accessed on 25th December 2016.] ACCOUNTING STANDARD AASB 10. 2012. [PDF]. Available through https://www.aasb.gov.au/admin/file/content105/c9/AASB. [Accessed on 25th December 2016.]