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IPSAS 35, Consolidated Financial Statements

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IPSAS 35, Consolidated Financial Statements Final Pronouncement January 2015 IPSAS 35 International Public Sector Accounting Standard Consolidated Financial Statements This document was developed and approved by the International Public Sector Accounting Standards Board® (IPSASB®). The objective of the IPSASB is to serve the public interest by setting high-quality public sector accounting standards and by facilitating the adoption and implementation of these, thereby enhancing the quality and consistency of practice throughout the world and strengthening the transparency and accountability of public sector finances. In meeting this objective the IPSASB sets International Public Sector Accounting Standards™ (IPSAS™) and Recommended Practice Guidelines (RPGs) for use by public sector entities, including national, regional, and local governments, and related governmental agencies. IPSAS relate to the general purpose financial statements (financial statements) and are authoritative. RPGs are pronouncements that provide guidance on good practice in preparing general purpose financial reports (GPFRs) that are not financial statements. Unlike IPSAS RPGs do not establish requirements. Currently all pronouncements relating to GPFRs that are not financial statements are RPGs. RPGs do not provide guidance on the level of assurance (if any) to which information should be subjected. The structures and processes that support the operations of the IPSASB® are facilitated by the ® ® International Federation of Accountants (IFAC ). Copyright © January 2015 by the International Federation of Accountants® (IFAC®). For copyright, trademark, and permissions information, please see page 101. IPSAS 35—CONSOLIDATED FINANCIAL STATEMENTS CONTENTS Paragraph Objective ............................................................................................................................... 1–2 Scope .................................................................................................................................... 3–13 Public Sector Combinations ........................................................................................... 4 Presentation of Consolidated Financial Statements....................................................... 5–10 Government Business Enterprises ................................................................................. 11–13 Definitions.............................................................................................................................. 14–17 Binding Arrangement ...................................................................................................... 15 Economic Entity .............................................................................................................. 16–17 Control ................................................................................................................................... 18–37 Power .............................................................................................................................. 23–29 Benefits ........................................................................................................................... 30–34 Link between Power and Benefits .................................................................................. 35–37 Accounting Requirements ..................................................................................................... 38–55 Consolidation Procedures .............................................................................................. 40 Uniform Accounting Policies ........................................................................................... 41 Measurement .................................................................................................................. 42 Potential Voting Rights ................................................................................................... 43–45 Reporting Dates .............................................................................................................. 46 Non-Controlling Interests ................................................................................................ 47–51 Loss of Control................................................................................................................ 52–55 Investment Entities: Fair Value Requirement ........................................................................ 56–64 Determining Whether an Entity is an Investment Entity ................................................. 59–60 Judgments and Assumptions ......................................................................................... 61–62 Accounting for a Change in Investment Entity Status .................................................... 63–64 Transitional Provisions .......................................................................................................... 65–78 Effective Date ........................................................................................................................ 79–80 Withdrawal and Replacement of IPSAS 6 (December 2006) ............................................... 81 Application Guidance Amendments to Other IPSASs 3 CONSOLIDATED FINANCIAL STATEMENTS Basis for Conclusions Implementation Guidance Illustrative Examples Comparison with IFRS 10 International Public Sector Accounting Standard 35, Consolidated Financial Statements, is set out in paragraphs 1–81. All the paragraphs have equal authority. IPSAS 35 should be read in the context of its objective, the Basis for Conclusions, and the Preface to International Public Sector Accounting Standards. IPSAS 3, Accounting Policies, Changes in Accounting Estimates and Errors, provides a basis for selecting and applying accounting policies in the absence of explicit guidance. 4 CONSOLIDATED FINANCIAL STATEMENTS Objective 1. The objective of this Standard is to establish principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities. 2. To meet the objective in paragraph 1, this Standard: (a) Requires an entity (the controlling entity) that controls one or more other entities (controlled entities) to present consolidated financial statements; (b) Defines the principle of control, and establishes control as the basis for consolidation; (c) Sets out how to apply the principle of control to identify whether an entity controls another entity and therefore must consolidate that entity; (d) Sets out the accounting requirements for the preparation of consolidated financial statements; and (e) Defines an investment entity and sets out an exception to consolidating particular controlled entities of an investment entity. Scope 3. An entity that prepares and presents financial statements under the accrual basis of accounting shall apply this Standard in the preparation and presentation of consolidated financial statements for the economic entity. Public Sector Combinations 4. This Standard does not deal with the accounting requirements for public sector combinations and their effect on consolidation, including goodwill arising on a public sector combination (see the relevant international or national accounting standard dealing with public sector combinations). Presentation of Consolidated Financial Statements 5. An entity that is a controlling entity shall present consolidated financial statements. This Standard applies to all entities, except that a controlling entity need not present consolidated financial statements if it meets all the following conditions: (a) It is itself a controlled entity and the information needs of users are met by its controlling entity’s consolidated financial statements, and, in the case of a partially owned controlled entity, all its other owners, including those not otherwise entitled to vote, have been informed about, and do not object to, the entity not presenting consolidated financial statements; (b) Its debt or equity instruments are not traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local and regional markets); (c) It did not file, nor is it in the process of filing, its financial statements with a securities commission or other regulatory organization for the purpose of issuing any class of instruments in a public market; and (d) Its ultimate or any intermediate controlling entity produces financial statements that are available for public use and comply with International Public Sector Accounting 5 CONSOLIDATED FINANCIAL STATEMENTS Standards (IPSASs), in which controlled entities are consolidated or are measured at fair value through surplus or deficit in accordance with this Standard. 6. This Standard does not apply to post-employment benefit plans or other long-term employee benefit plans to which IPSAS 25, Employee Benefits applies. 7. A controlling entity that is an investment entity shall not present consolidated financial statements if it is required, in accordance with paragraph 56 of this Standard, to measure all of its controlled entities at fair value through surplus or deficit. 8. A controlled entity is not excluded from consolidation because its activities are dissimilar to those of the other entities within the economic entity, for example, the consolidation of Government Business Enterprises (GBEs) with entities in the budget sector. Relevant information is provided by consolidating such controlled entities and disclosing additional information in the consolidated financial statements about
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