IFRS Application


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Hello there,

This is just an inquiry about the consolidation of different companies (Parent and Subsidiaries) using different accounting policies. Is it possible that accounting policies used by the subsidiary is different for the accounting policies of the parent company? Is this allowed by IFRS?

To give you an specific example:

The group is composed of three companies for consolidation (Parent, Subsidiary 1 and Subsidiary 2). The policy of parent company and subsidiary 1 in relation to its Property and equipment is cost less depreciation while subsidiary 2 uses the revaluation method. Both valuation method are permitted under IFRS.

Question:
1. Since both method are allowed by IFRS, in its separate statement, can subsidiary 2 used the revaluation method considering that the parent company uses the cost less depreciation method?
2. For consolidation purposes, adjustment is needed for subsidiary 2 to be uniform with the parent company? Just for consolidation? or required to be stated even in separate statement of subsidiary 2?


Thanks
 

Fidget

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Parent & subsidiaries *should* have uniform accounting policies, says IFRS 10. But it doesn't elaborate on that, so how mandatory "should" is, is a bit of a grey area. Where different accounting policies are used by subsidiaries, then whatever they relate to need to be adjusted in the consolidated accounts to bring them into line with the parent's.

The subsidiary's accounts would be in line with its own policies, which is similar to foreign subsidiaries presenting their own accounts in their local currency, but on consolidation, their results have to be presented in the same currency as the parent.
 
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Thanks for the feedback, the word "should" I think is a suggestion, else, they will use the word "must". I can reflect separate fs using revalution method then in subsidiary and maybe another set of fs using cost method for consolidation purposes.
 
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Fidget

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IFRS tends to avoid words such as "must" and so can be quite vague at times with "should" or "probable" instead, leaving things open to interpretation.

Personally, rather than it being a suggestion, I'd take "should" to mean that there would have to be a justifiable reason for a subsidiary not having the same accounting policies as the parent, rather than it just can if it wants to.
 
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