Consolidated financial statements topic is a difficult accounting topic, so accountants need to learn step by step to prepare consolidated financial statements. The first step is the consolidated financial statements overview.

In order to help you remember easily, this content will be presented in the question-and-answer format:

Question 1: What are the consolidated financial statements?

Answer:

According to International Financial Reporting Standards, IFRS No. 10 in 2011: Consolidated financial statements are the financial statements of a group in which the assets, liabilities, equity, income, expenses, and cash flows of the parent and its subsidiaries are presented as those of a single economic entity.

According to Vietnamese Accounting Standards, VAS No. 25 in 2003: Consolidated financial statements: are the financial statements of a group presented as those of a single enterprise. These financial statements are prepared based on the consolidation of the financial statements of a parent and those of its subsidiaries in accordance with this VAS.

In conclusion, when there is a parent company and subsidiaries, it is necessary to prepare consolidated financial statements.

Question 2: When is considered as a parent company and a subsidiary?

Answer:

The company which holds more than one-half of the voting power of an enterprise is the parent company. A subsidiary is an enterprise that is controlled by another enterprise (known as the parent).

Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one-half of the voting power of an enterprise, or control also exists even when the parent owns less than one-half of the voting power of an enterprise power over more than one-half of the voting rights by virtue of an agreement with other investors.

Control also exists even when the parent owns less than one-half of the voting power of an enterprise by the power to govern the financial and operating policies of the enterprise under a statute or an agreement, appoint or remove the majority of the members of the Board of Management or equivalent governing body, amend the charter of the enterprise.        

For example, FPT company has 47% capital in ABC company, but FPT managers have more than 90% participation in the Board of Management in ABC. So FPT is the parent company of ABC.

Note: All state-owned companies which are established and operate as a group, have to prepare consolidated financial statements.

Question 3: When have to submit and disclosure the consolidated financial statements?

Answer:

The annual consolidated financial statements have to be prepared and submitted to the state agency within 90 days from the end of the annual accounting period. The annual consolidated financial statements have to be disclosure within 120 days from the end of the fiscal year.

Companies that are required to submit their interim consolidated financial statements have to prepare and submit them to the state agency within 45 days from the end of the mid-year accounting period.

Question 4: Which parent company have not to prepare the consolidated financial statements?

The parent company have not to prepare the consolidated financial statements in the case of it satisfies all 6 conditions in Article 5, Section 2, Circular 202 dated December 22, 2014 of the Ministry of Finance.

Question 5: How to define the control right in accounting?

Answer:

We let “x” be the control of company A in company B.

• If “x” is less than 20%, it is a normal investment relationship.
• If “x” is greater than or equal to 20%, and less than 50%, it is an association.
• If “x” is 50%, it is a joint venture.
• If “x” is greater than 50%, and less than or equal to 100%, it is a group.

Question 6: What are the forms of consolidated financial statements?

Answer:

The annual and interim consolidated financial statements include:

• Consolidated balance sheet.
• Consolidated income statement.
• Consolidated cash flow statement.
• Notes to the consolidated financial statements.

Note: The interim consolidated financial statements can be prepared in entirety or as a summary.