Company Accounting

Company Accounting

Question 1

Consolidated Financial Statement Report

According to the two of Australian Accounting Standards AAS 24 and AAS 29, the main purpose of consolidated financial reporting is to declare all the revenues, expenses, assets, liabilities and equities are owned by the firms. All the financial reports need to be combined and form in the shape of a report must be presented, so that a clear view of the business is presented to the external and internal users. These standards develop limitations of reporting to individuals. Another purpose of consolidated report is to present theinternal users with full information about the financial position of the firm. According to Hoggerett, (2012), It also enable the external users like government agencies, financial institutions and investors to make decision regarding a firm whether loan should be granted or investment should be made or not.

According to Cooper, The AAS 24 & 29 also provides guidance regarding control. Control is the capability of an individual to influence the decisions made either directly or indirectly in accordance with firm's financial and operational objectives and enable the firm to follow according to the decisions of that influential person. So it is simply the power that rests in the hand of an individual who can either accept a decision or simply reject it.

The consolidation process takes place in four steps: first is to identify the firms and its activities that can be consolidated, all the financial statement accounts of the subsidiaries are merged in a single consolidated statement, third is to consolidate the accounts of operations and transactions with third parties and fourth step is to develop consolidated balance sheet, income statement, cash flow and statement changes in stockholder equities. The consolidation process also requires certain omissions like internally realized profit earned from stocks, certain entries related to depreciation, goodwill, ...