Samenvatting
Samenvatting consolidation
Samenvatting van het deel 'Consolidation' gegeven in het derde jaar Bedrijfsmanagement Accountancy-Fiscaliteit
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Voorbeeld 3 van de 18 pagina's
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Voorbeeld van de inhoud
Summary consolidation Fatima IrainECONOMIC GROUPS
1. Example – EURONAV
2. Why legal obligation to publish consolidated fi nancial
statements?
Management accounting (= internal reporting):
- Internal use: used by management themselves, to support management in management
decision making, planning,..
- Detailed and disaggregated information about products, divisions, plants, operations, tasks,
individual activities, etc.
- Confidential information
- Primarily forward-looking
- Computed by reference to the needs of managers (tailored to their own needs) the one
who needs the information decides it
Financial accounting (= annual accounts):
- Information for external stakeholders such as shareholders, creditors, public regulators,
suppliers,..
- Focus on the company as a whole (not just divisions)
- Made available for public use
- Historical information
- Computed by reference to general financial accounting standards
Company internal (employees, manager, owner) and external stakeholders (suppliers, society,
government, investors, customers)
A company is regarded as a junction of contractual relations, agreements,.. is the company able to
deliver?
Financial reporting = information towards external stakeholders:
Shareholders
Employees
Customers
Suppliers
Government
External stakeholders need to understand the information provided need for accounting standard
(legislation) to provide a frame of reference to interpret and understand the information provided
(so basically each company can be compared to another company because they have the same
formula)
Statutory annual accounts = information towards external stakeholders about:
Solvency (equity/liabilities,..)
Of the legal entity (plc,
Liquidity (cashflow, working capital,..)
LLC: NV, BVBA)
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,Summary consolidation Fatima Irain
Profitability (earnings per share,..)
..
insufficient for economic groups: activities are spread over multiple legal entities
consolidated financial statements: economic entity!
Consolidated financial statements = the financial statements of a group in which the assets,
liabilities, equity, income, expenses and cash flow of the parent and its subsidiaries are presented as
those of a single economic entity. (profitability, solvency, liquidity of the economic entity)
Consolidated financial statements provide a true and fair view of assets, financial position and the
results of the group (C. Law art 115)
3. Annual accounts (statutory accounts): investments in
equity instruments
Purpose
Where can we find investments in equity instruments (equity investments, or the acquiring shares of
other companies = assets) in the annual accounts?
51 (geldbeleggingen) – part of the working capital short term investments of (temporary)
cash surplus, sold within the span of a year
28 (financiële vaste activa) – classified as a non-current asset non-current assets: resources
that are not expected to be consumed or sold within the normal operating cycle. Non-
current assets are acquired by a company to realise her goals in the long term (e.g.
machinery).
Investment in equity instruments (shares): non-current assets
Example: D’Ieteren is a Belgian import and distribution company of cars and has a need for transport
to get its products from the port of Antwerp where they arrive by ship towards the multiple selling
points in Belgium by truck.
3 ways to organise the transport by trucks:
1. Buy trucks and engage drivers
- Buy trucks: (D) 24 Vehicles @ (C) 55 Bank
- Using the trucks: each year (D) 63 Amortisations @ (C) 24..9 Accumulated depreciations
vehicles
- Drivers: (D) 62 Salaries @ (C) 55 Bank
2. External service provider
- Purchase invoice: (D) 61 Services @ (C) 55 Bank
3. Engage in one’s own transport company (separate legal entity)
- Acquiring a subsidiary: (D) 28 Shares @ (C) 55 Bank
- The subsidiary buys the truck and becomes the service provider:
Contrary to an external provider, we own the company (shares = voting rights general
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, Summary consolidation Fatima Irain
assembly, general assembly appoints board of directors = policy and decisions)
Risks related to transport are linked to the legal entity of the ‘subsidiary’
Economic activities (selling products, distribution,..), assets, risks related to these activities or
assets ect, are spread over a multitude of legal entities (criteria: activities, country,..)
1 economic group but +1 legal entities
Consolidated financial statements reporting at the level of the economic entity, ie the economic
group
Annual accounts reporting a level of the legal entity
Annual accounts
Investment in equity instruments (shares) non-current assets points out the existence of an
economic group
Remarks:
- We do not necessarily need 100% of the voting rights, 50% (depending on the articles of
association) to appoint..
- Sometimes with less than the majority decisive power can be obtained
- Sometimes we only want to have influence on policy, instead of a decisive majority
- (explained later on)
Exercises set 1
CONSOLIDATED FINANCIAL STATEMENTS
1. Defi nitions
Participation = voting rights acquired for the purpose of creating a sustainable and specific relation
with the entity, and to enable the holder to influence the orientation of management decisions (art
13)
Presumed (refutable) to be a participation:
1. Voting rights representing 10% or more
3
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