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FORMATION OF
CONSOLIDATED
FINANCIAL
STATEMENTS
AT ENTERPRISES
WAYS OF
EVOLUTION
STUDENT: TOLIBJONOVA
DILOROM TOKHIRJON QIZI.
“Stars International University”
ESHONKULOV AZAMAT
ABDIRAKHIMOVICH
Tashkent State University
of Economics Assistant of
“Accounting” department
azamatabdiraximovich543@
gmail.com
Abstract
:
This article discusses the proposals and challenges of theoretical foundations
of consolidated financial reporting in business entities.
Keywords:
IFRS, IAS, consolidation, report, subsidiaries.
INTRODUCTION
On February 24, 2020, the Decree of the President of the Republic of Uzbeki-
stan № 4611 “On additional measures to switch to International Financial Report-
ing Standards” was adopted. By accelerating the processes of transformation
of financial statements into international standards, providing foreign investors
with necessary information and expanding access to international financial mar-
kets, also, in order to improve the system of training specialists in the field of
accounting and audit by international standards, Joint-Stock Companies, com-
mercial banks, insurance organizations and legal entities included in the catego-
ry of large taxpayers have established the conduct of financial statements on the
basis of international standards (IAS) since 2021 and 2021 prepare their financial
statements.
In current period, social and economic development of the countries of the world
differs sharply from the previous stages in terms of its meaning. The most basic
and important aspect is increasing integration and globalization of national econ-
omies. However, in its place it should be noted that along with the positive aspects
of integration and globalization into the world economy, there are certain conflict-
ing aspects. In particular, such situations as the fact that economic development
in different countries does not go smoothly, there is a discrepancy between the
countries of the world in terms of social and economic development, the intensi-
fication of environmental threats, sharp differentiation of population changes in
https://doi.org/10.47689/STARS.university-pp266-271
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different countries prevent the sustainable development of the world economy as
an integrated system.
Another aspect of these processes is that social and economic shocks taking
place in one country of the world will inevitably affect other countries as well.
As a result of the need for effective activity in business relations, financial state-
ments of economic entities, ongoing competition in the market, in many respects
the organization of large companies and ensuring the truthfulness and transpar-
ency of their financial statements compiled by them are one of the most import-
ant issues. One of the important issues in the development of economic relations
is long-term continuous operation of companies and availability of competitive
products.
Currently, from the point of view of the presence of control in preparation of
consolidated reports reflecting the results of the group in international standards
of financial reporting, practical application of the rules of international standard
of financial reporting entitled № 10 “Consolidated financial reporting” is of great
importance.
On the basis of IFRS № 10, called “Consolidated Financial Statements”, the com-
pany must develop the principles of preparation and compilation of consolidated
financial statements when controlling one or more societies.
Financial accounting activity is a generally accepted standard of financial re-
porting on consolidation, which indicates strict standards, however, the issuance
of standard reports is directly financed by consolidation.
List of IFRS and IAS associated with consolidation of financial statements.
STANDARD NUMBER
STANDARD NAME
3
rd
IFRS
“BUSINESS UNIFICATION”
9
th
IFRS
“FINANCIAL INSTRUMENTS”
10
th
IFRS
“CONSOLIDATED FINANCIAL STATEMENTS”
11
th
IFRS
“JOINT ACTIVITY”
12
th
IFRS
“DISCLOSURE OF INFORMATION ON PARTICIPATION
CONTRIBUTIONS TO OTHER COMPANIES”;
1
st
IAS
“SUBMISSION OF FINANCIAL STATEMENTS”
24
th
IAS
“DISCLOSURE OF INFORMATION ABOUT
INTERCONNECTED PARTIES”
27
th
IAS
“SEPARATE FINANCIAL STATEMENTS”
28
th
IAS
“INVESTMENTS IN ASSOCIATED
COMPANIES AND JOINT VENTURES”
29
th
IAS
“FINANCIAL REPORTING IN HYPERINFLUENT ECONOMIES”
34
th
IAS
“INTERIM FINANCIAL STATEMENTS”
39
th
IAS
“FINANCIAL INSTRUMENTS:
RECOGNITION AND EVALUATION”
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Source: prepared by the author
Consolidated financial statements in accordance with IFRS № 10 – are financial
statements of this group, in which the assets, liabilities, capital, income, expenses
and cash flows of parent company and its subsidiaries are summarized according
to these funds and their sources as the economic financial and economic activi-
ties of one society.
In this international standard, parent company – the one who controls one or
more enterprises, and subsidiary – economic entity, in particular, is a non-corpo-
rate economic entity, for example, a partnership (general enterprise) that con-
trols the activities of another entity. In this case, parent company prepares a
consolidated financial report by adding and summarizing the information of sub-
sidiaries.
In this international standard, parent company – the one who controls one or
more enterprises, and subsidiary – economic entity, in particular, is a non-cor-
porate economic entity, for example, a partnership that controls the activities
of another entity (the parent enterprise). In this case, parent company prepares
a consolidated financial report by adding and summarizing the information of
subsidiaries.
To add also the essence of the concept of “real” control, which is accepted
today.
The specificity of interpretation of the term “control” describes the principle of
control and is one of the important issues for the consolidation of control. Manage-
ment concept (including: criteria for recognizing its existence or not) International
Financial Reporting Standards (IFRS) № 3 “business unification” and (IFRS) №10
“consolidated financial statements” are related to each other.
IFRS № 10 “Consolidated Financial Statements” was published in May 2011,
stating principles of preparation and compilation of consolidated financial state-
ments when a company oversees one or more companies.
According to this standard, there is also the term “protection rights”, which is
the rights in which management consists of protecting the share of the parties
to the rights as a participant without giving authority to the parties involved with
the rights to the said party. At the same time, we must also cite the concept of
“real value”, in which the real value is the price that can be paid when transfer-
ring income or obligations from the sale of assets in typical operations between
market participants on valuation date”.
Preparation of Consolidated Financial Statements of a group of societies. The
consolidation of the group’s consolidated financial statements is carried out in
accordance with the basic principles of preparation of Consolidated Financial
Statements of the group, financial statements regulated by legislative acts with
interrelated organizations that make up this group.
The requirements for the conceptual framework for consolidation of financial
statements are explained as follows by the PEMPAL organization, which is con-
sidered the International Treasury Association, which implements it in the state
and public sectors: “The idea of consolidating financial statements is very simple.
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If two or more organizations are united under one general control, they will have
to be considered as a “group” in one organization in order to have complete in-
formation about the financial condition of the group”. In doing so, as the politi-
cal will of governments, they argue that in mutual settlements it is necessary to
“support the transition to the calculation method, as well as to implement four
main steps (improvement of current legislation, application of international stan-
dards, personnel issue and Information Technology.
In our opinion, in order to prove and confirm the correctness of the structure of
the consolidated report, it is necessary to use such generally accepted methods
and methods as tracking, checking assets and liabilities, data validation, docu-
ment analysis, recalculation, and analytical procedures. The ability to evaluate
this information, as well as to be able to verify its reliability and compatibility,
should be calculated from the prerequisites.
The creation of consolidated financial report by a group of general and subsid-
iary societies is carried out in stages.
In our opinion, The Economist scientist S.S. Nasretdinnov in scientific work of
“in international practice, there are three main stages of creating consolidated
financial statements”.
In this case, each country has the opportunity to develop a consolidated finan-
cial statements structure based on its characteristics based on the requirements
of the international standard of financial statements. Therefore, in almost most
countries there is a financial reporting structure that is developed by the compe-
tent authorities or ministries”, quotes the opinion.
The necessity of the first stage lies in the fact that in most cases, that is, de-
spite the requirements that the group of head and subsidiary enterprises in the
accounting policy is unique for all enterprises, their report can be drawn up with
different deadlines and in different currencies, the procedure for assessing their
structure and clauses may differ from each other. This does not correspond to
the legal requirements for consolidation of financial statements without taking
into account the existing differences.
In this situation, it is considered appropriate to prepare a consolidated finan-
cial statement by drawing up a consolidated (transition) report of the financial
statements of certain enterprises of the group of head and subsidiary enter-
prises.
The purpose of unification (transition) report means that it is necessary to
eliminate cases of deviations from the accounting policy of general and subsidi-
ary groups and coordinate it with the unified requirements of accounting policy
of the parent enterprise.
At the second stage, the financial statements of merged enterprises are
summed up horizontally. The result is a generalized balance sheet, which ex-
presses the amount of relevant articles of Consolidated Financial Statements
of societies. At this stage, special control should be established over the pro-
cedure for compiling consolidated financial statements and compliance of all
enterprises to which the group of head and subsidiary enterprises should be
combined. For this reason, this stage is considered to belong only to subsid-
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iaries and joint ventures. In this case, the data of subsidiary enterprise are
fully concentrated, while the data of financial statements of joint ventures are
concentrated only in proportion to the share of participation of parent enter-
prise.
The third stage represents a direct Unification, which involves creation of a
consolidated report on the balance sheet and financial results. Its purpose is to
provide information about the main and subsidiary group of enterprises as a sin-
gle economic structure. To do this, it is necessary to develop a clear order of uni-
fication, aimed at excluding circulation within the group of head and subsidiary
enterprises and their results.
In our opinion, we believe that the inclusion of the following procedures and
stages of compiling consolidated financial statements in accounting policy will
serve to build the report qualitatively and transparently:
The first stage: Reporting on financial condition, income and expenses of gen-
eral and subsidiary societies, establishing a sequence of similar indicators of the
assets and liabilities of the enterprise;
Second stage: Mutual exclusion of the share of investments of parent compa-
ny and its subsidiaries in authorized capital. This does not take into account the
fact that parent company has invested itself a share in the authorized capital of
subsidiary and is not indicated in consolidated financial statements;
Third stage: Exclusion of balances and working capital for intergroup settle-
ments between organizations entering the Economic Union. At this stage, the
parent company will not be included in Consolidated Financial Statements of
working capital between its subsidiaries and subsidiaries;
Fourth stage: Inclusion of its share in capital of parent company in changing
the relevant charters of subsidiaries for the reporting period. In this case, the
parent company must clearly indicate the amount of capital input when drawing
up the Charter of its subsidiaries at the beginning of the year, and by the end of
the year reporting it will control the introduction of capital;
fifth stage. The parent company recognizes as Goodville the difference be-
tween the value of net assets of another enterprise and market price at its acqui-
sition and its actual value.
Sixth stage: Calculation and reflection of net operational results of the subsid-
iary and share of uncontrolled shareholders in capital structure, to which parent
company belongs to a share that does not own directly or indirectly.
The actions described in the first, second and third stages are typical for sub-
sidiaries that were previously members of the Economic Association, and subsid-
iaries purchased during the reporting period. It is proposed that the calculations
made in the remaining stages will be applied to the Enterprises purchased during
the reporting period.
At the same time, according to regulatory legal acts adopted to measure in-
vestments in acquired subsidiaries during the reporting period, it will be nec-
essary to identify assets, capitals and liabilities and determine the real value of
assets and liabilities by drawing up contracts by the company that purchased
them.
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References
1. Resolution of the president of the Republic of Uzbekistan № 4611
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2. “Consolidated financial statements” international standard of financial state-
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3. International standard of financial statements № 3 “assessment of real value”.
http://www.mf.uz
4. International standard of financial statements № 3 “assessment of real value”.
http://www.mf.uz
5. Consolidation of financial statements Treasury Community PEMPAL Thematic
Group on Accounting and Reporting in the Public sector. 2016., 99 p.
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