Anomalies of the control principle as part of the consolidated financial reporting concept

2021 ◽  
Vol 22 (1) ◽  
pp. 24-47
Author(s):  
Sergei V. KOLCHUGIN
Keyword(s):  
Financial Reporting ◽  
Methodological Approach ◽  
Financial Statements ◽  
Parent Company ◽  
Consolidated Financial Statements ◽  
Analysis And Synthesis ◽  
Methodological Principles ◽  
Control Criteria ◽  
Control Principle ◽  
The Impact

Subject. The article discusses the impact of the control principle on the existing consolidated financial reporting concept. Objectives. I evaluate possible alterations in the consolidation methodology as a result of the anomaly of the control principle. Methods. The study is based on the method of analogy for scientific hypothesizing. The study methodologically relies upon Thomas Kuhn's paradigm shift theory and the impact of anomalies on methodological principles of normal science. The study combines the analysis and synthesis, induction and deduction, and the method of comparison when analyzing the existing control criteria and identifying anomalies of the control principles as part of the consolidated financial reporting concept, and examining how the anomaly influences the consolidation methodology. Results. I discovered that the control principle in the consolidated financial reporting concept influences the consolidation methodology. I suggest using my own methodological approach to preparing consolidated financial statements in case of the non-equity control the parent company holds over its subsidiary. Conclusions and Relevance. The control principle in the consolidated financial reporting concept has not been formalized, thus causing anomalies affecting methodological principles of consolidated financial reporting. The non-equity control of the parent company over its subsidiary is a case in point. This control induces unavoidable changes in the consolidation methodology. The findings can be used to prepare consolidated financial statements in case of the non-equity control of the parent company over its subsidiary.

scholarly journals The influence of culture on disclosures in financial statements prepared under International Financial Reporting Standards

2019 ◽  
Vol 2019 (101 (157)) ◽  
pp. 111-132 ◽  
Author(s):  
Jerzy Gierusz ◽  
Katarzyna Koleśnik
Keyword(s):  
Financial Reporting ◽  
Comparative Studies ◽  
Financial Statements ◽  
Arab Countries ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Consolidated Financial Statements ◽  
Financial Reporting Standards ◽  
Financial Disclosures ◽  
The Impact

The primary objective of this article is to investigate the impact of culture (as measured by Hofstede) on disclosures in financial statements prepared under International Financial Reporting Standards (IFRS) by firms from different countries. The sample comprises 2011−2013 consolidated financial statements of stock companies (excluding banks, insurance, and other financial institutions) from four countries repre- senting different cultural areas: the United Kingdom (Anglo), Germany (Germanic), Poland (Central Eastern Europe; CEE) and Kuwait (Arab). The research material came from 312 annual consolidated financial statements from 104 companies. The results reveal that cultural values have a significant impact on financial disclosures even after the use of IFRS. The paper is one of the few comparative studies attempting to assess the effects of culture on financial disclosures in Western Europe countries, CEE countries and Arab countries. Most of the international comparative studies in this research area have neglected CEE and Arab countries.

scholarly journals Disclosure of Subsidiaries with Non-controlling Interest in Accordance with IFRS 12: Case of Materiality

2016 ◽  
Vol 64 (1) ◽  
pp. 275-281 ◽  
Author(s):  
Tereza Gluzová
Keyword(s):  
Financial Reporting ◽  
Value Relevance ◽  
Stock Exchange ◽  
Financial Statements ◽  
Parent Company ◽  
Reporting Standards ◽  
Consolidated Financial Statements ◽  
Financial Reporting Standards ◽  
Disclosure Requirements ◽  
Definition Of

Consolidated financial statements present aggregated information for parent company and its subsidiaries. For non-wholly owned subsidiaries, International Financial Reporting Standards require non-controlling interest to be presented within consolidated equity to distinguish it from the amount of equity attributable to the shareholders of the parent. Since 2014, new standards on consolidation introduced broadened disclosure requirements for subsidiaries with material non-controlling interest. Definition of material non-controlling interest however is not included in the standards. The article provides the analysis of the financial statements published by companies listed on Prague Stock Exchange. Main focus is given to assessment criteria applied to identify material non-controlling interest. Consequently, study of compliance with the disclosure requirements for selected companies has been undertaken. The results of the analysis indicate whether value relevance of financial statements has been improved as a result of the new disclosures.

scholarly journals Consolidation of Specific Items of Financial Statements of Company Group: Principles, Conditions and Features

2020 ◽  
Vol 87 (4) ◽  
pp. 117-128
Author(s):  
I. M. Dmytrenko ◽  
N. V. Shaimukhometova
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Subject Area ◽  
Consolidated Financial Statements ◽  
External Auditors ◽  
Financial Reporting Standards ◽  
Economic Decision Making ◽  
Company Group ◽  
The Impact ◽  
A Company

The impact of the adequacy of the application of the basic principles, conditions and order of consolidation by a company group, to ensure the reliability of the most specific items of financial statements, is considered as a subject matter of internal and external auditors. The components of the consolidated financial statements, its structural elements, specific items and a set of necessary disclosures in the notes are distinguished on the basis of comparative analysis. The conditions for the parent company’s control as an investor over the activities of its subsidiaries as an investee for the purpose of applying the consolidation procedure are systematized. The prerequisites for ensuring the reliability of the consolidated reporting information are generalized. The characteristics of these prerequisites are given in view of the parent company’s ownership of a certain share of the net assets of the subsidiaries at the reporting date and its investments in the subsidiaries during the reporting year with their inclusion in the book value. The necessary emphasis is placed on the proper disclosure of information about all subsidiaries in accordance with the principles of financial reporting. The subject area of internal and external audit is analyzed with focus on the most specific items of the consolidated financial statements: uncontrolled interest, goodwill and intra-group transactions. The factors for minimizing the risk of distortion at the level of individual articles and the consolidated financial statements of a company group as a whole are identified. The instruments of ensuring the proper degree of completeness and reliability of disclosure in the consolidated statements of a company group in accordance with the requirements of international financial reporting standards are considered. In particular, the specificity of the disclosure of the influence of related parties on the profit, loss and financial position of the group is discussed. The pragmatic value of disclosures is determined in view of providing users with consolidated financial statements that are transparent and relevant to economic decision making.

Particularities of the independent auditor's report on reliability of accounting (financial) statements for 2019: COVID-19 as qualitatively essential information (Part 2)

2020 ◽  
Vol 23 (7) ◽  
pp. 777-799
Author(s):  
O.I. Shvyreva ◽  
Z.I. Kruglyak ◽  
A.V. Petukh
Keyword(s):  
Financial Reporting ◽  
Financial Statements ◽  
Economic Situation ◽  
Risk Disclosure ◽  
Essential Information ◽  
Logical Method ◽  
Annual Reporting ◽  
The Face ◽  
Key Aspects ◽  
The Impact

Subject. This article discusses the issues related to the practice of financial reporting in the face of uncertainties caused by the coronavirus contagion, as well as the specifics of the audit strategy and formation of an audit opinion on this reporting. Objectives. The article aims to identify the quality characteristics of financial reporting prepared in the context of the COVID-19 pandemic and justify the key aspects of assurance engagement completion in an extremely uncertain epidemiological and economic situation. Methods. For the study, we used an abstract-logical method, content analysis techniques, systematization, and classification. Results. Analyzing the impact of the extremely uncertain epidemiological and economic situation on financial statements, the article clarifies aspects of disclosure of events after the reporting date and threats to business continuity in the annual reporting of economic entities. The article identifies possible alternative procedures and algorithms to obtain proper evidence when it is insufficient in the face of the inability to meet certain audit standards requirements in a remote audit environment. The article defines the impact of COVID-19 risk disclosure on the structure of the audit report and opinion. Relevance. The results of the study can be used in the practical activities of economic entities that prepare financial statements in the face of significant uncertainty, as well as auditors and audit organizations.

IFRS IMPLEMENTATION AS ONE OF THE FACTORS FOR IMPROVING THE INVESTMENT CLIMATE IN UKRAINE

2017 ◽  
Author(s):  
Kateryna Sova ◽  
◽  
Natalia Yatsenko ◽  
Denys Zagirniak ◽  
◽  
...  
Keyword(s):  
Financial Reporting ◽  
Direct Investment ◽  
Financial Statements ◽  
International Standards ◽  
Investment Climate ◽  
The European Union ◽  
Economic Activities ◽  
Financial Reporting Standards ◽  
Almost All ◽  
The Impact

The article is devoted to the study of the impact of the introduction of International Financial Reporting Standards (IFRS) on changes in the investment climate in Ukraine. The relevance of the topic is that improving the practice of applying IFRS as a tool for exchanging financial information is one of the key conditions for improving the investment climate in Ukraine. The authors have created the generalized scheme that illustrates the chronological list of enterprises that are required by law to prepare financial statements in accordance with IFRS. It was noted that in 2018, in accordance with Part 2 of Article 12 of the law on accounting and financial reporting in Ukraine and resolution of the Cabinet of Ministers of Ukraine No. 547 from 11.07.2018, the criteria of enterprises that are required to prepare financial statements in accordance with IFRS were updated. This step significantly increased the level of application of international standards due to the adoption of such a decision at the legislative level. The dynamics of the number of IFRS enterprises in Ukraine was analyzed. The analysis showed that over the past three years, the number of almost all enterprises that must apply international standards has been growing. The advantages of using IFRS for different users of financial statements were determined. It was determined that the priority users of IFRS financial statements are investors. At the same time, it was noted that the main advantage for other users of financial statements prepared in accordance with international standards is the improvement of the investment climate. The dynamics of the Investment Attractiveness Index of Ukraine based on the Likert scale in the period from 2016 to 2020 was analyzed. The direct investment receipts to Ukraine from the European Union countries were studied. The dynamics of direct investment in the Ukrainian economy was analyzed for two types of economic activities that should form financial statements in accordance with IFRS, namely, the extractive industry and quarrying, as well as financial and insurance activities.

scholarly journals Statutory audit in Slovakia – significant phenomenon of global European changes

2020 ◽  
Vol 74 ◽  
pp. 06006
Author(s):  
Denisa Domaracká ◽  
Veronika Kňažková
Keyword(s):  
Financial Reporting ◽  
Global Economy ◽  
Financial Statements ◽  
Legislative Regulation ◽  
Significant Phenomenon ◽  
The Subject ◽  
The Impact ◽  
Regulation Changes ◽  
Audit Performance

The changing global economy environment also affected the area of statutory audit. Nowadays, statutory audit faces the significant changes not only because of the processes of digitization and automation in accounting and auditing, but because of increased and tightened legislative regulation, too. The most important aspects of financial reporting and auditing are subject to EU Regulations and EU Directives. For this reason, the issue of legislative regulation changes in field of statutory audit in Slovakia has become the subject of our article. Currently, the proposal of amending and supplementing Act. No 431/2002 Coll. on Accounting, as amended underwent an interdepartmental comment procedure. The proposal includes the changes on requirements for statutory audit. This article examines the current proposal to change (mainly increase) the conditions for performing the mandatory statutory audit of financial statements in Slovak audit environment. Our goal is to clarify the reasons and implications behind the changes of Slovak legislation as well as the impact of these changes on audit performance in Slovakia. We believe conducting statutory audits in accordance with the applicable legislation accepted and implemented at international European level can contribute to transparency and improve the quality of audit performance. In order to achieve the goal, it was necessary to choose a purposeful work methodology and research methods.

Megascreens USA Inc.—A Foreign Operations Case

2007 ◽  
Vol 22 (4) ◽  
pp. 579-590 ◽  
Author(s):  
Charles A. Carslaw ◽  
S. E. C. Purvis
Keyword(s):  
Financial Reporting ◽  
Foreign Currency ◽  
Financial Statements ◽  
The United States ◽  
Cash Flows ◽  
Consolidated Financial Statements ◽  
Comprehensive Overview ◽  
Financial Reporting Standards ◽  
Foreign Operations ◽  
Statement Of Cash Flows

This relatively short case gives students a comprehensive overview of the steps required to prepare consolidated financial statements under U.S. GAAP when a subsidiary prepares its accounts under a foreign GAAP—in this case, International Financial Reporting Standards (IFRS). While the case is closely based on an actual Australasian company seeking listing in the United States, the product and the exact financial details are disguised. Specifically, the case exposes students to the following: accounting for foreign currency transactions; adjustments to convert foreign GAAP to U.S. GAAP (accounting for license fees); translation of financial statements; change of functional currency; remeasurement of financial statements; and foreign consolidation and statement of cash flows with foreign operations. The case has been field-tested in an advanced accounting course and is also suitable for use in international accounting courses. Both undergraduate and graduate students have profited from the case.

scholarly journals A literature review on the impact of IAS/IFRS and regulations on quality of financial reporting

2016 ◽  
Vol 6 (4) ◽  
pp. 102-114 ◽  
Author(s):  
Newman Wadesango ◽  
Edmore Tasa ◽  
Khazamula Milondzo ◽  
Ongayi Vongai Wadesango
Keyword(s):  
Financial Reporting ◽  
Accounting Standards ◽  
Reporting Quality ◽  
Financial Statements ◽  
Conclusive Evidence ◽  
Financial Reporting Quality ◽  
International Accounting Standards ◽  
Ifrs Adoption ◽  
The Impact

The International Accounting Standards Board (IASB) in its objectives and preamble, presume that IFRS adoption and perceived compliance to regulatory framework is associated with increased financial reporting quality. Based on these assumptions, this desktop study reviewed several documents to determine whether the IFRS adoption has led to increased financial reporting quality in Zimbabwe. The researchers reviewed literature on how the IAS/IFRS and regulations affect the financial reporting quality of listed companies. The factors around IFRS adoption were identified (mandatory, voluntary and convergence) and discussed in relation to the financial reporting quality. Evidence from previous studies conducted in line with this same issue shows that there is no conclusive evidence on how IFRS and regulations affect the financial reporting quality. Issues to be addressed in further studies include the importance of financial statements prepared under IFRS framework and the importance of compliance with accounting and auditing requirements.

scholarly journals Formation of XBRL reporting

2020 ◽  
pp. 95-102
Author(s):  
Нalyna Umantsiv ◽  
Yevheniia Polovyk
Keyword(s):  
Financial Reporting ◽  
Reporting System ◽  
Financial Statements ◽  
Developed Countries ◽  
Inductive Method ◽  
Basic Material ◽  
Problem Statement ◽  
Or Methodology ◽  
The Developed Countries ◽  
The Impact

Relevance of the research topic. At the present stage of transformational transformation of the economy, the issue with the use of the XBRL format in Ukraine, which is a prerequisite for successful interaction of enterprises in the global financial market and enhancing the competitiveness of domestic enterprises. Problem statement. The absence of the practice of applying taxonomy of financial statements in Ukraine, causes the relevance of this study. The developed countries of the world have already introduced this format, because it allows to make the reporting not only transparent and accessible to potential investors, but also convenient for analysis. Analysis of recent studies and publications. The process of functioning of the financial reporting system in the format XBRL is the newest, it was researched in works: Kuznetsova S. A., Borisenko A. A., Boyko R. V., Ostrovskaya O. A., Khatib E., Yassin M., Harber M., Marx B., De Jager P. and other. Highlighting unexplored parts of a common problem. Particular attention is needed to develop solutions that will minimize potential problems associated with the implementation and use of the XBRL format in Ukraine. Setting of the task, objectives of the research. Analyzing the implementation of XBRL format in Ukraine. Identifying prospects for using and setting the potential issues in the preparation of new financial statements using global experience. Research method or methodology. Dialectical methods of scientific cognition, collection and analysis of information and inductive method were used in the course of the research. Basic material presentation (results of work). The article defines the essence of the XBRL format, analyzes the stages of its implementation in Ukraine. Prospects and typical errors in the preparation of financial statements using the format have been identified. Measures have been developed to minimize the likelihood of occurrence and to overcome problems associated with its application, taking into account world experience. Areas of application of the results. The results of this study may be applied in the preparation of financial statements in accordance with the specified format. Conclusions to the article. All of the benefits of implementing XBRL far outweigh the impact of its application Its use in Ukraine shall allow reporting entities to properly prepare financial statements, adjust the requirement for duplicating financial statements while presenting to regulators, and help woo investors through formation of the qualitative financial statements.

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