Line-by-line combination and elimination of the investment

Learning objectives

• Explain the line-by-line combination and the elimination of the carrying amount of the investment against the parent's portion of the subsidiary's equity.L1, L2, L3
• Prepare the combination of the line items of a parent and a subsidiary, with the elimination of the investment.L2, L3

Normative references

• IFRS 10 §B86Consolidated financial statements combine like items of assets, liabilities, equity, income, expenses and cash flows of the parent with those of its subsidiaries; offset (eliminate) the carrying amount of the parent's investment in each subsidiary and the parent's portion of equity of each subsidiary (IFRS 3 deals with goodwill); and eliminate in full intragroup items, including profits or losses resulting from intragroup transactions that are recognised in assets. An intragroup loss may indicate an impairment, and IAS 12 applies to temporary differences arising from these eliminations.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

3 questions

• In the consolidated financial statements, the carrying amount of the parent's investment in a subsidiary is eliminated against the parent's portion of the equity of that subsidiary.L1
• Orme SA owns 100% of Pin SA. Orme reports: cash 100,000 and shares in Pin 60,000. Pin reports: cash 25,000 and inventories 35,000, no debt, for equity of 60,000. Case convention: the carrying amount of the shares in Pin equals Pin's equity, and there is no goodwill and no intragroup transaction. What is the total of consolidated assets?L2
• Explain in a few lines how a parent moves from the individual financial statements of the parent and its subsidiaries to the consolidated financial statements, stating what is combined, what is eliminated and why.L3