Measurement options for non-controlling interests and their effects on consolidated financial statements consistency. Which should the disclosure be?

Abstract

This paper aims at emphasizing some drawbacks arising from the alternatives consolidation approaches allowed by the IFRS 3 revised 2008. We develop our analysis working on simulated figures to demonstrate that subsidiaries with similar underlying economics might have a different impact on the calculation of the group equity and income. That is merely due to the accounting treatment chosen by the parent company. This fact does not respect the consistency among values within consolidated financial statements and causes lack of comparability among consolidated financial statements prepared by different reporting entities. Since nowadays there is not any Standard requiring disclosure suitable for the comprehension of this matter, we suggest which relevant disclosure should be provided to better understand the composition of the group results

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

“…Investigation of the allocation of income in consolidated statements has consequently been developed by Aceituno, Valeriano, Bolívar et al (2006), analyzing the impact of the diff erent ways of allocating income on fi nancial ratios. From the most recent years, work of Sotti, Rinaldi and Gavana (2015) is devoted to measurement options for NCI, where the authors criticize availability of two currently applicable approaches and document the lack of comparability under such circumstances.…”

“…The treatment of NCI in the consolidated statements varies, based on the approach to consolidated fi nancial statements. Throughout the literature, three major theories of consolidated statements can be distinguished (Sotti, Rinaldi and Gavana, 2015;Zelenka and Zelenková, 2013;Baltariu and Cîrstea, 2012;Zelenka, 2012;Davis and Largay, 2006;Beckman, 1995). Under proprietary theory, only the portion of the subsidiary held by the parent is accounted for in the consolidated statements and thus, no NCI is recognized.…”

The Methods and evaluation of RIC Integrated Business Indicators

“…The description of the consolidation process is reflected in the works of many Russian and foreign scientists [2][3]. The features of definitions of processes related to the consolidation of reporting were studied by Italian scientists Sotti, F. Rinaldi, L. Gavana, G. [4]. Kazan economists Usanova D. S. and R. Z. Mukhametdinov [5] discussed the issues of consolidation of business in their scientific works.…”